NFP, inflation data from the Eurozone and Switzerland, GDP from Australia, retail sales and ISM PMI data from the US as well official PMI data from China will highlight the heavy week ahead of us. Developments surrounding US – Iran conflict will take the center stage.
USD
Fed Governor Waller stated that January jobs report was a surprise and if that trend continues in February it could call for rates to remain unchanged. On the other hand he added, if January report was a one-off then there is still argument for March rate cut. He stated that NFP data does not match with other jobs data and warned that it could lead to downward revision to January number. Mortgage rate on a 30y mortgage dropped below 6% for the first time since September of 2025.
US and Israel attacked Iran. Iran retaliated by attacking UAE, bombing Dubai and Israel with death toll climbing into double digits. Both sides confirmed death of Supreme Leader Khamenei. Xi-Trump meeting was supposed to be held in China from March 31 to April 2 but with developing situation in Iran the meeting may be delayed. NVDA earnings crushed expectations with revenues rising astonishing 73% y/y and revenue guidance for Q1 revised up by some 10%. Rate on 30y mortgages dropped below 6%.
The yield on a 10y Treasury started the week at 4.09%, rose to 4.09% and finished the week below 4% at around 3.97%. The yield on 2y Treasury started the week at 3.48%, rose to 3.48% and finished the week at around 3.38%. Spread between 2y and 10y Treasuries started the week at 60bp and finished the week at 59bp. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 4% while probability of no change is at around 96%. Gold breached $5200 on Monday while BTCUSD plunged below $63k and then bounced back to finish the week at around $66k.
This week we will have ISM PMI data as well as retail sales data and NFP on Friday. Headline number is expected to print 70k while unemployment rate is expected to stay at 4.3%
Important news for USD:
Monday:
ISM Manufacturing PMI
Wednesday:
ISM Services PMI
Friday:
NFP
Unemployment Rate
Retail Sales
EUR
February German Ifo business climate index rose to a new six-month high of 88.6 from 85.6 in January and printed higher than 88.4 as expected. Optimism is seen in both current assessment and in expectations. Spending on defense and infrastructure is boosting new orders. Final Eurozone inflation numbers for January were unchanged with headline at 1.7% y/y and core at 2.2% y/y.
ECB President Lagarde spoke in front of the European Parliament and stated that bank members expect inflation to stabilize at targeted 2%. She proudly added that ECB’s actions helped bring inflation down and added that they remains data-dependent and will take meeting-by-meeting approach in making decisions on monetary policy. Regarding speculations that she will step down before her term ends Lagarde clarified that her baseline scenario is to stay until the end of her term.
Preliminary February CPI saw jump in French reading to 1% y/y from 0.3% y/y and higher than expected 0.8% y/y. The report shows that base effects of electricity prices were the main reason for surge in prices. Spanish reading came in unchanged at 2.3% y/y while markets were expecting a tick down to 2.2%. German reading declined to 1.9% y/y from 2.1% y/y in January with core staying at 2.5% y/y.
This week we will have preliminary February PMI data expected to show no change.
Important news for EUR:
Tuesday:
CPI
GBP
BoE policymaker Alan Taylor, dovish member, stated that he is becoming more certain that economy is moving steadily towards inflation normalization. He clarified that services inflation remains elevated and that is moving down slower than expected but he still sees it coming down by the end of the year coupled with declining wages. Taylor mentioned weaker than expected productivity growth as well as weakening jobs market as main risks warning that economy is gliding towards low inflation and high unemployment. He concluded that two or three more cuts are needed for rate to come to neutral. Green Party won a by-election in Gorton and Denton, a Manchester seat that used to be a Labour stronghold. Every hit to Labour party and thus Prime Minister Starmer is bad for GBP as it increases political instability which investors hate.
AUD
January CPI data showed headline come in at 3.8% y/y unchanged from December but higher than 3.7% that markets were expecting. Core measure ticked up to 3.4% y/y from 3.3% y/y the previous month and higher than expected. The report shows that inflation pressures were broad with housing costs leading the way followed by recreation and culture as well as food and non-alcoholic beverages. Goods inflation rose to 3.8% y/y while services inflation eased but still remains elevated at 3.9% y/y. Both headline and core outside of 2-3% targeted range are pushing RBA to deliver more rate hikes and chances of a May rate hike are increasing substantially.
Q4 CAPEX showed a 0.4 q/q growth, slower than 6.4% q/q growth seen in Q3, but beating expectations of it coming flat. The composition showed increase in investment into buildings and structures as well as improvement for future expected spending. This just adds to the strength of the economy and nudges RBA further towards a rate hike in May.
PBoC has kept 1-year and 5-year Loan Prime Rates unchanged at 3% and 3.5% respectively as was widely expected. They have, however, cut FX risk reserve ratio to 0% from 20%. This move, according to PBoC, is intended to strengthen hedging services while keeping the currency reasonably balanced and controlling strengthening of yuan. Two Sessions will start next week and we could see authorities lower growth target for 2026 to a range from 4.75 to 5%.
This week we will have Q4 GDP data from Australia as well as official PMI data from China and the start of Two Sessions.
Important news for AUD:
Wednesday:
GDP
Manufacturing PMI (China)
Non-Manufacturing PMI (China)
Composite PMI (China)
Thursday:
Two Sessions (China)
NZD
February business confidence eased to 59.2 from 64 in January but it remains at a very healthy and elevated level. Inflation pressures are evident from the survey as they show inflation expectations 1y out rising to 2.93% from 2.77% making it the highest reading since July of 2024. Combined with rising inflation expectations we have rising wage expectations 1y out which came in at 3.01%, up from 2.88% and highest since April of 2024. Cost expectations rose to 79.4% making it highest reading in 2 and a half years. Investment and profit expectations were highest in agriculture sector. With inflation threatening to get out of RBNZ’s 1-3% range we should see the bank pause for a while and consider rate hike near the end of the year which should limit NZD declines.
CAD
Q4 GDP saw economy shrank by 0.6% annualized vs coming in flat as expected after growing 2.4% in Q3. GDP rose 0.2% q/q after a 0.6% q/q growth in the previous quarter. Looking into details of the report we see a brighter picture as decline was due to a sharp drop, withdrawal, in inventories. Household consumption, government spending and gross fixed investment were all positive on the quarter with exports contributing the most as they rose 1.5% q/q. December GDP rose 0.2% m/m. Ugly headline number but better details should keep BoC on pause for a while.
JPY
Reports that Prime Minister Takaichi expressed her reservations to BoJ Governor Ueda regarding further rate hikes caused waves in markets with JPY plunging more than 100 pips against all major currencies. Japan government nominated two new members to BoJ monetary policy board. Although it is not clear whether they are hawks or doves given Takaichi’s comments on rate hikes markets lean towards them being more dovish. This was enough to weaken JPY by additional 100 pips across the board.
February inflation data for the Tokyo Area saw headline number unexpectedly tick up to 1.6% y/y while core CPI fell to 1.8% y/y thus making it first time since October of 2024 that it is below BoJ’s target of 2%. Ex fresh food, energy category, core-core, ticked up to 2.5% y/y. The report says that fuel subsidies were the main reason for drop in core print. Additionally, we got a rebound in January retail sales as they printed 4.1% m/m and 1.8% y/y growth.
CHF
SNB total sight deposits for the week ending February 20 came in at CHF457.6bn vs CHF452.7bn the previous week. Second week of rising deposits but just moving closer to the centre of a well-established range. SNB Governor Schlegel clarified that there could be a “handful” negative inflation prints in the future but that would not trigger reaction from the bank as they see inflation gradually rising in the months to come. He reiterated that they are prepared to intervene in the markets should the need arise. Final Q4 GDP print saw economy grow by 0.1% q/q and 0.8% y/y after declining by 0.4% q/q and rising 0.9% y/y in the third quarter.
This week we will have February inflation data.
Important news for CHF:
Wednesday:
