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PMI data will be the key driver

USD

Last week was marked by the Federal Reserve rate decision, with the Fed Chair Jerome Powell dampening speculation that the stronger economic prospects could push back the central bank’s economic stimulus. The remarks gave the markets additional energy to an already inflated reflation trade. February PMI data will be the key driver while highlighting a notable divergence between the U.S. and Europe. The focus will then shift to GDP in the fourth quarter and initial jobless claim figures on Thursday. It is expected the jobless claims to have the greatest impact as last week's numbers were disappointing. Spending and consumption numbers will wrap the week up. Key figures coming up:

  • On Monday (03/22): U.S. Existing Home Sales (Feb) | Chicago Fed National Activity Index (Feb)
  • On Tuesday (03/23): Current Account (Q4) | New Home Sales (Feb)
  • On Wednesday (03/24): IHS Markit Flash PMI (Prelim, March) | Durable Goods (Feb)
  • On Thursday (03/25): GDP (Q4, Final) | Initial Jobless Claims (Mar)
  • On Friday (03/26): Personal Income, Spending & Consumption (Feb) | Core PCE Price Index (Feb) | Michigan Consumer Sentiment (Mar)

EUR

This past week was dominated by pandemic-related turbulence. Although Germany, France, and Italy, are restarting AstraZeneca's vaccine jabs after the European Medicines Agency gave the shot its endorsement, the vaccination rollout appears to be in disarray across the bloc. Meanwhile, the rally in U.S. bond yields already compelled the ECB to bring forward bond purchases under its quantitative easing program to prevent borrowing costs from rising too far for comfort. On the economic calendar, prelim private sector PMI figures for the Eurozone will be in focus on Wednesday. Late in the day on Wednesday, Eurozone consumer confidence figures for March will also draw attention. Thursday marks the beginning of the latest EU economic summit, which will unite national leaders to discuss recovery plans, although it is not clear if there will be further financial support for Eurozone's members. Key figures coming up:

  • On Monday (03/22): Eurozone Current account (Jan)
  • On Tuesday (03/23): Italy Industrial Sales & Orders (Jan)
  • On Wednesday (03/24): IHS Markit Flash PMI (Prelim, March) | European Consumer Confidence Indicator (March, Prelim)
  • On Thursday (03/25): Germany Gfk Consumer Confidence (Apr) | ECB Council Meeting (25-26 March) ECB Economic Bulletin | ECB President Christine Lagarde Speaks 
  • On Friday (03/26): Germany IFO Business Climate (Mar)

GBP

In the U.K., the week ahead is a busy one for economic releases. The week kicks off on Monday with January’s labor market report, with the official data covering unemployment and wages during the opening stages of the year. id-week will bring the inflation numbers, which will be carefully watched for signs of price pressures. Meanwhile, the flash PMI data also on Wednesday will be eyed for first indications as to how the U.K.’s economy is fairing as the first quarter of 2021 ends. Bank of England Governor Bailey will give a speech on Thursday, following last week’s unanimous vote to hold policy unchanged. At the end of the week, February retail sales figures will wrap things up. Key figures coming up:

  • On Tuesday (03/23): Unemployment Rate (Jan)
  • On Wednesday (03/24): IHS Markit Flash PMI (Prelim, March) | Inflation Data (Feb)
  • On Thursday (03/25): BoE Gov Bailey Speaks 
  • On Friday (03/26): Retail Sales (Feb)

JPY

Last week, the Bank of Japan (BoJ) has watered down negative rates, intending to help out the financial sector. Also, there were expectations that the BoJ wants to avoid being left behind, as global interest rates rise. During the upcoming week, Japan will be the first country to get the prelim private sector PMIs for March on Wednesday. It is expected the manufacturing numbers to draw some interest. At the end of the week, March inflation figures for Tokyo are likely to show some improvement (from -0.3% in February to -0.2% in March), thanks to oil-driven reflation in energy and private transportation. Key figures coming up:

  • On Monday (03/22): Coincident Index (Jan) | Leading Economic Index (Jan)
  • On Tuesday (03/23): Bank of Japan Monetary Policy Meeting Minutes
  • On Wednesday (03/24): Au Jibun Bank / IHS Markit Japan Flash PMI (Prelim, Mar)
  • On Thursday (03/25): Tokyo Consumer Price Index (Mar)

CAD

The Canadian Dollar is the best performing G10 currency on a year-to-date basis, thanks, in part, to the increasing speculation that the Bank of Canada (BoC) will be the first major central bank to taper its purchases of assets this year. It is a relatively quiet week on the economic data front, the BoC’s Toni Gravelle will speak on Tuesday about the BoC’s role during periods of market stress and may include remarks on the status of current purchase programs. The BoC’s Gov Macklem will also speak on Thursday. Ending the week, the Budget Balance numbers will be watched by investors, who will be looking for further clues to assess the economic recovery. Key figures coming up:

  • On Tuesday (03/23): Bank of Canada Deputy Gov. Toni Gravelle Speaks 
  • On Thursday (03/25): Bank of Canada Gov. Macklem Speaks
  • On Friday (03/26): Budget Balance (Jan)

MXN

The U.S. Fed’s dovish stance left more room for Mexico’s Central Bank to hold the overnight rate at 4% on Thursday’s policy meeting, leading to a favorable perspective for the Mexican economic recovery. However, inflation dynamics need to be closely monitored as effects from strong projected U.S. growth due to the U.S. fiscal stimulus, and expected vaccine progress could weaken the argument that inflation may prove to be transitory in Mexico. Therefore, the unemployment rate and inflation reading on Wednesday will be fully eyed and will provide fundamentals to Mexico’s interest decision. Key figures coming up:

  • On Wednesday (03/24): Unemployment Rate (Feb) | 1st Half-Month CPI (Mar)
  • On Thursday (03/25): Mexico’s Central Bank Interest Rate Decision | Economic Activity (Jan) | Retail Sales (Jan) | Fiscal Balance

CNY

Last week was marked by the first face-to-face talks between China and the U.S since President Joe Biden took office. As expected, the meeting underscored the two major powers have been deeply divided over human rights and security issues, sparking speculation that a “new Cold War” would escalate ahead. The People’s Bank of China is expected to leave the 1-year and 5-year Loan Prime Rates (LPR) unchanged at the start of the week. The LPR has remained unchanged since April 2020 and should stay on hold over the coming months as the economy’s recovery continues. Key figures coming up:

  • On Monday (03/22): Loan Prime Rate Decision
  • On Friday (03/26): Chinese Industrial Profit (Feb)  

BRL

Last week, Brazil’s Central Bank decided to hike the Selic rate by 75 bps, from 2% to 2.75%, and signaled the intention to repeat the current pace in the next policy meeting in May. On the one hand, the Central Bank highlighted that inflation and inflation expectations have been rising, due to the recent rebound of commodities prices and a weak BRL. On the other hand, Brazil still needs a low-interest rate as the economic recovery remains fragile. Brazil’s Covid-19 new cases and the death rate are the highest in the world. On Friday (19), Brazil registered 89,409 new cases and 2,730 deaths. On that note, the perspective of the government’s popular support is mixed. While it is clear that the disapproval ratings are increasing, the approval numbers remain stable. This week, the FGV Consumer Confidence and inflation numbers will drive attention. Key figures coming up:

On Monday (03/22): Central Bank Focus Market Readout   

On Tuesday (03/23): Central Bank Copom Meeting Minutes | FGV Consumer Confidence (Mar)

On Thursday (03/25): Mid-Month Consumer Price Index (Mar) | CAGED Net Payroll Jobs

On Friday (03/26):   Foreign Direct Investment (Feb)

Quick Insights

USD: PMI is set to show a notable divergence between the U.S. and Europe

USD: PMI is set to show a notable divergence between the U.S. and Europe

EUR: The EU economic summit will bring national leaders to discuss recovery plans

EUR: The EU economic summit will bring national leaders to discuss recovery plans

GBP: The mid-week will bring inflation numbers, which will be carefully watched for signs of price pressures

GBP: The mid-week will bring inflation numbers, which will be carefully watched for signs of price pressures

JPY: Japan will be the first country to get the prelim private sector PMIs

JPY: Japan will be the first country to get the prelim private sector PMIs

CAD: The BoC’s role during periods of market stress

CAD: The BoC’s role during periods of market stress

MXN: Last week was marked by the first face-to-face talks between China and the U.S

MXN: Last week was marked by the first face-to-face talks between China and the U.S

CNY: Recent data are set to show roaring growth in China

CNY: Recent data are set to show roaring growth in China

BRL: The perspective of the government’s popular support is mixed

BRL: The perspective of the government’s popular support is mixed

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