Most Important Economic Events of the Week 02.21.2022 – 02.27.2022
The index of the US dollar DXY almost did not change at the end of the last week. Nothing new was said in the minutes of the FRS meeting, published last Wednesday. On the contrary, they weakened expectations of a more aggressive tightening of the Fed's policy. "If, contrary to expectations, inflation does not slow down, it would be advisable for the Committee (on open market operations) to remove stimulus measures faster than expected", the minutes of the central bank meeting, released on Wednesday, said. Market participants were probably so disappointed with the neutral FOMC protocols that they practically ignored the strong macroeconomic statistics from the US published last week. At the same time, the main US stock indices continued to decline, closing in negative territory for the 2nd week in a row.
They, like other major world stock indices, continue to be pressured by growing tensions on the Russian-Ukrainian border. It is noteworthy that gold quotes reached a new 8-month high last week at around 1902.00 dollars per ounce.
If the escalation of tension is not replaced by detente, then we can expect further growth in gold quotes and a fall in world stock indices.
Next week, market participants will also pay attention to the publication of important macro statistics for Germany, the US, the UK, the Eurozone, New Zealand, as well as the results of meetings of the central banks of China and New Zealand on monetary policy issues.
Of the most significant macroeconomic data, the publication of which is expected next week, it is worth noting the following:
*) new events can be added to the calendar and/or some scheduled events canceled during the coming week
**) specified time – GMT
Monday, February 21
In the US, banks and exchanges are closed on the occasion of Presidents’ Day: trading volumes during the American trading session will be reduced
01:15 CNY People's Bank of China Interest Rate Decision
Since May 2012, the People's Bank of China has been steadily lowering the interest rate, providing support to Chinese manufacturers. The bank last lowered the rate in December 2021 (by 0.05% to 3.80% at the moment).
In 2020, in the context of international trade conflicts and a slowing global economy, the world's largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitive ability of goods exported from these countries.
The People's Bank of China is also in line with this process. The depreciation of the yuan became especially relevant, when the confrontation between the two most powerful economies in the world began. One of the measures to offset the negative effects of increased duties on the import of Chinese goods to the United States was the depreciation of the national currency of China. An additional strong negative factor was the coronavirus.
It is likely that at this meeting, the People's Bank of China will keep the interest rate at the same level of 3.70%, although a rate cut is also possible.
However, if the People's Bank of China makes unexpected statements or decisions, volatility may increase throughout the financial market. Investors will also be interested in the bank's assessment of the impact of the coronavirus on the Chinese economy and its policy in the near future in this regard.
08:30 EUR Markit Economics Business Activity Index (PMI) in the manufacturing sector of the German economy (preliminary release). Composite index (PMI) of business activity in the German economy according to Markit Economics (preliminary release)
The PMI business activity index in the manufacturing sector of the German economy is an important indicator of the business environment and the overall state of the German economy. This sector of the economy forms a significant part of Germany's GDP. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. Previous monthly readings: 59.8, 57.4, 57.4, 57.8, 58.4, 62.6, 65.9, 65.1, 64.4, 66.2, 66.6, 60, 7, 57.1, 58.3, 57.8, which indicates the uneven recovery of business activity in this sector of the German economy after its slowdown in 2020 due to the coronavirus pandemic, and this is a negative factor for the euro. The growth of the indicator above the previous values will support the euro (in the short term). The data is worse than the forecast and / or the previous value will have a negative impact on the euro.
The composite PMI business Activity index in the German economy is an important indicator of the business environment and the overall state of the German economy. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. Previous monthly values: 53.8, 49.9, 52.2, 52.0, 55.5, 60.0, 62.4, 60.1, 56.2, 55.8, 57.3, 51.1, 50.8, 52.0, 51.7. The data is worse than the forecast and / or the previous value will have a negative impact on the euro.
09 00 EUR Composite index (PMI) of business activity in the manufacturing sector of the Eurozone economy according to Markit Economics (preliminary release)
The PMI manufacturing PMI is an important indicator of the overall health of the European economy. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. Previous monthly values: 52.3, 53.3, 55.4, 54.2, 56.2, 59.0, 60.2, 59.5, 57.1, 53.8, 53.2, 62.5, 48.8, 47.8, 49.1, 45.3. Data worse than the forecast and/or the previous value will have a negative impact on the euro.
09:30 GBP Index (PMI) of business activity in the services sector of the UK economy according to Markit Economics (preliminary release)
The PMI business activity index in the UK services sector is an important indicator of the state of the British economy. The services sector employs the majority of the UK's working-age population and accounts for approximately 75% of GDP. The most important part of the service sector is still financial services. If the data is worse than the forecast and the previous value, the pound is likely to decline sharply in the short term. The data is better than the forecast and the previous value will have a positive impact on the pound. At the same time, a result above 50 is seen as positive and strengthens the GBP, below 50 - as negative for the GBP.
Previous values of the indicator: 54.1 in January, 53.6 in December, 58.5 in November, 59.1 in October, 55.4 in September, 55.0 in August, 59.6 in July, 62.4 in June 2021 after falling to the levels of 29.0 in May, 13.4 in April, 34.5 in March 2020.
Tuesday, February 22
In Japan, banks and exchanges are closed due to the celebration of the Emperor's birthday: trading volumes during the Asian trading session will be reduced. The publication of important macro statistics on this day is also not scheduled.
Wednesday, February 23
01:00 NZD RB of New Zealand interest rate decision. RBNZ accompanying statement
Subdued economic growth (New Zealand GDP growth has slowed since the second half of 2018) and a weakening labor market, as well as an escalation of international trade wars and a worsening global economic outlook, have forced the Reserve Bank of New Zealand to keep interest rates low for a long time. An additional and unforeseen risk to the global and New Zealand economies was the coronavirus epidemic.
However, following the results of the meetings held in October and November, the Reserve Bank of New Zealand (for the first time in 7 years) raised the key interest rate to 0.50%, and then to 0.75%. The rate was raised to dampen inflation and contain rapidly rising home prices. Earlier, the RBNZ said that the economy no longer needs the current level of monetary stimulus. However, the New Zealand dollar weakened after the publication of the Reserve Bank of New Zealand's short-term interest rate forecast, which fell short of market expectations. The bank predicted that the rate would reach a peak of 2.6% by the end of 2023 (the previous forecast of the Central Bank assumed that the rate would reach 2.1% by the beginning of 2024). Still, the forecast turned out to be weaker than the market expectations reflected in the quotes, amid various risks and uncertainty in the economic outlook.
At this meeting, the RBNZ is expected to raise the interest rate by another 0.25% to 1.00% and may also speak in favor of further increases. Market participants following the NZD quotes need to be prepared for a sharp increase in volatility during this period of time.
In the accompanying statement and comments, the RBNZ management will provide an explanation of the decision on the interest rate and comments on the economic conditions that facilitated the adoption of this decision.
At this time, the volatility in the quotations of the New Zealand dollar may rise sharply.
Earlier, the RBNZ stated that against the background of "many uncertainties", monetary policy "will remain soft in the foreseeable future", but "may be adjusted accordingly".
02:00 NZD RBNZ press conference
During the press conference, the head of the RBNZ Adrian Orr will make an explanation of the bank's decision. His speeches often serve as an unofficial source of information on the future direction of the RBNZ's monetary policy. In his opinion, the country's monetary policy should correlate with the dynamics of employment and financial stability of the state.
Earlier, the RBNZ stated that against the background of "many factors of uncertainty" monetary policy "will remain soft for the foreseeable future", but "may be adjusted accordingly".
In any case, volatility in the New Zealand dollar trade is expected to rise during the RBNZ press conference.
GBP Inflation Report Hearing (no exact time set)
The Governor of the Bank of England and members of the Monetary Policy Committee of the Bank of England will speak in Parliament with comments on the current economic situation and the outlook for the economy. At this time, the volatility in trading in the pound can rise sharply. One of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the inflation rate. If the tone of the report is soft, then the British stock market will receive support, and the pound will fall. Conversely, tough rhetoric from the Bank of England on curbing inflation, implying an increase in the interest rate in the UK, will lead to a strengthening of the pound.
Thursday, February 24
13:30 USD Annual US GDP for the 4th quarter (Second Estimate)
GDP data is one of the key data (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. A strong result strengthens the US dollar; a weak GDP report negatively affects the US dollar. In the previous 3rd quarter, GDP grew by +2.3%, in the 2nd quarter of GDP - by +6.7%, in the 1st quarter of 2021 by +6.3%. If the data points to a decline in GDP in the 3rd quarter, the dollar will be under pressure. Positive GDP data will support the dollar and US stock indexes. First estimate was +6.9%.
21:45 NZD Retail Sales (4th Quarter)
The Retail Sales Report is published by Statistics New Zealand. Changes in retail sales are generally considered an indicator of consumer spending. In general, a high reading is a positive factor for the NZD, while a low reading is a negative factor. In the 3rd quarter of 2021, retail sales decreased by -8.1% due to Covid-19 quarantine restrictions. The NZD will strengthen if the data is better than previous values. A weak report will negatively affect the NZD.
Friday, February 25
13:30 USD Orders for durable goods. Orders for capital goods (excluding defense and aviation)
This indicator reflects the value of orders received by manufacturers of durable goods and capital goods (capital goods are durable goods used for the production of durable goods and services), involving large investments. Goods produced in the defense and aviation sectors of the American economy are not included in this indicator. A high result strengthens the USD. Previous values of the indicator "orders for durable goods": -0.7% in December, +2.6% in November, -0.4% in October, -0.3% in September, +1.8% in August, -0.1% in July, +0.9% in June, +2.3% in May, -1.3% in April, +1% in March, -1.2% in February, +3.4% in January 2021.
Previous values of the indicator "orders for capital goods excluding defense and aviation": +0.3% in December, -0.1% in November, +0.7% in October, +0.8% in September, +0.6% in August, 0% in July, +0.7% in June, +0.1% in May, +2.2% in April, +1% in March, -0.9% in February, +0.6% in January 2021.
In theory, the relative growth of the indicator has a positive effect on the dollar, while the decline in the indicator is negative. The market reaction to its negative value can also be negative for the dollar in the short term. Data worse than the previous value and / or forecast will also negatively affect the dollar quotes.
Forecast for January: +0.6% (durable goods orders), 0% (capital goods orders, excluding defense and aviation). The data is likely to have a positive impact on the dollar if the forecast is confirmed.