Approaching the end of the month, there is often a few loose ends to tie up. Despite it being Presidents Day for the US on Monday, the rest of the week is pretty packed with data. Flash PMIs, final Eurozone inflation, Michigan Sentiment, and the second reading of US Q4 growth all need to be watched. However, there is also tier one US data in the form of Consumer Confidence and the Fed’s preferred inflation gauge, the core PCE. We are also on the lookout for potential hawkish signals from the Reserve Bank of New Zealand, along with a rates decision by the Colombian central bank. Once more in Latin America, the focus is on inflation. 

Watch for: 

  • North America – US flash PMIs, Consumer Confidence, Prelim GDP, and core PCE
  • Europe & Asia – German Ifo, Eurozone revised inflation and RBNZ monetary policy 
  • LatAm – Mid-month inflation for Brazil and Mexico, and Colombian central bank rates

North American data: 

  • US Flash PMIs (Tuesday 22nd February, 1445GMT) Flash Manufacturing is expected to slip marginally to 55.0 in February (from 55.5 in January), with an improvement in flash Services to 52.0 (from 51.2). This would leave the flash Composite slightly better at 51.9 (up from 51.1).
  • US Consumer Confidence (Tuesday 22nd February, 1500GMT) Confidence is expected to worsen slightly to 110.0 in February (from 113.8 in January)
  • Richmond Fed Manufacturing (Tuesday 22nd February, 5000GMT) Consensus is looking for a slight improvement to +10 in February (from +8 last month).
  • US GDP – Q4 Prelim (Thursday 24th February, 1330GMT) A marginal upward revision to +7.0% is expected at the second reading of Q4 growth (up from +6.9% Advance GDP)
  • US New Home Sales (Thursday 24th February, 1500GMT) Sales are expected to have reduced in January to 807,000 (from 811,000 in December).
  • US Core Personal Consumption Expenditure (Friday 25th February, 1330GMT) Core PCE is expected to increase slightly to +5.0% in January (from +4.9% in December)
  • US Durable Goods Orders (Friday 25th February, 1330GMT) Core durables (ex-transport) are expected to see a growth of +0.4% in January (after +0.4% in December)
  • Michigan Sentiment - revised (Friday 25th February, 1500GMT) Final sentiment for February is expected to be unrevised at 61.7 (61.7 prelim February, 67.2 final January)
  • US Pending Home Sales (Friday 25th February, 1500GMT) Pending sales are expected to fall further to -8.0% year on year in January (-6.9% in December).

Flash PMIs give a good forward-looking view of confidence in the economy. Consensus sees a slight decline in manufacturing PMIs but an improvement in services, which would pull the Composite PMI closer to 52.0 and a mild acceleration of growth prospects as Q1 develops.

Consumer sentiment is also on the docket. However, the trends are not great, with the Conference Board’s Consumer Confidence is expected to slip slightly to 110.0 (back to where it was in September) whilst the final reading of Michigan Sentiment is expected to confirm the continued deterioration after the prelim dropped to 61.7.   

Consumer Confidence

Prelim GDP for Q4 is expected to see a slight upward revision to 7.0% which is up from the 6.9% Advance reading. The Fed’s preferred inflation gauge, the core PCE is also worth watching. Consensus often calls this one right though, with an increase o 5.0% expected. Subsequently, any upside surprise would be a market mover.

US Inflation gauges

Market Reaction: 

  • Lots of USD moving data this week. Any positive surprises to the flash PMIs or confidence data will be USD supportive. However, given the importance of the PCE data to the Fed, any positive surprises would certainly be a boost to the USD.

Europe & Asia: 

  • German Ifo Business Climate (Tuesday 22nd February, 0900GMT) The Business Climate is expected to improve slightly to 96.6 in February (from 95.7 in January)
  • Reserve Bank of New Zealand monetary policy (Wednesday 23rd February, 0100GMT) A +25 basis points hike is expected to +1.00% (from +0.75% previously)
  • Eurozone CPI inflation – revised (Wednesday 23rd February, 1000GMT) Consensus is not expecting any revision to the 5.3% headline inflation or the 2.3% core inflation from the January flash readings (after 5.0% and 2.3% respectively in December).
  • Eurozone Economic Sentiment (Friday 25th February, 1000GMT) 
  • Eurozone Industrial Confidence (Friday 25th February, 1000GMT) 
  • Eurozone Services Sentiment (Friday 25th February, 1000GMT) Sentiment is expected to improve slightly to +11.1 in February (from +9.1 in January).

The Reserve Bank of New Zealand is set to start hiking rates this week. With unemployment falling to 3.2% (multi-year lows) and annual inflation jumping to 5.9, the pressure is mounting on the RBNZ to act. The talk has been that there is even risk of a +50 basis points hike this week. However, the bank has recently said that it prefers a gradual tightening.  

There is also a clutch of European data this week. The signs are that economic activity is beginning to recover after the Omicron induced slowdown of H2 2021. The initial focus will be on whether the German Ifo Business Climate can improve for a second consecutive month. Improvement is expected to be driven not only by the expectations component (as it did last month) but also in current conditions too. 

German Ifo Business Climate

The consensus is not expecting any revisions to the January Eurozone inflation data this week. However, there will also be a focus on the Eurozone sentiment gauges for the industrial and services sectors. After falling away around the turn of the year, an improvement in sentiment would be a welcome boost in February.

Eurozone confidence

Market Reaction: 

  • EUR to be supported by any improvements to the Ifo, and sentiment gauges. Final Eurozone inflation rarely sees much revision so any surprises will jolt EUR.
  • NZD to be volatile on RBNZ decision, given there are three potential outcomes. Any hike should be supportive though.

Latin America: 

  • Brazil Consumer Confidence (Tuesday 22nd February, 1100GMT) Analysts are expected a slip to 73.0 (from 74.1) 
  • Brazil mid-month inflation (Wednesday 23rd February, 1200GMT) Mid-month is expected to come in at 10.2%
  • Brazil Unemployment (Thursday 24th February, 1200GMT) the rate is expected to have picked up slightly to 11.9% in December (from 11.6% previously)
  • Mexico mid-month inflation (Thursday 24th February, 1200GMT) Mid-month inflation is expected to come in at 7.07%
  • Mexico Q4 GDP - revised (Thursday 24th February, 1200GMT) Q4 growth is expected to be unrevised at -0.1% (after -0.4% in Q3)
  • Colombian Central Bank interest rates (Friday 25th February, 1800GMT) The 

Brazilian inflation increased to 10.38% in January but is expected to have fallen back to +10.2% at the mid-month stage in February. This slight trend of moderation in inflation is also expected to show again in Mexico too, with Mexican mid-month inflation forecast at 7.07%.

Latam Inflation

The Colombian central bank is set to meet this week, but the seven-member committee will not vote on the interest rate. With inflation moving ever higher (likely to be around 7.6% in February) and the central bank is expected to hike by another 100 basis points in March to 5.0%.

Market Reaction

  • BRL and MXN will move on any inflation surprises. Signs of inflation being tamed would be seen as a positive for the currencies.
  • COP will be reactive to the language of the central bank signaling the size of the hike in March.