- Much busier day for statistics sees 'flash' PMIs, UK labour and PSNB
data, South Africa CPI and US Existing Home Sales; BoE testimony
accompanies FOMC minutes and Fed speak: US to sell 5-yr
- UK labour data: strong employment gain expected, but all eyes on expected
no change in Average Weekly Earnings
- MPC testimony: looking for some clarification on modest shift in policy
outlook at last MPC meeting
- G7 'flash' PMIs: slight dip expected for Eurozone after January jump,
France surprises downside; US seen little changed
- FOMC minutes: discussion on inflation perhaps the key element, along
with loose financial conditions
- US Existing Home Sales: modest rise expected, super low inventories
may be a headwind
- Charts: US Financial Conditions Index, US Existing Home inventories
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** EVENTS PREVIEW **
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After the relative famine to start the week, today's schedule has plenty to digest, starting off with the low but slightly above forecast Australian Wages data, which remain a large distance away from RBA governor Lowe's 3.5% objective. Ahead lie the run of G7 'flash' PMIs, UK Employment, Wages and PSNB budget readings, South African CPI and US Existing Home Sales. On the central bank front, Carney and fellow BOE MPC members testify on the Q1 Inflation Report, ahead of the FOMC minutes and speeches by Harker and ueber dove Kashkari, while in earnings terms there are reports from Accor, Glencore, Iberdrola, Lloyds Bank & Orange, and across the pond Avis Budget and DISH Network. Last but not least there is more govt bond supply from the US with $15 Bln of 2-yr FRN and $35 Bln of 5-yr Treasury Note. Yesterday's deluge of Treasury supply was well absorbed across the spectrum, given that the Street bids for the 2-yr were the highest since 2015, and yields did not budge when they were allotted more than expected (40.3%), suggesting that Treasury market is now priced for the sharp increase in overall supply, as such the remaining supply today and tomorrow should be well received, and give scope for a modest short-term rally. In terms of the run of flash PMIs a marginal setback is expected in the Eurozone readings after stronger than expected prints in January, but overall levels will remain robust, while the US Manufacturing PMI is expected to hold at its 3-yr high, while the Services PMI is seen edging up to 53.7, having drifted lower for the past 5 months since peaking at 56.0 in August (though this is in contrast to the more reliable Non-Manufacturing ISM).
** U.K. - Dec/Jan labour data / Jan PSNB **
- After a hiatus in Q3 2017, labour demand looks to have picked up quite sharply in Q4, with the Oct-Dec LFS Employment measure seen accelerating up to 165K, not far off the best levels of 2017 (July +181K), though the Unemployment Rate is expected to be unchanged at the 4.3% cyclical low for a sixth consecutive month. But as ever, it will be the Average Weekly Earnings that attract most attention, though the consensus looks for no change from 2.5% y/y headline and 2.4% ex-Bonus, thus leaving real earnings still firmly in negative territory. January is the month for income tax returns and as a result sees a large monthly PSNB surplus, which is expected at £-11.4 Bln, somewhat weaker than Jan 2017's £-13.18 Bln (though that was revised from a preliminary £-11.7 Bln. As ever one eye needs to be case in the direction of VAT receipts, particularly given the weakness seen in Retail Sales. In the wake of other rather mixed UK data, and a perhaps overly hawkish market interpretation of the BoE's February Inflation Report and policy meeting, Carney & Co will testify to the Treasury Select Committee, and it will hopefully shed some light on whether they were actually using the upward shift in market rates to carve out some additional room for manoeuvre, taking a leaf out of the Fed's playbook two year ago, as would appear to be the case given Broadbent's and Haldane's comments post MPC meeting.
** U.S.A. - Jan Existing Home Sales / FOMC minutes **
- January Existing Home Sales are seen up a modest 0.9% m/m to a very solid 5.62 Mln SAAR pace, though the big question is whether the 20-yr low of just 3.2 months' worth of supply seen in December proves to be a headwind for sales. The FOMC minutes are unlikely to dispel or even dent the view that the Fed will likely hikes rates again in March, the key point of interest will probably be the discussion around the growth and inflation outlook, as well as the committee's view on financial conditions, which have since tightened, though remain well below where they were at the start of last year (see chart).
from Marc Ostwald