Morning Brief – Data resumes

Data resumes

The start of this week was particularly data light. With most major pairs still trading within recent ranges, markets are missing a catalyst in inject volatility. That may be a welcome scenario but with the data calendar becoming increasingly dense over the coming trading sessions, let’s take a look at some potential risks. Yesterday’s perhaps only notable data release was the sentiment data published within some eurozone nations and for the area as a whole. The key impression from a growth perspective was that Eurozone economic sentiment continues to fall. The one potential positive of this reality comes from an inflation narrative, with the data also showing that price expectations amongst consumers are falling.

The publication was enough to move the dial within European fixed income and FX slightly, but certainly not by any means large enough to force a significant repricing of either asset class. The next Fed decision is due on March 20th with Fed speakers unanimously agreeing that the FOMC will be led by data when transitioning into rate cuts. The Fed will of course be looking at a host of economic data but none more so than its preferred inflation measure: the PCE deflator. This item of data is due to be read today at 13:30pm GMT. Forecasts suggest a fall of 0.1% within the core PCE deflator to 2.8% in January with a slightly larger fall to compare with the December figure in the headline PCE index to 2.4%. 

Measures of core inflation have been seen recently as more meaningful with respect to gauging sentiment at the central bank level. That said, a downside miss within either statistic would trigger USD selling on spot markets with yields likely to fall should such an outcome prevail. There are several data points that will present risks to EURUSD over the next week and offer the potential for further significant volatility. Tomorrow, notably Eurozone January CPI inflation will be read ahead of the ECB’s latest decision due next Thursday. Sentiment data in the US will be due tomorrow ahead of the closely watched non-farm payroll data due next Friday. After a slumberous data calendar, several key risks now present themselves that shouldn’t be underestimated. 

Discussion and Analysis by Charles Porter

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