Key Events This Week: Drum beat of war continues, inflation risks remain

The escalation of troops and military armaments, the non-stop headlines about explosions here and skirmishes there have caused very choppy financial markets in recent sessions, and this only looks set to carry on in the near term. Of course, geopolitics can be tricky to trade, but opportunities for intraday traders to take advantage of overbought and oversold markets are plentiful in this environment.

Here are some of the key events for investors and traders worldwide this week:

Monday, February 21

• CNH: China loan prime rates
• EUR: Eurozone February Markit PMIs
• GBP: UK February Markit PMIs
• US markets closed for Presidents’ Day

Tuesday, February 22

• AUD: Australia weekly consumer confidence
• EUR: Germany February IFO business climate
• GBP: BOE member Dave Ramsden speech
• USD: US February Markit PMIs and consumer confidence

Wednesday, February 23

• NZD: RBNZ rate decision
• GBP: BOE Governor Andrew Bailey appears before Treasury Committee
• EUR: Eurozone January CPI (final print)

Thursday, February 24

• GBP: Speeches by BOE Governor Andrew Bailey, and BOE Chief Economist Huw Pill
• US crude: EIA crude oil inventory data
• USD: Weekly jobless claims and 4Q GDP (second print)
• USD: Fed speak – Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic
• Alibaba earnings
• Moderna earnings
• Dell earnings
• Coinbase earnings

Friday, February 25

• EUR: 4Q GDP for Germany and France (final prints)
• EUR: Eurozone February economic and consumer confidence
• USD: US January personal income and PCE deflator, February consumer sentiment

 

It’s a long weekend in North America which means US markets are closed on Monday.

The blurry picture around the Ukraine may clear when the US Secretary of State and his Russian counterpart meet sometime this week. With markets still very tense and uncertainty around diplomatic developments, the dollar should find support with safe-haven demand to the fore.

Fed, Fedspeak and rate hikes

Support for the buck should also be helped by market expectations for Fed rate hikes. Speculation about a 50bp move in March has turned down slightly, as last week’s FOMC minutes didn’t provide strong signals for favouring either a 25 or 50bp hike, with the market currently pricing in around a 30% risk of the latter.

There will be more Fed officials on the wires this week to focus on in the lead up to the blackout period ahead of that pivotal mid-March meeting. The Fed’s favoured inflation gauge, the core PCE deflator, will be released on the last day of the month and is expected to remain elevated near 40-year highs. It should also shed some light on how well consumption held up in January. Any positive surprises in the data could boost the greenback and push the dollar index out of its current narrow range.

 

RBNZ expected to raise for a third time

The most active major central bank, the RBNZ, meets on Wednesday with another 25bp rate hike fully priced in by money markets. This would take rates to 1% and the bank is expected to raise its forecast peak in the cash rate to 3%, but there is only small chance of a bigger half-point move.

Developments since the last review three months ago have been positive for the interest rate outlook with bumper inflation prints, though the Omicron effect may make the data messy for the next few months. There has also been a faster-than-expected cooling in the housing market.

The kiwi touched trendline resistance last Friday as it tried to rebound from its late January low at 0.65292.

Risk sentiment will need to change heavily with the Ukraine crisis pointing to de-escalation, or the RBNZ surprise with a bigger rate move, to extend the bounce in the kiwi.

 

Ukraine crisis risk aversion Federal Reserve FOMC Fed rate hike RBNZ Reserve Bank of New Zealand inflation Omicron