Week ahead: Could the Fed be swayed by RBNZ hike?

Here are the week’s key events:

Citigroup says traders should start to price in the risk of a rate hike by the Fed. If that’s so then a potential increase in rates by the Reserve Bank of New Zealand (RBNZ) would be a major event for markets. For the first time since May 2023, a rate hike is a real possibility. Meanwhile traders will keep watch on the latest PCE inflation data and more earnings reports out of the US.

Monday: Quiet Start to The Week, U.S. New Home Sales

A relatively quiet start to the week with little in the way of high impact economic data. US new home sales will be of marginal value. Keep an eye on Japan’s national core CPI inflation, with expectations of when the Bank of Japan might begin to recalibrate monetary policy fluctuating on seesawing economic data. Covid-era favourite Zoom reports earnings.

Earnings: Zoom Video Communications (ZM)

Tuesday: U.S. Durable Goods Orders, Consumer Confidence Report

A couple of important U.S. releases to consider. First up is durable goods orders, which are bit of a leading indicator for demand. The CB consumer confidence report is also closely watched, not just for how households view the economy but also inflation – a month ago average 12-month inflation expectations fell to 5.2 percent, the lowest since March 2020. The Richmond Fed manufacturing index and Case-Shiller house price data are also due out. Ahead of these the European session features the start of a slew of earnings releases this week alongside the German GfK consumer climate survey.

Earnings: Davide Campari-Milano (CPR), SIG Group (SIG), Virgin Galactic (SPCE), Lemonade (LMND)

Wednesday: New Zealand Central Bank Interest Rate Decision

All eyes on the RBNZ with some forecasters indicating a hike is on the table. ASB says it’s the first RBNZ meeting since May for which an OCR increase is a realistic possibility. Whilst it expects the central bank to remain on hold, it is mindful of the relative intolerance the RBNZ seems to have for transitory inflation shocks due to the underlying inflationary pressures.

Meanwhile ANZ expects the RBNZ to hike this week and in April to take the official cash rate to 6.0%. “If inflation pressures were to be stronger than anticipated, the OCR would likely need to increase further”, the RBNZ warned in November. Since then, inflation has marginally surprised on the upside, ANZ’s chief economist Sharon Zollner says. A hike would certainly create some angst in markets that the RBNZ is not going to be an outlier. Updated Q4 GDP figures from the US are also due, whilst Australian CPI inflation data could have a bearing on the RBA, particularly if the RBNZ is active.

Earnings: Baidu (BIDU), AMC Entertainment (AMC), Salesforce (CRM), Snowflake (SNOW),

Thursday: China PMIs, Bank of Japan Core CPI Data

The day starts with China’s official February manufacturing and non-manufacturing PMIs. The manufacturing PMI edged up in January but remained in contraction, betraying the Chinese economy’s sluggish recovery. The non-manufacturing index improved further into expansion.

Elsewhere, Japan’s BoJ core CPI data will be watched for clues about the central bank’s next steps. German preliminary CPI inflation data could swing things for the European Central Bank so the euro will be worth watching. Later the big release is the US PCE inflation reading. This has offered the Fed reason to remain hopeful, with the December reading decline to to 2.9% in from 3.2% in November, versus expectations for 3.0%.

Earnings: Air France – KLM (AIRF), Anheuser-Busch Inbev (ANHJ), International Consolidated Airlines Group (IAG)

Friday: Eurozone Flash CPI Inflation Data

If the ECB sat up for the German inflation numbers, it will be watching the flash CPI inflation data for the Eurozone like hawks (or doves). Inflation in January was down to 2.8%, whilst the core reading declined to 3.3%, offering scope for the ECB to lead on rate cuts sooner than G10 central bank peers.

Elsewhere, China’s Caixin manufacturing PMI and US ISM manufacturing PMIs are the other major economic data releases. And we hear from RBNZ governor Orr in the wake of the monetary policy decision earlier in the week.

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