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Ukraine’s ongoing fight against the Russian invaders will continue to drive a lot of the market price action this week, particularly in the commodity space where we have seen a blowout in front-month crude. Elsewhere we are looking to see what the European Central Bank response to the crisis is when it meets on Thursday. And with inflation soaring, US CPI numbers will be the main data release in the coming days. 

Ukraine War 

Front and centre for investors this week is of course the war in Ukraine. The situation remains dynamic, and we cannot rule out just about any outcome at this stage. Stock markets have been moving on headlines but on the whole held up pretty well. Energy and other commodity markets have been a lot more volatile, with prices surging to 14-year highs across the board for things like Brent and wheat.  

ECB Response 

The European Central Bank meets on Thursday for a scheduled policy meeting. Only a few weeks ago we were talking about tightening: an end to the asset purchase programme and likely rate hike later this year. 

After its meeting at the start of February, it looked almost certain that the ECB was preparing markets for an abrupt change in forward guidance coming at the March meeting. Markets started pricing for hikes this year, but the situation in Ukraine has changed the calculation. But it’s not clear what direction the market will take. 

On Wednesday, amid a sharp rally for sovereign debt, markets were pricing in less than 15 bps worth of rate hikes by December by the European Central Bank; last week it was 35bps by year end. But by Thursday yields had rallied and the market was again pricing in a 95% chance of 30bps worth of hikes by December. Shifting sands make it hard to trade. 

ECB Governing Council member Gabriel Makhlouf said the central bank was likely to agree on a faster wind-down of asset purchases at its March meeting but agreement on when to raise rates are less clear. ECB’s Holzman said war could slow down tightening, keep QE going longer. 

There does seem to be a large range of potential outcomes in terms of the war, and an even larger variety of potential responses by the ECB. This should keep EUR traders on their toes. 

US Inflation 

Inflation is soaring in the US and elsewhere. The Russian invasion of Ukraine, and subsequent surge in commodity prices, is only going to make things worse. Last time out the headline CPI number hit 7.5%, the highest in 40 years, but traders are expecting it go higher still. Inflation swaps price CPI above 8% in the next few months. Does spiking inflation lead the White House to do what it needs to do and get the shale companies drilling again?  

Major economic data (times in GMT)

Sun Mar 6  9:30pm    AUD  AIG Services Index 
Mon Mar 7  12:30am    AUD  ANZ Job Advertisements m/m 
  6:45am    CHF  Unemployment Rate 
  7:00am    EUR  German Factory Orders m/m 
  7th-10th    EUR  German Retail Sales m/m 
  7:00am    GBP  Halifax HPI m/m 
  7:45am    EUR  French Trade Balance 
  8:00am    CHF  Foreign Currency Reserves 
  9:30am    EUR  Sentix Investor Confidence 
  8:00pm    USD  Consumer Credit m/m 
  11:30pm    JPY  Average Cash Earnings y/y 
  11:50pm    JPY  Bank Lending y/y 
      JPY  Current Account 
Tue Mar 8  12:01am    GBP  BRC Retail Sales Monitor y/y 
  12:30am    AUD  NAB Business Confidence 
  5:00am    JPY  Economy Watchers Sentiment 
      JPY  Leading Indicators 
  7:00am    EUR  German Industrial Production m/m 
  9:00am    EUR  Italian Retail Sales m/m 
  10:00am    EUR  Final Employment Change q/q 
      EUR  Revised GDP q/q 
  11:00am    USD  NFIB Small Business Index 
  Tentative    GBP  30-y Bond Auction 
  1:30pm    CAD  Trade Balance 
      USD  Trade Balance 
  3:00pm    USD  Final Wholesale Inventories m/m 
  Tentative    USD  IBD/TIPP Economic Optimism 
  9:45pm    NZD  Manufacturing Sales q/q 
  11:30pm    AUD  Westpac Consumer Sentiment 
  11:50pm    JPY  Final GDP Price Index y/y 
      JPY  Final GDP q/q 
      JPY  M2 Money Stock y/y 
Wed Mar 9  1:30am    CNH  CPI y/y 
      CNH  PPI y/y 
  6:00am    JPY  Prelim Machine Tool Orders y/y 
  6:30am    EUR  French Final Private Payrolls q/q 
  9:00am    EUR  Italian Industrial Production m/m 
  Tentative    GBP  Annual Budget Release 
  3:00pm    USD  JOLTS Job Openings 
  3:30pm    USD  Crude Oil Inventories 
  6:01pm    USD  10-y Bond Auction 
  11:50pm    JPY  PPI y/y 
Thu Mar 10  12:00am    AUD  MI Inflation Expectations 
  12:01am    GBP  RICS House Price Balance 
  7:00am    CHF  SECO Economic Forecasts 
  Tentative    CNH  M2 Money Supply y/y 
  Tentative    CNH  New Loans 
  12:45pm    EUR  Main Refinancing Rate 
      EUR  Monetary Policy Statement 
  1:30pm    EUR  ECB Press Conference 
      USD  CPI m/m 
      USD  Core CPI m/m 
      USD  Unemployment Claims 
  Tentative    CAD  ADP Non-Farm Employment Change 
  3:30pm    USD  Natural Gas Storage 
  6:01pm    USD  30-y Bond Auction 
  7:00pm    USD  Federal Budget Balance 
  9:30pm    NZD  Business NZ Manufacturing Index 
  9:45pm    NZD  FPI m/m 
  11:30pm    JPY  Household Spending y/y 
  11:50pm    JPY  BSI Manufacturing Index 
Fri Mar 11  Tentative    CNH  Trade Balance 
  Tentative    CNH  USD-Denominated Trade Balance 
  7:00am    EUR  German Final CPI m/m 
      EUR  German WPI m/m 
      GBP  Construction Output m/m 
      GBP  GDP m/m 
      GBP  Goods Trade Balance 
      GBP  Index of Services 3m/3m 
      GBP  Industrial Production m/m 
      GBP  Manufacturing Production m/m 
  9:00am    EUR  Italian Quarterly Unemployment Rate 
  9:30am    GBP  Consumer Inflation Expectations 
  Tentative    GBP  10-y Bond Auction 
  Tentative    EUR  German 30-y Bond Auction 
  Tentative    GBP  NIESR GDP Estimate 
  1:30pm    CAD  Employment Change 
      CAD  Unemployment Rate 
      CAD  Capacity Utilization Rate 
  3:00pm    USD  Prelim UoM Consumer Sentiment 
      USD  Prelim UoM Inflation Expectations 

 

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