The stock market sell-off grabbed the headlines and triggered a risk-off sentiment that had clear implications for currencies. Will the crash continue? The focus shifts back to the US with the inflation and retail sales reports. Here are the highlights for the upcoming week.
The US stock market sell-off on Monday set the tone for the week and was followed by another significant drop on Thursday. In this environment, the safe-haven yen is sought after and the US follows. All the rest lag behind. The pound stood out with gains amid a hawkish stance from the BOE. The euro received mixed messages from ECB officials. The RBA left rates unchanged as expected but weak Australian data added to the sell-off. The loonie also had its trouble: oil prices turned south. Will the sell-off continue?
UK inflation report: Tuesday, 9:30. After the BOE turned hawkish, market expectations for a rate hike in May have risen quite substantially. However, a lot depends on the inflation keeping up. Headline CPI stood at 3% y/y in December and now we get the first release for 2018. Core CPI was 2.5%.
German GDP: Wednesday, 7:00. We already have a preliminary estimate of euro-zone GDP, but that did not include the largest economy: Germany. The locomotive of the euro-zone saw a very robust growth rate of 0.8% in Q3 2017. We will now get an estimate for the Q4 and the full year.
US inflation: Wednesday, 13:30. Inflation is the missing ingredient: with solid growth, an upbeat job market and even higher wages, the absence of inflation is a “mystery” as former Fed Chair Janet Yellen described it in the past. Core CPI rose by 0.3% m/m in December and 1.8% y/y. A rise here is the key. Headline inflation was only 0.1% higher.
US retail sales: Wednesday, 13:30. The US economy is focused on consumption, making this a top-tier indicator. However, with the growing importance of inflation and the simultaneous publication, an “as expected” outcome on CPI would be needed to put more emphasis on sales. In December, both headline and core sales rose by 0.4%.
US PPI: Thursday, 13:30. The Producer Price Index usually has more impact when it is released before the CPI, but it still carries a lot of weight. PPI and Core PI both slipped by 0.1% back in December. Note that the Empire State Manufacturing Index (17.7 last time) and the Philly Fed Manufacturing Index (22.2 last time) are published at the same time.
US housing data: Friday, 13:30. Building permits and housing starts have a significant impact when they move in tandem but they can also offset each other. In December, building permits stood at a high annualized level of 1.30 million. Housing starts lagged behind with 1.19 million. Note that the US releases import prices at the same time.
US consumer sentiment: Friday, 15:00. The University of Michigan’s consumer confidence measure was at 95.7 points in the final read for January. It will be interesting to see if the stock market downturn will have had an impact on sentiment in the preliminary read for January.
*All times are GMT
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