The Week Ahead – Banking Crisis Puts the Fed and the BoE in Focus
On the Macro
It’s a busy week ahead on the economic calendar, with economic indicators, the Fed, and the Bank of England in focus. Following reports of UBS AG (UBS) entering into talks to acquire Credit Suisse Group (CS), banking sector-related news will also draw plenty of interest.
For the Dollar:
It is a quiet start to the week, with no economic indicators for investors to consider until Tuesday.
However, existing home sales for February should have a limited impact on investor sentiment. The Fed will deliver its final interest rate decision of Q1 on Wednesday, with the markets betting on a 25-basis point interest rate hike despite the deepening banking crisis.
A 25-basis point interest rate hike would place the focus on the FOMC projections, rate statement, and Fed Chair Powell press conference. The Fed may talk about pausing rate hikes to assess banking sector contagion risk and could even signal a rate cut later in the year.
On Thursday, jobless claims will be in focus ahead of private sector PMI numbers and core durable goods orders on Friday.
With plenty for the markets to consider this week, investors should also monitor FOMC member chatter.
For the EUR:
It’s a busy week and another significant week for the EUR.
German wholesale inflation and euro area trade data will draw interest on Monday. The euro area trade data should have more influence, barring a spike in German wholesale inflation. However, ECB President Lagarde could overshadow the numbers. Comments relating to the banking sector and the impact of the deepening banking crisis on monetary policy would move the dial.
On Tuesday, the focus will shift to ZEW Economic Sentiment numbers for Germany and the Eurozone. As investors grapple with the implications of a banking crisis, a slide in economic sentiment would weigh on the EUR/ISD.
However, prelim private sector PMI numbers for March will be the material stats for the week. On Friday, prelim numbers for France, Germany, and the Eurozone will be in focus.
ECB commentary also needs consideration. ECB President Lagarde will speak again on Tuesday and Wednesday, with ECB Chief Economist Philip Lane in the spotlight on Wednesday and Thursday.
For the Pound:
It is a big week ahead for the pound. February inflation figures will draw plenty of interest on Wednesday ahead of the Thursday Bank of England monetary policy decision.
A hotter-than-expected CPI Report could raise bets of a more aggressive BoE interest rate hike. The markets expect a 25-basis point rate hike to 4.25%.
Following the policy move, retail sales and private sector PMIs will provide direction on Friday. A rise in the services PMI and solid retail sales figures should provide GBP/USD support.
For the Loonie:
It is a busy week ahead on the economic calendar for the Loonie. On Tuesday, inflation figures for February will draw interest, with retail sales figures on Friday also likely to move the dial.
Out of Asia
For the Aussie Dollar:
It is a quiet week ahead for the Aussie Dollar.
On Monday, RBA Assistant Governor Kent will be in focus ahead of the RBA meeting minutes on Tuesday.
In early March, RBA Governor Philip Lowe delivered an unexpectedly dovish tone, raising the possibility of pausing interest rate hikes. A similar consensus from other board members would test AUD/USD support.
From elsewhere, private sector PMI and market risk sentiment will also influence. A deepening banking crisis would weigh on the AUD/USD.
For the Kiwi Dollar:
For the Kiwi Dollar, trade data for February will draw interest on Tuesday. Following the larger-than-expected economic contraction in Q4, weak numbers would further pressure the Kiwi Dollar.
On Wednesday, consumer sentiment figures for Q1 will also provide direction. Risk aversion and weak consumer sentiment figures would be NZD/USD negative.
For the Japanese Yen:
It is a quieter week ahead for the Japanese Yen. Inflation and private sector PMI numbers will be in the spotlight on Friday.
With the Bank of Japan unwavering on its ultra-loose monetary policy stance, the Services PMI would garner more interest. A pickup in service sector activity should deliver Yen support.
Out of China
The PBoC will set the 1-year and 5-year loan prime rates on Monday. However, economists forecast the PBoC to leave the 1-year and 5-year LPRs at 3.65% and 4.30%, respectively.
The war in Ukraine and China-Russia relations will remain the focal point. However, investors should monitor events in France as protests rage over Marcon’s pension reforms.