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The Week Ahead: US inflation to Guide Fed Policy Route

Feb 10, 2023
3 min read
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    With the Federal Reserve entering a new phase of data-dependence, all eyes this week will be on the US inflation data for a clue about how much the central bank hikes further and when it might be inclined to pause rate increases. “The reality is we’re going to react to the data,” Powell said last week, adding that the Fed may well need to raise rates “more than is priced in” by markets. Two separate inflation reports this week will be essential to deciding where the Fed goes next.

     

    Here are the week’s key events:

    Monday

    The focus on inflation starts with Swiss CPI numbers out the gate early on Monday. Eurogroup meetings of Eurozone finance ministers kick off in Brussels and German wholesale inflation data is also due. Later the Japanese preliminary GDP price index is due.

    Earnings:  Arista Networks (ANET), Palantir Technologies (PLTR)

     

    Tuesday

    US inflation data is the major event of the week with markets looking for further signs of disinflation. CPI declined to 6.5% from 7.1% a month ago, fuelling hopes that the Federal Reserve can look to slow and stop rate hikes. Many will be looking at the month-on-month core inflation level, which was still running at +0.3%. New Zealand inflation expectations are due out overnight ahead of the latest unemployment and earnings data for the UK, which might have a bearing on sterling crosses as markets figure out what the Bank of England may do next.  

    Earnings: Coca-Cola (K), Airbnb (ABNB), Upstart Holdings (UPST)

     

    Wednesday

    More US data on tap with the latest retail sales numbers and the Empire State manufacturing index. Business activity contracted sharply in New York State, according to the January 2023 survey. The headline general business conditions index fell 22 points to -32.9, the lowest level since May 2020, at the height of the pandemic. Meanwhile retail sales posted their sharpest decline in a year in December, slipping 1.1% (core –0.7%) amid signs the US economy is losing momentum.

    Earnings: Barrick Gold (GOLD), Kraft Heinz (KHC), Shopify (SHOP), Cisco Systems (CSCO), Roku (ROKU), Twilio (TWLO), Barclays (BARC)

     

    Thursday

    US producer price index (PPI) inflation is next up with investors looking at this as a leading indicator for consumer inflation. PPI increased 6.2% in December, down sharply from the 7.3% in November as the index declined the most in two years. Dollar bears and equity bulls alike will be hoping for more disinflationary signals this time.

    Earnings:  Applied Materials (AMAT)

     

    Friday

    With Reserve Bank of Australia governor Lowe set to speak, AUD crosses may be in for action. At the start of the European session the latest UK retail sales report is due, with final French CPI inflation shortly after. Not a lot in the US session except the Conference Board leading index and possibly the first biannual Fed monetary policy report. 


    Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients. 

    Neil Wilson
    Written by
    Neil Wilson
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