FX G10 key events: a rich data week - Nomura

FX G10 key events: a rich data week - Nomura

28 March 2016, 00:29
Vasilii Apostolidi

Analysts at Nomura Bank gave us the this week’s headline events (all times are GMT).

"1. US: Core PCE MoM (Monday 13:30), Employment Report (Friday 13:30), ISM Manufacturing (Friday 15:00) 2. Europe: Euro area inflation (March) (Thursday 10:00) 3. Japan: Labor Force Survey (Tuesday 00:30), Industrial production index (Wednesday 00:50), March BOJ Tankan (Friday 00:50) 4. China: Manufacturing PMI (02:00).

"A data-rich week coming up, with the employment situation, ISM manufacturing and PCE inflation for February the highlights for the U.S. Our economists expect the relevant PPI data to be a drag of 2bp to core PCE inflation, following a positive 2bp contribution in January. On the other hand, the strength in the CPI’s core goods prices should boost core PCE inflation enough to potentially offset the negative impact from PPI data. They forecast a 0.183% increase in core PCE price index in February, which would keep the y-o-y comparison at 1.7%. The slowdown in job growth in January proved to be transitory with gains picking up in February. 

Employment indicators from the manufacturing sector point to fewer layoffs and initial and continuing claims data remain stable at very low levels. Our economists forecast that NFP added another 230k workers in March with 5k coming from the government sector, while the unemployment rate should be unchanged at 4.9% in March. 

The ISM manufacturing indicator showed a meaningful pickup in February (+1.3 points to 49.5), signaling that the pace of contraction seems to be slowing (we expect the index to make further progress toward 50 and edge higher to 49.8 in March) (see The Economy Next Week, 24 March 2016). 

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In Europe, the key release will be the flash estimates of euro area March inflation. Our economists forecast flash March HICP (31 March) to remain unchanged at -0.2% y-o-y (lowest level since February 2015), where the negative energy price base effect (around -0.2pp on the headline) will be the main drag on the annual inflation rate this month. Core inflation should rebound to 1.0% y-o-y in March, due to an earlier Easter this year boosting a number of volatile seasonal core inflation components. 

On oil base effects, assuming oil prices remain at around $40, oil price base effects will contribute positively starting around April’s numbers, which could begin to lift headline CPI inflation in much of G10 (notably including the Eurozone and Japan) as soon as April. We estimate that the cumulative contribution from base effects on CPI over the next 12 months to be around 1.1pp in the Eurozone.

In terms of the UK, our economists expect ONS’s third estimate of Q4 GDP to be unrevised from 0.5% q-o-q. In Japan, we expect the February unemployment rate to come in at 3.2% (unchanged from January amid mixed signals) and job openings-to-applicants ratio at 1.30x. On industrial production, our economists expect the headline index to be down 6.0% m-o-m for February. 

In terms of the March BOJ Tankan, we expect current business conditions DI for large non-manufacturing to come in unchanged at 25 from December. For the manufacturing sector business conditions DI for March, we see key factors as weakness in exports and industrial production, and we expect a fall in the BOJ Tankan reading. In China, we expect China’s official PMI to indicate stabilizing growth (rise to 49.4 in March from a 51-month low of 49.0 in February), albeit at low levels."

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