Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt Jones, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Thank you very much Matt. It's great to be here.
So, many of the elements that we discussed last week still dominate, especially as we look into next week, and we have additional data releases that are going to be in focus. So perhaps you can look into next week and tell us what you're going to be focusing on.
Absolutely. Yeah. Thanks Matt. As you say, the US data continues to be the dominant force in financial markets at the moment. Last week we discussed the impact of the January employment report and its seasonal distortions. This week US CPI and retail sales have added to the hawkish rate repricing in the US. Now, next week, it is likely that the US rate repricing conundrum continues to dominate. But there are a couple of other things we'll be keeping a close eye out for. In Europe next week we get both ZEW and IFO indices for Europe. Analysts expect a further improvement in both sentiment indices. But both likely boosted by the continued improvement in activity and outlook driven by the China reopening, much of which has yet to feed through into the data and the surprising collapse in the natural gas price as a function of a mild winter and expansion of alternative energy sources. The energy price decline and by extension the far greater residual gas storage volumes translates into a huge amount of euros that won't need to be sold for dollars to buy gas this year. And along with the FX hedging cost implications for global bond holdings favoring Europe, there's another factor that keep us bullish EURUSD this year and something we discussed further in the blog this week.
Secondly amid the debate on monetary policy at the moment and higher rate paths. Next week we'll see a strong focus on the UK and Australia. Now in the U K where this week, Bank of England, chief Economist highlighted the loosening of the labor market and the need to slow the policy increment to prevent over tightening house price data will be a key focus to gauge the impact on the interest rate sensitive sectors of the economy. In Australia, we get RBA minutes from the February meeting following two consecutive weak employment reports in Australia that have led concern at the RBA this week. The RBNZ, are also expected to hike 50 basis points next week to add to this complexity.
And then lastly, we get the FOMC minutes for the February policy decision. Now, after the recent strong data market sentiment has swung back wildly in the direction of higher rates and higher terminal rates. However, while some Fed speakers retain a hawkish narrative this week, we are more inclined to see recent data as anomalous to the underlying trend and distorted by pandemic seasonality. Furthermore, inflation while disappointing analysts this week is already significantly below the Fed December forecast, and thus it is not clear that the fed dots will be revised significantly higher as a function. and as markets now expect. We expect the inflation growth debate to remain dominant next week and the details of the FOMC meeting to be forensically examined, plenty to focus on this week.
Fantastic. A lot to be looking out for in the week ahead, as always. In the meantime, it's the weekend, perhaps slightly quieter, although still some notable things to be watching out for. So what are you going to have your eye on?
Absolutely. Yeah, we get a break from Six Nations this week. A chance to spread our focus a little more widely. A full premiership schedule this week with Liverpool, Newcastle, and Spurs, West Ham, the pick of the action. Half an eye on Tiger Woods's performance at the Genesis invitation after a competitive start birding the final three holes on the first day now, but my attention, will probably be mostly drawn to the very un-sociably timed cricket test ,New Zealand versus England, the day night format, making tactics, concentration, and even eyesight, more of a factor in the proceedings. All great entertainment for the weekend.
Absolutely a fascinating format, but also not too long to wait for the return of the rugby as well. Thank you very much for joining us and for outlining your thoughts on the week ahead. I look forward to catching up with you again next week.
Thank you for joining us for "The Long and Short of the Week Ahead". Further insights are available on our website eurizonsljcapital.com/insights. We look forward to you joining us again next week for more insights into macro-economic events and "The Long and Short of the Week Ahead".
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