Top Things to Watch this Week

The main U.S. stocks indexes ended lower on Friday after a stronger than expected producer price inflation.

Once again, a near-term interest rate cut becomes a scenario farther away.

Latest stats indicate that financial markets see just a 10% chance of the Fed cutting rates in March, while the odds for May stand at about 30%. Markets are pricing in a 75% chance that rates will only be lowered by the end of June.

This week starts with a holiday in the U.S. - the Presidents' Day - so take your time to look at charts and plan your trades.

February 19th

China: Markets reopen after Lunar New Year holiday

Spending patterns during the holiday suggest consumption in China has revved up even as the broader economy struggles with deflation and a property crisis.

Chinese stock market is expected to open in a bullish trend. Authorities managed to stem the equities rout ahead of the holiday, with state funds driving up purchases to reduce selling pressure. Such moves enabled the benchmark CSI 300 Index to rebound from a five-year low and climb 5.8 per cent in the week before the holidays.

A continuation of the rally would be pivotal for the world’s second-largest market. Traders are pinning their hopes on further policy support across the monetary and fiscal space.

February 20th

Canada: Consumer Price Index (CPI) YoY

The BoC (Bank of Canada) admitted that although data shows interest rate hikes are slowing down the economy, the underlying inflation is still a concern.

BoC monetary policy managed to cool down inflation from highs of 8.1 per cent in the summer of 2022. However, the CPI has been running steady in a range near 3% over the past half year. As long as prices hold this pattern no interest rates moves are expected.

February 21st

US: Federal Open Market Committee Minutes (FOMC)

This is the event of the week. The FOMC Meeting Minutes are a detailed record of the committee's policy-setting meeting held about three weeks earlier. These debrief normally gives additional clues and detailed insights regarding the FED stance on monetary policy.

No one is expecting for a rate cut this quarter and the US dollar (USD) has been on a bullish trend, supported by increasing speculations that the FED will delay the easing cycle of its monetary policy later than anticipated.

February 22nd

Germany: HCOB Germany Manufacturing PMI

The Hamburg Commercial Bank (HCOB), is a leading indicator gauging business activity in Germany’s manufacturing sector. A reading bellow 50 is a signal of economic contraction.

Europe's biggest economy is set to remain among its weakest. The International Monetary Fund predicts Germany will only grow 0.9 percent in 2024, well below the 1.4 percent it predicts for advanced economies in general in 2024.

Bad news for Germany are no good news for Europe... Manufacturing industries face the same problemas everywhere - global rate hikes and heightened energy prices - but German companies are more sensitive to China tailwind. As long as the Chinese economy continues in an eminent crisis situation, the lower the possibilities of an economic recovery in this European leading country.

Euro Area: ECB Monetary Policy Meeting Account

Euro Area data suggests that the European Central Bank (ECB) is likely to be the first major Central Bank to start cutting rates. If this week’s EU and German data continues to highlight weakness, these expectations will rise, and such assumption is likely to weaken the Euro in the weeks ahead.

However, some caution is recommended, hence the ECB fears that a bad timing on rate cuts could make inflation rise again.