• The week ahead ??“ The usual G7 chatter
  
• Informa Global Markets Calendar for the week ahead
  
  

The week ahead

The Usual G7 Chatter

The Dollar continues to remain under pressure with the FINEX Dollar basket drifting vulnerable around the 83 handle despite some unwinding of the more dovish of Fed expectations. Cable has continued to outperform in an environment that has generally favoured the high yielder. This has left the carry currencies at the bottom of the pile. In addition, in a holiday affected week, European markets will be reacting to this Friday??™s US payrolls outturn with a very foreshortened US trading day on Good Friday.

Next week provides some relaxation on the busy data/events schedule. Attention at the end of the week swings to Friday??™s G7 meeting (followed by the semiannual World Bank/IMF conclave at the weekend). The former is more a focus for FX markets. The February G7 linked of statements about the Japanese recovery being on track and that exchange rates should reflect fundamentals was an implicit side swipe at the Yen. At the same time, the statement repeated the desirability of greater flexibility in emerging markets ??“ namely China - and also carried warnings that carry trades are not one-way bets. However, given the continued expression about the undesirability of disorderly and volatile FX moves, plus FX developments since the last G7, any statement this time is unlikely to be any more concrete than that in February. Nonetheless, pre-G7 chatter could run around markets and generate some potential funding currency short covering.

US remains in the background as the unwinding of dovish Fed expectations. The focus is thus on March PPI Friday which turned out firmer than expected in February, and higher March energy prices risk another upside impulse. The trend in y/y terms has been for PPI to pick up after the October low (negative) read. With attention shifting back towards prices, the number could provide some support for the Dollar. The US February trade balance is released the same day. This has dropped to average around the Usd 60 bn mark, the levels of June/July last year. However, given the focus elsewhere, the trade side remains the poor relation of the US data slate.

Canada also has its February trade release Friday as well, although again this is not really an issue for the Loonie and is comfortably above the average of the last five years. Little change is seen in this scenario. More importantly, the BoC??™s Deputy Governor Kennedy speaks Thursday. Given the jump in February inflation, any policy comments will particularly be scrutinised to see if the BoC is potentially hardening its stance ??“ key March inflation is released the week after next. Canadian new house prices are out Wednesday. Prices are moderating off recent peaks, but albeit with a continuing relatively robust tone.

Central bank meetings continue, starting with the BoJ Monday/Tuesday and the subsequent press conference. With inflation turning negative and therecent Tankan survey slightly less robust, rates are expected to remain comfortably on hold. Otherwise expect BoJ to maintain its assessment that the economy is "expanding moderately" in its monthly economic report. On Monday, March??™s economy watchers poll will be eyed closely whilst on Wednesday sees a heap of data. Feb core machinery could pull back after January??™s surge, but overall remain firm. February??™s current account surplus is expected to widen out solidly amid ongoing strength in the exports. March M2+CDs should maintain a 1.1% y/y pace, and bank lending, although cooling, mark a 13th monthly gain. Consumer confidence for March will be eyed later on to see whether consumption will be kept abreast. Wrapping up; Thursday??™s March CGPI is seen remaining soft.

In the Eurozone, Trichet takes a starring role with Thursday??™s ECB policy meeting takings the headlines. ECB speak remains hawkish with some indications that policy is still seen as accommodative. Moreover, the latest CPI/M3 data is particularly rate hike friendly with inflation edging back up to the 2% ceiling and M3 now in double figures. However, having raised rates 25 bp in March and refrained from using the appropriate key phrase of "strong vigilance" on prices that signals a hike at the next meeting, there is little likelihood of a change in the 3.75% refi rate. So the focus remains on the press conference and what signals ECB Governor Trichet seeks to provide. ECB speak has remains relatively hawkish but Trichet is unlikely to fall into the trap of 2006 and Q1 this year of pre-committing the ECB well in advance. The data slate is relatively empty - French industrial production and manufacturing output Tuesday are of note. With sentiment indicators strong in Feb, January??™s dip should be reversed.

Elsewhere the UK starts to pitch up into the following week??™s cornucopia with the Q1 BCC quarterly manufacturing survey and March RICS house price balance Thursday. The latter is closely watched by the BoE, and has cooled from the elevated levels of Nov. This could continue into March but still remains above the long term average. The RICS expects that affordability will decrease, but prices in London and the South East remain strong due to demand/supply factors. Meanwhile, the BCC survey jumped up in Q4 and should maintain this elevated tone in Q1. UK February global trade balance (February) released Thursday. This could retreat from January??™s large jump, but nothing to should home about.

The other stars on the scene are the Scandinavian March inflation releases Norway Tuesday and Sweden Thursday. Seasonal factors boosted the February read in Norway, while the Swedish headline jumped higher, but the core targeted by the Riksbank slipped. The Norway headline has been flattered by electricity prices (regulated). Overall core inflation remains well below target, and central banks are hanging their policy normalisation more on activity indicators. Wednesday sees both industrial production indices for Norway and Sweden (March and February respectively), plus Feb orders for the latter. Production and industrial orders fell in Sweden in January, and should recover in February to continue the solid trend of output. The same pattern should be repeated in Norway.

As for the antipodeans, Australian data dominates in the post-RBA environment. The focus is firmly on Thursday??™s March labour force report. Another month of solid jobs growth is expected and unemployment easing back to January's record 31yr low of 4.5%. With some evidence now emerging that wages are starting to increase at a faster rate than the central bank would like, the RBA will be wary of further strong gains. As a precursor, job advertisements are due Tuesday. In NZ, NZIERS Q1 Quarterly Business Survey of Opinion (QSBO) will be potentially market moving. It is likely to maintain a robust tone. Key will be on whether capacity constraints have remained extreme and pricing intentions tick higher, placing pressure on RBNZ to act on rates again. February retail sales are due on Thursday, with another month of solid growth likely. Overall, the data should keep rate hawks barking.