It’s a busy week of important data releases and a major announcement out of Japan:

Monday, February 13

• EUR: ECB Governing Council member Mario Centeno speech
• USD: Fed Governor Michelle Bowman speech

Tuesday, February 14

• AUD: Australia February consumer confidence
• JPY: New BOJ Governor to be announced by Japanese PM; Japan 4Q GDP
• EUR: Eurozone 4Q GDP and employment data
• GBP: UK December unemployment, January jobless claims
• USD: US January CPI; speeches by Dallas Fed President Lorie Logan, New York Fed President John Williams, Richmond Fed President Tom Barkin
• US earnings: Coca-Cola, Airbnb, Marriott International

Wednesday, February 15

• GBP: UK January CPI
• EUR: Eurozone December industrial production
• USD: US January retail sales and industrial production

Thursday, February 16

• CNH: China January new home prices
• AUD: Australia January unemployment; February consumer inflation expectations
• USD: US weekly initial jobless claims

Friday, February 17

• AUD: RBA Governor Philip Lowe speech
• USD: Richmond Fed President Thomas Barkin speech

Markets are still erring on the bullish side of the ledger with risk assets relatively buoyant even with the moderate selloff in stocks last week. Earnings have overall been marginally better than expected.

But it is the constant hawkish rhetoric from the majority of Fed speakers since the FOMC meeting which may slowly be seeping into equity bulls.

The “higher for longer” rates mantra from policymakers remains on loop and warns of a more prolonged downturn in both the wider economy and risky assets.
 

US CPI to pit stock markets vs. Fed

It is logical that markets and central banks are now massively data-dependent as we get closer to the end of policy tightening.

Both headline and core annual readings are forecast to slow but the recent upside revision to the prior monthly print hints at prices possibly remaining more entrenched than previously thought. That would be an unwelcomed development for the Fed and certainly for markets which are anticipating that price pressures drop sharply in the coming months.

This report is the singular most important data point for the Fed so is fully expected to move markets.

With markets forecasting that January’s headline CPI will register a 6.2% year-on-year advance, a lower-than-expected print could help boost the S&P 500 past the 50% Fibonacci retracement resistance level.

However, a higher-than-expected CPI number that forces markets to recalibrate their forecasts for peak US interest rates may pull the S&P 500 back into sub-4k territory.

USDJPY awaits new BOJ Governor

The announcement of the nominees for the new BoJ head are expected to be presented to Parliament on Tuesday, with a successor to present Governor Kuroda whose term end in April, named on Friday.

The front-runner according to local press reports is Ueda, after Amamiya turned down the role.

After the shock hawkish tweak to its yield curve control policy in December, markets are expecting more policy normalisation by the BoJ this year. But the pace of these changes may be modest and more of a slower process than initially thought, even though recent inflation data hit multi-year highs.

Again, policymakers are data dependent with these price pressures predicted to be transitory.

Strong support in USD/JPY resides around its 21-day simple moving average (SMA) with the upside potentially capped at 133, with its 50-day SMA and 50% Fib level from its 2022 ascent likely offering resistance in the interim.

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