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Week Ahead: Central banks, CPIs and ceasefire in focus
Updated Updated Sun, 2025 February 16 04:21
It’s likely to be another enthralling week in financial markets. We have a packed data calendar full of important economic data, like global PMIs figures, UK, Japan and Canada CPI numbers. On top of that, both the Antipodean central banks are expected to cut interest rates, though the similarities between the RBA and RBNZ are few. Of course, nothing happens in this world at the moment, without mentioning the “t-word” – Trump, tariffs (and threats) in no particular order!
The mood of markets appears to now be one of relative fatigue to any Trump announcements about tariffs. Last week, the POTUS emphasised that America would target countries with high VAT, a move that appeared to be aimed at the EU. Notably, Trump, who campaigned on a pledge to bring down consumer prices, acknowledged that prices could go up in the short term because of this policy. An April deadline was given, which enables both sides time to, as usual, negotiate a deal. The market reaction saw risk-on sentiment, resulting in lower US yields, a weaker dollar, and higher equities.
Going forward, the EU will remain in the Trump tariff crosshairs, with progress on a ceasefire in Ukraine now front and centre. Lower energy prices and broader investment in Europe is a huge deal, but the road towards a peace settlement, and price action too, will no doubt be bumpy. We will also be watching the considerable outperformance of European stocks this year, with the German election next weekend likely to get more focus. The German Dax stock index is currently up 13% year-to-date, in contrast to the relatively paltry 3.6% rise in the US benchmark S&P 500. A lower risk premium, improving consumer confidence and a ready-to-rate-cut ECB are all reasons cited for the big move in German equities. However, the overbought nature of the parabolic price action on multiple timeframes warns of a correction.
In Brief: major data releases of the week
Tuesday, 18 February 2025
– RBA Meeting: Markets expect a first 25bps rate cut, taking the cash rate to 4.10%. Recent CPI data printed softer than forecast, while wage pressures and household consumption have eased too. Unemployment remains above target so likely means a gradual easing path.
– UK Jobs: Reliability issues still dog the unemployment data, but the payroll figures show some easing. Wage growth remains sticky with ex-bonus earnings seen rising to 5.85 from 5.6%.
Wednesday, 19 February 2025
– RBNZ Meeting: Consensus expects a second consecutive 50bps rate cut, taking the OCR to 3.75%. Inflation remains in the 1-3% range amid a backdrop of weak economic conditions and a worryingly soft labour market. A 3% terminal rate is forecast by markets.
– UK CPI: Analysts forecast the headline rate to tick up to 2.7% from 2.5%. The core is seen at 3.6% from 3.2% and services inflation at 5.2%, matching the MPC’s most recent projection.
– FOMC Minutes: The Fed held rates steady in what was seen as a “hawkish hold”. Sticky inflation, a solid labour market and robust activity means an extended policy pause is probable. Tariff uncertainty cements this stance.
Thursday, 20 February 2025
– Australia Jobs: Consensus expects 20k jobs added, less than the prior 56k. January has typically been a weaker month of job creation in recent years due to seasonal patterns. The jobless rate is predicted to tick up one-tenth to 4.1%.
– Japan CPI: Inflation is expected to rise to 4% in January, mainly due to a surge in fresh food prices. Tokyo CPI, a forerunner to the nationwide figures, rose at its fastest pace in nearly a year.
Friday, 21 February 2025
– UK Retail Sales: Expectations are for January activity to print at 0.2%, up from the -0.3% in December. Other indicators have been mixed, but a solid start to the year is likely, especially due to weak comparables.
– Global PMIs: It is likely to be a familiar picture of struggling manufacturing sectors and relatively buoyant services. But going forward, the latter may be impacted by tariffs with possible weakness in consumer spending. That said, the eurozone did deliver some positive news in January with the decline in manufacturing appearing to slow.
