FYI | Mar 08 2008
By Greg Peel
The US market is expecting the Fed to cut by 50-75 points on or before March 18, but there are many who believe the Fed should cease and desist. One reason is inflation, but another is the Fed’s actions to date have done nothing to save the credit markets and simply sent the US dollar spiralling (See The Overnight Report). The inflation part of the equation will become a focus on Friday night, when both the US and EU learn their February CPIs. February was the month that saw the bulk of the recent commodity price surge. Have the effects reached consumer prices?
There will be more data to absorb before then in the US, starting with January wholesale inventories on Monday. Tuesday sees January trade and Wednesday the monthly budget statement. Thursday sees fourth quarter utilisation, and the potentially sobering figures of February import prices and retail sales. Friday it’s the March consumer confidence measure from Michigan University, along with that February CPI.
It’s not a busy week for Australia, and the only interim result left to learn is from Asciano ((AIO)) which we already know all about. Monday is the HIA new home sales for January, and Tuesday January housing finance (predating two subsequent rate rises) and investment lending, and the ANZ jobs ads survey for February.
Wednesday is March consumer confidence, Thursday the March inflation expectation and then the more revealing February employment data. (Will we finally see any sign of increased unemployment?) Friday we can all go to lunch.
The ECB may well be vindicated on Friday when it learns its February CPI. The ECB left its rate unchanged last week under heavy criticism on both sides of the Atlantic from some, and respect from others. The Bank of Japan left its rate unchanged at 0.5% on Friday, as was largely expected, and on Wednesday will be hit with fourth quarter GDP, January trade and current account and February consumer confidence. Along with the minutes of last week’s meeting.
The balance of data in the US, EU and Japan and subsequent central bank responses are important determinants in where the US dollar, looking weak but heavily sold, might move next. This, in turn, will impact on commodity prices. One technician who called the oil price to US$107/bbl two weeks ago (it briefly traded over US$106 on Friday) said on CNBC on Friday oil will rise to US$120/bbl if the US dollar index breaks 72 (last trade 72.46).
