UPCOMING EVENTS:

• Tuesday:
  Japan
  PPI, UK Labour Market report, Switzerland CPI, German ZEW, US NFIB Small
  Business Optimism Index, US CPI.
• Wednesday:
  UK CPI,
  Eurozone Industrial Production.
• Thursday:
  Japan
  GDP, Australia Labour Market report, UK GDP, UK Industrial Production,
  Switzerland PPI, US Retail Sales, US Jobless Claims, US Industrial
  Production, US NAHB Housing Market Index, New Zealand Manufacturing PMI,
  PBoC MLF.
• Friday:
  UK
  Retail Sales, Switzerland Industrial Production, US PPI, US Housing Starts
  and Building Permits, US University of Michigan Consumer Sentiment.

Tuesday

The UK Unemployment Rate is expected to
tick higher to 4.0% vs. 3.9% prior.
The markets are likely to focus on wage growth with the Average Earnings
ex-Bonus seen at 6.0% vs. 6.6% prior, while the Average Earnings including
Bonus expected at 5.7% vs. 6.0% prior. The data will influence the market’s
pricing with a miss bringing rate cuts forward.

The Switzerland CPI Y/Y is expected at
1.6% vs. 1.7% prior. The inflation rate has been is the SNB’s 0-2% target
range since last summer and although the central bank expects a short term
increase, Chairman
Jordan said that their base case
scenario is that inflation should average below 2% this year.

The US CPI Y/Y is expected at 3.0% vs.
3.4% prior, while the M/M measure is seen at 0.2% vs. 0.2% prior. The Core CPI
Y/Y is expected at 3.8% vs. 3.9% prior, while the M/M reading is seen at 0.3%
vs. 0.3% prior. This is going to be the most important report for the week and,
as it’s been the case for the prior releases, it will influence the market’s
pricing with a miss bringing rate cuts forward and a beat pushing them backword.

Wednesday

The UK CPI Y/Y is expected at 4.2% vs.
4.0% prior, while the M/M reading is seen at -0.3% vs. 0.4% prior. The Core CPI
Y/Y is expected at 5.2% vs. 5.1% prior. The last
report surprised to the upside which
prompted a hawkish repricing in interest rates expectations. The BoE is
particularly focused on services inflation, so that would be the most important
metric to watch for. Again, a downside surprise should bring rate cuts
forward, while another upward surprise is likely to push them backword.

Thursday

The Australian Unemployment Rate is
expected to tick higher to 4.0% vs. 3.9% prior with 30K jobs added in January
vs. -65.1K in December. The last
report surprised to the downside with a
hefty contraction in full-time employment. Citing RBA’s Governor Bullock, the
central bank is “very, very focused” on employment but unless we get some
notable surprise, it’s unlikely to change much for the RBA.

The US Retail Sales M/M are expected at
-0.1% vs. 0.6% prior, while the ex-Autos M/M measure is seen at 0.3% vs. 0.4%
prior. The last
report surprised to the upside with the
Control Group coming in at a strong 0.8% vs. a previous positively revised 0.5%
reading. US Retail Sales have been strong for several months, but they are
expected to be weaker in January due to negative weather effects.

The US Jobless Claims continue to be one
of the most important releases every week as it’s a timelier indicator on the
state of the labour market. Initial Claims keep on hovering around cycle
lows, while Continuing Claims remain firm around cycle highs. This week the
consensus sees Initial Claims at 220K vs. 218K prior,
while Continuing Claims are seen at 1878K vs. 1871K prior.

The PBoC is expected to keep the MLF rate
unchanged at 2.50%. The central bank surprised
recently by cutting the RRR by 50bps vs. 25 bps expected and sparked a rally in
the stock market (although most of the gains were
erased in the following weeks). The PBoC will have an opportunity to surprise
the markets again with a cut and this time trigger a more sustained and
positive reaction.

Friday

The US PPI Y/Y is expected at 0.7% vs.
1.0% prior, while the M/M measure is seen at 0.1% vs. -0.1% prior. The Core PPI
Y/Y is expected at 1.6% vs. 1.8% prior, while the M/M reading is seen at 0.1%
vs. 0.0% prior. This report is unlikely to be that much market moving given
that the focus will be on the US CPI on Tuesday.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Sunday features the quintessential American cultural event — the Super Bowl.

The game itself and its importance in American culture hint at what makes America what it is, and why US stock markets are at record highs as the rest of the world falls further behind.

The fairy-tale version of United States excellence leans on high-minded ideas — freedom, democracy, capitalism, a rules-based economic order, a magical scroll from the Founding Fathers.

That’s all bullshit.

Modern America stands for one thing and operates on one single principle: Win.

This Sunday is Super Bowl 58 (or LVIII in a nod to Rome). I’d argue that all the past 58 years of American economic dominance comes down to a creeping, evolving and now dominant philosophy built on winning as the singular guiding light in nearly all aspects of life.

What makes America unique in the empires of history is the slight tweak in philosophy. Past empires aimed to dominate and control; American just wants to win. Now sometimes that requires tapping into the $886 billion defense budget for some old fashioned dominance and control but the wisdom of America is that it realizes this is an expensive game that has been the downfall of many empires.

To use a schoolyard analogy, America doesn’t want to beat everyone else so badly that they quit, start their own game, or collectively turn against the US. America wants to keep everyone playing the game but always making sure it has a comfortable lead. There has to be an illusion of a reasonably fair playing field or it all falls apart.

Perhaps the real genius of the US has been in convincing the world that it is a fair game. Or that all of those old-fashioned high-minded ideas are what guides American government and business when it’s one simple thing: Win at all costs.

Seeing as football is on the agenda this weekend, here’s a quiz: What do the greatest football coach of all time and this year’s college football national champions have in common?

The answer: They cheated.

Both were caught red-handed cheating to win. As were the Houston Astros and, just Friday the New York Mets (Yes those are the same Mets owned by hedge fund billionaire Stevie Cohen who was caught insider trading).

What else do all these examples have in common? They effectively got away with it.

In a culture of winning, all that matters at the end of the day is wins. If you ask them, they’d probably tell you they only cheated more effectively than the others.

Now in sports it’s disgraceful, I don’t want my kids looking up to cheaters, but business is business. It’s ruthless.

The two quintessential businessmen of the last 40 years — Bill Gates and Steve Jobs — both admittedly stole their best early ideas from Xerox PARC.

Jobs first debuted the graphical interface and then Gates quickly copied it, leading to this famous exchange.

„You’re ripping us off!“, Steve shouted, raising his voice even higher. „I trusted you, and now you’re stealing from us!“

But Bill Gates just stood there coolly, looking Steve directly in the eye, before starting to speak in his squeaky voice.

„Well, Steve, I think there’s more than one way of looking at it. I think it’s more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.“

Meanwhile, the current world’s richest man — Elon Musk — has a long history of bending the law. It’s not particularly notable that top businessmen look for an edge anywhere, what’s notable is how the US tolerates it so long as you’re a winner.

Cheating is ok, so long as you win; so long as you’re sending up spaceships, redefining the automobile industry, or popularizing computers. And who could argue against it? The benefits of what those men have done for civilization far outweigh whatever ethical, and even legal, transgressions that might have been involved.

By the same token, the US winning doesn’t mean everyone else loses; just the opposite. A richer planet is a place where American companies have more consumers to sell to. The beauty of the system is that it grows the global economic pie and ultimately delivers incredible innovations globally. Hardly a person alive hasn’t benefited greatly from the American system, it’s a marvel.

Still, the American-style capitalism part of that bargain though only works perfectly fine on one condition: American companies win. Just like back in the school-yard, America will change the rules of the game until it wins. It will cheat on treaties, subsidies, litigate, persecute, lie and cheat to keep its companies on top, or at least in the game.

I have no doubt that a large part of the American spying apparatus is dedicated to industrial espionage and passing those secrets to US companies (and protecting those companies from other countries trying to do the same) — the ROI on those operations is undoubtedly spectacular for taxpayers. It’s hardly a conspiracy, as it’s precisely what Edward Snowden revealed.

Huawei may or may not have been spying on you but there is compelling evidence that the dramatic steps to get them out of the western world was an orchestrated campaign more about economic security than military security.

The same treatment is coming for TikTok and BYD. Foreign companies Nokia, Nortel, Siemens, Blackberry and Alstrom were all well-documented victims of industrial espionage, some by the US, some by others, some unknown. Yet I find it awfully coincidental that American companies came out ahead. But state-sponsored winning is still winning.

That’s not to say that China isn’t stealing everything it can get its hands on. It is. They understand that game.

But American is three steps ahead. They see how the game is also changing before anyone even realizes it’s being played. The US isn’t trying to limit Chinese access to Nvidia chips only because China will use them in military hardware. It’s trying to limit access to invention. The era of people investing things is dead. Every breakthough in the future will come from AI and that means that whoever has the best chips owns the future.

I worry about the side effects of a win at all costs culture.

The clannish dedication to football-style winning has devolved into politics and — worse yet — voting. People increasingly support their team no matter what.

I’d argue that the entire political story of this century is explained by Republicans briefly believing their own free-market ethos for a few weeks in 2008. That resulted in the worst American economic calamity in generations and led to the rise of the Tea Party, which started as a fiscal protest group then morphed into a protectionist populism that is undermining the illusion of a level playing-field.

Donald Trump is deeply unpopular in much of the world, yet he won the Presidency in the United States and is on track to do it again. He’s undoubtedly a conman and huckster yet he’s rich and famous. It’s that kind of winning that resonates in America.

But the bigger investing lesson of America’s winning philosophy is that it’s not because of politicians, it’s in spite of them. What industry has come to dominate markets and returns over the past 20 years? Technology — the least-regulated part of the American economy and the best one. It’s the one where win-at-all-costs flourishes best.

So all this to say one thing: if you want to play the game, you need to understand how the game works. Many parts of the world think the name of the game is collective welfare or social cohesion or harmony with nature (and maybe in the big picture it is). But while Europe is regulating, the US is innovating — and winning.

If you’re here, the game you’re in is investing. So when you’re considering where in the world to invest, forget comparing national P/E ratios. What you want to invest in is winners. In business that means America. That’s why I’ll never write a post about the downfall of the dollar or US capital markets.

Enjoy the game.

This article was written by Adam Button at www.forexlive.com.

Governor of the Bank of Italy and hence European Central Bank Governing Council member Fabio Panetta spoke on Saturday, saying that „the time for a reversal of the monetary policy stance is fast approaching.“

The ECB have already stopped raising rates, the last was in September when the Bank raised its interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility to 4.50%, 4.75% and 4.00% respectively.

More:

• „What should be discussed now are the conditions to start monetary easing, while avoiding risks to price stability and unnecessary damage to the real economy“
• says the policy board will „need to consider the pros and cons of cutting interest rates quickly and gradually, as opposed to later and more aggressively, which could increase volatility in financial markets and economic activity“
• „Any speculation on the exact timing of monetary easing would be a sterile exercise“
• inflation is falling as quickly as it rose
• strong growth in nominal wages are being offset by declines in other costs to firms
• doesn’t see a high risk of inflation impacts from Red Sea issues, but acknowledged the risk of further escalation in the region

This article was written by Eamonn Sheridan at www.forexlive.com.

Canada added 37.3K jobs in January compared to 15K expected. The unemployment rate fell to 5.7% from 5.9% as labor force participation also slipped.

„Although labour market
conditions remain looser than they were a year ago, today’s data certainly won’t speed up the path to a first interest
rate cut from the Bank of Canada,“ CIBC wrote after the report.

One caveat to the report was that it was tiled to part time jobs at +49K rather than full time at -12K with much of the jobs growth from government jobs. That’s part of an ongoing trend:

„The number of private sector employees
rose by only 7K, and has increased by only 1.6% on a year-over-year basis. That is in contrast to a 4.2% rise in public
sector payrolls,“ CIBC wrote.

Another notable quirk is that population growth in the month was +125K, which has dragged the employment to population rate to the lowest since Jan 2022.

Some of these shifts explain why the loonie wasn’t able to hold onto its initial gains on Friday.

CIBC maintained its call for the first rate cut to come in June but now sees the BOC ending the year at 3.75% compared to 3.50% previously. The current overnight rate is 5.00% and the first cut is 76% priced in for Jun with the market priced at 4.25% at year end.

„The unemployment rate isn’t rising as quickly as previously expected given the generally
sluggish trend in GDP, although a stabilisation or rebound in participation, combined with only modest employment
growth, could still take the jobless rate above 6% by mid-year. That said, today’s data confirm that the Bank won’t be in a
rush to cut interest rates, and we maintain our expectation for a first move in June. Given indications from today’s data
and previously released GDP figures that the Canadian economy is in somewhat better shape than previously expected“

This article was written by Adam Button at www.forexlive.com.

Week Ahead 12th-16th February

• Mon: BoC SLOS, Indian CPI (Jan), Export/Imports (Jan), Holiday: China (New Year), Hong Kong, Tokyo
• Tue: OPEC MOMR, Swedish Unemployment (Jan), UK Unemployment/Wages (Dec), Swiss CPI (Jan), EZ/German ZEW (Feb), US CPI (Jan), NFIB (Jan). Holiday: China (New Year), Hong Kong
• Wed: Indonesian Presidential Election, UK CPI (Jan), Norwegian GDP (Dec), EZ Employment (Q4), Japanese GDP (Q4), Holiday: China (Spring Festival)
• Thu: IEA OMR, Australian Employment (Jan), UK GDP (Dec/Q4), EZ Trade (Dec), US Import/Export Prices (Jan), IJC (w/e 10th Feb), Philadelphia Fed (Feb), Retail Sales (Jan), Industrial Production (Jan), Business Inventories (Dec), New Zealand Manufacturing PMI (Jan), Holiday: China (Spring Festival)
• Fri: CBR Policy Announcement, UK Retail Sales (Jan), German WPI (Jan), US Building Permits/Housing Starts (Jan), Uni. of Michigan Prelim. (Feb), Holiday: China (Spring Festival)

Note: Previews are listed in day order

UK Employment/Wages (Tue)

Expectations are for the unemployment rate in the 3-month period to December to come in at 4.0% with headline wage growth in the 3M/YY in the same period seen declining to 5.8% from 6.5%, while the ex-bonus metric is seen cooling to 6.0% from 6.6%. The prior release saw the unemployment rate hold steady at 4.2%. However, since then, as part of the ONS’ Labour Force Survey re-weighting, the unemployment rate in the 3-month period to November is now estimated at 3.9%. On the wages front, headline earnings growth slowed to 6.5% from 7.2%, and the ex-bonus metric slipped to 6.6% from 7.2%. Note, the upcoming release will see the ONS resume publishing its Labor Force Survey. Analysts at Investec notes, however, that data “provided so far are still based on a smaller-than-desired sample of responses,” adding that efforts by the ONS will take time to filter through. As such, markets will remain sceptical over the reliability of the data. Investec thinks employment could contract in December by circa 33k, and wonders whether weaker activity data in H2 was factored into hiring decisions. Note, the earnings metrics will not be subject to methodological changes and will therefore likely take greater precedence, particularly given the emphasis on the data by MPC members. On which, Investec suggests that declines in Y/Y growth will primarily reflect base effects.

Swiss CPI (Tue)

SNB Chairman Jordan has noted that while he expects inflation to increase given VAT, rents and electricity, it should not surpass the 2.0% mark. Alongside acknowledging the likely short-term increase, Jordan emphasised that inflationary pressures are declining. The January release does not include an update to the quarterly rental price index, which will next be published alongside February’s inflation number. The last print (Dec.) was hotter than expected at 1.7% and a slight surprise against the SNB’s forecast for a 1.6% Q4 average. January’s metrics will be closely watched and given the guidance from Jordan outlined above, a significant uptick, particularly if it occurs before the Feb. rental data, may well spark a hawkish reaction given the SNB’s unwillingness to allow CPI to deviate from the 0-2% band. Albeit, this will need to be assessed in the context that any increase is expected to be short-term and comes in the context of a broader cooling in Swiss inflation thus far. Furthermore, traders will also be mindful of recent marked CHF action and speculation that the SNB could act to offset some of the currency strength

US CPI (Tue)

The consensus view looks for headline CPI to rise +0.2% M/M in January (prev. +0.2%), and the core CPI measure is seen rising +0.3% M/M, matching the rate seen in December. As always, the data will be framed in the context of the Fed’s policy function, where traders see lower inflation readings as a sign that the central bank could begin cutting rates, while any pickup in price pressures would see traders wager on a ‚higher for longer‘ playbook. Fed Chair Powell recently welcomed the notable easing of inflation, but reiterated that officials were attentive to risks that it posed to both sides of its mandate, and that ongoing progress was ’not assured‘. Powell warned that reducing policy restraint too soon or too much risked reversing the progress on inflation, and said officials wanted greater confidence that inflation was moving down sustainably (though he has conceded that if inflation were to move back up, that would be a surprise). Powell declined to offer a number of months that low inflation was needed to achieve this confidence.

RBNZ Inflation Expectations Survey (Tue)

Traders will focus on the Survey of Expectations (SoE) ahead of the 28th February RBNZ confab and in the context of ANZ’s recent call change – in which it forecasts 25bps hikes in both February and April taking the OCR to 6%, citing that the RBNZ may not be feeling like they’ve done enough to meet their inflation mandate. On the upcoming SoE release, ANZ suggests the metrics are likely to decline further, but any increase in the long-term measure would be a red flag. The prior Survey of Expectations (released in November) saw expectations for annual inflation one-year-ahead fall 57bps, from 4.17% to 3.60%, and two-year-ahead inflation expectations decreased 7bps from 2.83% to 2.76%, respectively. However, the mean five-year-ahead annual inflation expectation was 2.43%, an increase of 18bps from the prior quarter’s mean estimate of 2.25%, and the mean ten-year-ahead annual inflation expectation increased by 6bps to 2.28% from 2.22% in the previous quarter. Analysts at Westpac meanwhile suggest “With headline inflation dropping back, we expect that the slide in shorter term inflation expectations seen in recent months will continue in the RBNZ’s latest Survey of Expectations. That includes a fall in the closely watched survey of inflation 2 years ahead”, but the desk also says the importance of this particular measure has waned over time but softening in expectations will nonetheless be welcomed.

UK CPI (Wed)

Expectations are for the headline annual rate of CPI to rise to 4.2% Y/Y from 4.0%, with the core rate expected to cool to 5.0% Y/Y from 5.1%. The prior release saw an unexpected uptick in inflation with headline Y/Y CPI advancing to 4.0% from 3.8% while the All Services metric ticked higher to 6.4% Y/Y from 6.3%. The ONS noted that “the increase in the annual rate was largely the result of the increase in tobacco duty.” For the upcoming release, Pantheon Macroeconomics highlights the likely role played by base effects which will disrupt the recent run of downside surprises relative to MPC expectations. This is also expected to be visible in the service print, which it expects to rise to 6.9% Y/Y from 6.4%. Such an outturn would likely prompt further scepticism over imminent rate cuts by the MPC and push back market pricing which fully prices a first 25bps reduction in August, with 75bps of easing seen by year-end. That being said, one reason for optimism could come via food inflation which Pantheon expects to fall sharply in January.

Japanese GDP (Wed)

Q4 GDP Q/Q is expected at +0.3% (prev. -0.7%; range -0.1% to +0.9%), with the Annualised Q/Q seen at +1.4% (prev. -2.9%; range -0.3% to +3.7%), Private Consumption Q/Q at +0.1% (prev. -0.2%; range -0.4% to +0.3%), Capital Expenditures Q/Q at +0.3% (prev. -0.4%; range -0.2% to +1.3%), and External Demand Q/Q at +0.3% (prev. -0.1%; range 0 – 0.8%). Desks suggest any rebound in Q4 GDP should be modest based on recent data, whereby Industrial Production rose but missed expectations, whilst Retail Sales also unexpectedly declined, although the chip cycle and vehicle demand should support growth, according to some analysts. Analysts at ING said, “The gains in manufacturing output suggest 4Q23 GDP rebounded (0.3% Q/Q s.a.) from a mild contraction in 3Q23 (-0.7%), with the risk skewed to the upside.” The desk suggests that weak retail sales should be the main drag on overall growth, whilst “households’ cautious consumption behaviour could further discourage the Bank of Japan from raising its policy rates.” BoJ’s Deputy Governor Uchida recently suggested the Bank will not aggressively hike rates even after ending negative rates and added that Japan’s real interest rate is in deep negative territory and monetary conditions are very accommodative – “we don’t expect this to change in a big way” Uchida said.

Australian Employment (Thu)

The January Employment Change is forecast to have seen the addition of 30k jobs (prev. -65.1k), with the forecast range between +10k to +55k, according to Reuters. The Unemployment Rate is expected to have ticked higher to 4.0% (prev. 3.9%), with the analyst expectation range between 3.8-4.0%. The participation rate is seen steady at 66.8% (forecast range 66.7-67.0%). Analysts note that conditions in the labour market softened heading into the end of 2023, and Westpac posits that “the underlying trend continues to speak to labour demand easing from a robust level.” The desk forecasts a below-market jobs addition of +15k, with the unemployment rate at 4.0% and participation at 66.8%. Westpac however warns that “January’s data should be interpreted carefully, given the risk that one–off dynamics may cause large swings in hours worked or unemployment”, with the desk highlighting two dynamics that have played a significant role in labour market outcomes since the COVID reopening. The first dynamic being more opportunities to change jobs resulting in an “unexpected lift in the number of people who were not working but had a job lined up after the holidays”, and the second dynamic is the tourism recovery which has seen a greater number people take leave over the holidays.

UK GDP (Thu)

Expectations are for flat growth in the December GDP report. The prior release saw growth in November expand by 0.3% vs the 0.3% contraction in the prior month. Pantheon Macroeconomics notes that “output rebounded in consumer-facing sectors after spending in October was adversely affected by Storm Babet and the later-than-usual timing of school holidays in some areas” For the upcoming release, Pantheon (forecasts -0.3% M/M) says the report “will create a negative first impression, but the reality is the economy is now on the up.” If Pantheon’s forecast is realised, the consultancy suggests that it would contribute to a 0.1% Q/Q decline. Such an outcome would put the UK in a mild recession. However, given the shallowness of such a decline, it would be regarded in some quarters as something closer to “stagnation”. Although a 0.1% print would be below the MPC’s forecast of a flat reading, greater attention next week will likely instead be placed on CPI and wage metrics.

US Retail Sales (Thu)

Retail sales are expected to rise 0.2% M/M in January (prev. +0.6%), and the ex-autos measure is also seen rising +0.2% M/M (prev. +0.4%). Bank of America’s Consumer Checkpoint release for February showed consumer spending softening in January, with total card spending per household -0.2% Y/Y (prev. +0.2% Y/Y), and on a seasonally adjusted basis, its data suggests household spending -0.3% M/M. BofA says weather factors were largely to blame for the weakness, noting that when the weather was better, spending was resilient. It also said that in the later part of the month, total card spending per household rebounded across the country. „Despite the freeze, consumer confidence has rebounded as of late,“ it writes, „it does, however, remain relatively weak given the consumer has been resilient over the last year and the labour market has been solid.“ BofA says ’sticker shock‘ could explain that dynamic. Ahead, „as the rate of inflation comes down, this sticker shock should begin to fade, particularly as after-tax wages and salaries growth remains healthy for low and middle-income households in our data,“ adding that „consumers‘ savings buffers remain elevated and Bank of America’s latest Participant Pulse shows no significant sign that people are tapping into their longer-term retirement savings.“

UK Retail Sales (Fri)

Expectations are for headline retail sales to advance to 1.0% M/M in January from the 3.2% contraction in December. In terms of recent retail indicators, BRC’s retail sales indicator rose 1.4% Y/Y, with the accompanying report noting “easing inflation and weak consumer demand led retail sales growth to slow. While the January sales helped to boost spending in the first two weeks, this did not sustain throughout the month.” Elsewhere, the Barclaycard Consumer Spending report stated “overall retail spending grew 1.7% in January 2023, an uplift compared to the year-on-year growth of 0.6% in December 2023. This increase was predominantly driven by a rise in spend growth at supermarkets, which saw an uplift compared to December as consumers returned to their regular grocery shopping routines after the Christmas break.”

This article originally appeared on Newsquawk.

This article was written by Newsquawk Analysis at www.forexlive.com.