Hi Folks.
Last week I mentioned the Fed was likely sacrificing live chickens in an attempt to get a higher inflation number on CPI, justifying their refusal to cut rates at their last meeting. And it sure worked out well, for them anyway. CPI came in higher across the board than expected, PPI overall number came in higher, and in something of a surprise, Retail Sales dropped in at 7/10's of a percentage point worse than expected. You need to go back into the first 18 months of the Pandemic, and before that, the 2008-2012 Meltdown, to find numbers that far off from expectations on Retail Sales.
Since this month's CPI is actually reflecting what many of us have been seeing for a much longer period of time than what the earlier, cheerier numbers were trying to sell us, it shouldn't be much of a surprise that consumers are hauling in the jib and battening down the hatches in terms of spending (that, and the fact that most are carrying around a stack of maxed out credit cards in their wallets, which further dampens the ability to shop).
Was this just a one-off event, soon to be replaced by those smaller, happier numbers?
Or is this the first big warning shot the economy is on its last legs?
Tune in next week, same Bat Time, same Bat Channel, to learn more.
On with this week's forecast.
SUNDAY: Once again the calendar leads off with a pair of New Zealand numbers that drop before the market opens, so those are on our Pay No Mind list. Japan has a Preliminary GDP number at 6:50 p.m. my time. The previous two q/q numbers came out, one exactly as expected and the other 2/10's of a point better and the 1H candle for both showed a grand total of 13-14 points of activity, top to bottom. So GDP counts in some places but apparently not here. So don't expect much if you're trading this tonight. The Brits drop a number at 7, which is midnight in the UK, so you can safely ignore this one, and finally Japan is back at 11:30 with a pair of Industrial numbers with no track record of tradeable price action, post number drop. So once again, Sunday night trading is a bust, news-wise.
MONDAY: Asian/London Session: We open with a couple of Trade Balance numbers that can be ignored, and the Eurogroup is meeting once again, so the possibility exists of someone within the group saying something stupid to a reporter and causing a stir, but those are still not tradeable. The German Buba releases their Monthly Report, which also isn't tradeable as it's a report and not a number, but at the same time Nagel, head of the Buba is giving a presser. Also not tradeable, but he could say something that impacts the EUR at some point, so be aware if you're trading then. Canada has a bank holiday (Family Day...which apparently most banks don't recognize or celebrate) which likely explains why Canada is also releasing a Housing Starts and Foreign Securities Purchase numbers at 8:15 and 8:30 a.m. respectively. Canadian numbers are usually tradeable, so keep an eye open between 8 and 8:30 on the CAD carts. Finally, at 10:30 p.m. the Aussies release their Cash Rate (Interest Rate) decision, which is forecast to drop from 4.25% to 4.10%. I went back and looked at the last two numbers on this one (both of which were left at 4.35%) and the market yawned both times. But with a rate cut expected, you could see a little more activity than the 15+/- pips the last two announcements generated.
USA Session: The USA has the day off today for President's Day. But just because the banks are closed doesn't mean the mouths of the Fed clowns follow suit. Harker speaks at 9:30 and Bowman at 10:20 a.m., with Waller closing things out at 6:00 p.m.
TUESDAY: Asian/London session: A ton of reports on calendar, most of which can be ignored, so I'm just going to focus on the ones likely to spark some movement. At 2 a.m. my time, an hour before London Open, the Brits release their Claimant Count change number. For the last two months the number has come in dramatically better than expected (expectations were in the 20,000's, both numbers came in in the hundreds) and we saw 30+ pips of movement in the GBPUSD as a result. If they get the Turkey this month, expect to see more of the same. Later in the morning (4:30 a.m. my time) Gov. Bailey from the BOE speaks (similar to Powell from the US Fed), so not tradeable, but he has the power to make prices move depending on what he says, so be aware he's out there. Canadian CPI numbers at 8:30, so CAD traders should remain on high alert for these numbers. At 7:30 the Aussies have a Wage Price Index number dropping, but this one rarely causes more than 10 pips of movement over the 1H candle, so you can safely ignore it. At 8:00 p.m. New Zealand drops their Interest Rate decision, and the forecast is for a half a percentage point cut (4.25% down to 3.75%) With a big cut on tap you might expect to see some fireworks, but this number has dropped a quarter or a half point the last 3 meetings in a row and the NZDUSD rarely shows more than 10 pips of movement during the 1H candle. So in spite of its red letter status, there likely won't be much going on post-release.
USA Session: Garbage news today. Empire State Manufacturing Index at 8:30 a.m., NAHB Housing Market Index number at 10:00 a.m., Fed Clowns speaking at 10:20 a.m. and 1:00 p.m., and President Trump scheduled to speak at 4:00 p.m. (and he speaks damn near every day so unless he's on tap for something seriously important which we know of days in advance, I won't be mentioning this again); and the TIC Long Term Purchases number, which measures the difference in government securities purchased by locals versus foreigners. A number that has been around forever but I've never seen price action moved by its release, mostly because I'm not trading at 4 in the afternoon most days.
WEDNESDAY: Asian/London session: 2:00 a.m. my time, mark your calendars, set your alarm clock. GBP CPI number drops. Last month it handed traders around 100 pips in price action in both directions based on missing to the downside by 1/10th of a point. These are the numbers we live for. The remaining 4 numbers set to drop then as well are meaningless. This is the one you need to focus on. The rest of the morning numbers are garbage, but the Aussies drop their employment number at 7:30 p.m. FF Calendar says it's a red letter event. Traders say otherwise. Two significant misses in the last 2 months and price barely registered a stutter. Probably a safe pass here as well.
USA Session: Building Permits and Housing Starts at 8:30 a.m., and the Fed Meeting Minutes at 2:00 p.m. (and a Fed clown at 5:00 p.m., but no one cares at that time). All of which you can ignore, either because again, no one cares (housing numbers) or it isn't a tradeable number (Minutes). But the Minutes could create a short term trend worth watching, but the day has been so meaningless otherwise, from a local news standpoint, I doubt a lot of people will show up and make things happen based on ancient Fed chatter.
THURSDAY: Asian/London Session: Similar to Tuesday, a lot of entries on the calendar, but most can be safely ignored. The ones possibly worth paying attention to are the CAD Price Index numbers (3 of them) which, because the CAD is a little touchy, might give you something to trade into 8:30 a.m. post-number drop; Nagel of the German Buba speaks at 11:00 a.m. (not to trade but to be aware if you are trading the EUR in any capacity); Aussies lead off 5:00 p.m. with the Flash Manufacturing and Services PMI number, which won't do much for the AUD tonight but acts as an early warning signal for the boatload of other Flash numbers dropping in a few hours; at 5:30 the RBA Gov. Bullock speaks (head of the Aussie Fed) so be aware of that; the rest of the evening's numbers are not worth following.
USA Session: 8:30 we get Unemployment Claims and Philly Fed Manufacturing Index numbers. Unemployment is the important one (no one pays much attention to the manufacturing index numbers much, although that may change with the tariffs and increases in manufacturing payrolls over the coming months). Unemployment has been a mixed bag, some numbers create a lot of price action and others do not. Just have to play this one by ear. NatGas and Crude Oil are both on tap for later this morning, and there is a bunch of Fed Speak (9:35 a.m., 12:05 p.m., 2:30 p.m., 5:00 p.m.). A lot of stuff but aside from the Crude and NatGas numbers, traders are not going to get much help today from the numbers.
FRIDAY: Asian/London Session: 2:00 a.m. is GBP Retail Sales, Last month was a big miss and 60+ pips of movement. Two months back was a miss by half as much and very little activity. So who knows about this one. Just proceed carefully. All that matters the rest of the day is the Flash numbers, both Service and Manufacturing, for France (3:15 a.m.), Germany (3:30 a.m.), The entire Euro sector (4:00 a.m.), the UK (4:30 a.m.), and Canada (8:30 a.m.). If a trend starts to develop after the French and German numbers drop, ride the trend. If no trend develops, call it a weekend. But if you are desperate, Macklem from the Bank of Canada speaks at 12:30 p.m. so maybe you'll see something tradeable on the CAD as a result.
USA Session: The flash numbers drop at 9:45 and when they come out as a pair, we usually see some price action worth trading. After that, Existing Home Sales and the Revised UofM numbers at 10:00 (pass) and a Fed Clown speaking at 11:30 a.m. Pasadena.
Have a great week and see you back here next weekend.
Jeff
