Key Points from This Week

UK CPI Improves

Following on from the news that the UK avoided a double dip recession in the final quarter of 2020, there were further positive data surprises this week. UK headline CPI surprised to the upside in January, rising 0.7% against the expected 0.6%. Core inflation also beat at 1.4% versus 1.3% expected, helping lift GBP further this week.

US Retail Sales Surprise Beat

The US Dollar saw a midweek spike in response to better than expected January Retail Sales. The indicator recorded a 5.3% reading over the month, firmly beating the 1.2% projected. The increase was largely attributed to the direct stimulus cheques sent out over the month USD gains were short lived.

Biden's First Town Hall Event

Addressing the nation from his first Town Hall event following his inauguration, Biden pushed the need for delivering his $1.9 trillion fiscal package. Biden told the audience and reporters that the US economy would come “roaring back” with such a package and stated a new target of making vaccines available to all US citizens by July, aiming to return to normal by Christmas 2021.

Equities Pause At Highs

The rally in equities markets, which has recently seen US indices breaking out to fresh, record highs, paused this week. The midweek strength in the Dollar hampered upside momentum, which didn’t return even once the Dollar began to weaken again. For now, it seems the market is awaiting fresh catalysts for a continued move.

Key Events Next Week

RBNZ February Meeting

Over a fairly quiet data schedule next week, the RBNZ meeting will be one of the key focal points. The bank is not expected to adjust its monetary policy, though, given the surprise move by the RBA at the start of the month, there are dovish risks. Given that the domestic economy has been rebounding firmly, however, the broad expectation is that the bank will remain on hold.

Fed’s Powell Testifies

The main event next week will be Fed chairman Powell testifying before the Senate committee. Powell will present the Fed’s semi-annual monetary policy report, appraising the committee on the bank’s actions as well as its guidance going forward. Given the speculation around the upside risks in inflation, Powell’s comments will be closely watched next week.

Keep An Eye On

Storm Updates

The ongoing power outages in Texas and other parts of the US have the potential to run on into next week. Given the many major oil producing sites in the region, this could see a continued spike in oil prices if production is affected.

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