RBC Capital Markets

Week ahead: Central bank communication dominates the week, with Fed Chair Powell's Congressional testimony (Tuesday & Wednesday), Vice Chair Clarida's speech, and assorted other Fed speakers. BoC Governor Macklem will also speak on Tuesday, and BoE policymakers will appear before the Treasury Committee on Wednesday. The data calendar has Euro area final CPI (Tuesday), UK labour market report (see GBP), US durable goods orders (Thursday), and US personal income & spending (Friday) among others.

KRW: The consensus expectation regarding the Bank of Korea policy meeting (Thursday) is for the policy rate to be held steady, as the focus stays on fiscal policy. A fourth fiscal package is expected to be unveiled soon.

GBP: We expect this month’s labour market report (Tuesday) to show the unemployment rate remaining at 5.1%. The big question in terms of the outlook for the labour market, however, is what will happen when the current furlough scheme ends. The next two significant events for the labour market will be this week’s expected reopening ‘roadmap’ from the government and the Budget on March 3, at which the Chancellor is set to announce a replacement or extension of the furlough scheme. Those events will make it clearer: 1) how quickly some of the most affected sectors will be allowed to reopen; and 2) how much further fiscal support the Chancellor is prepared to provide.

SEK/CHF: Sweden Q4 GDP and Switzerland Q4 GDP (both Friday) are on tap this week.

AUD: The Wage Price Index (Wednesday) is the RBA’s preferred measure of wage growth and is currently running at a historic low of 1.4% y/y. Even with a modest ~0.3% rise in Q4, annual growth will test a new all-time low at a little above 1%, given the slack in the labour market. Meanwhile, business investment has been weak for some time, even before the pandemic. Capital imports have been strong in the last few quarters with non-residential approvals also starting to rise. However, it may still be too early to see a rise in capex and we look for a small 1% decline in the Q4 capital expenditure report (Thursday). We will also get the first cut of FY2021–22 capex plans, and we would expect reasonable lift of around 10%, adjusted by the 5y realisation ratio.

NZD: RBNZ policy meeting on Wednesday with the policy rate widely expected to be left unchanged at 0.25%.


US yields continue to remain in focus with 10y eyeing key levels around 1.38% in Asia hours after further US fiscal snippets over the weekend. Asia EM rates have tracked UST curve steepening closely. In FX and equities space, we have seen the USD trade firmly and US/regional equities for the most part tick lower with the market nervous amid the ongoing yield moves. Nonetheless, sporadic pockets of outperformance have been seen in NZD ahead of this week’s RBNZ meeting. AUD has also traded fairly well in contrast to select EM currencies overnight.

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