Key events to watch in the week ahead: 13-17 Mar 2023

This week’s overview

A hawkish takeaway from Federal Reserve (Fed) Chair Jerome Powell’s testimony has triggered a series of risk-off moves this week, which is further exacerbated by jitters in the US banking space. As the countdown to the next Federal Open Market Committee (FOMC) meeting begins, the fate of the next rate hike from the Fed will likely hinge on upcoming labour and inflation data. After the US job report release this week, next week will have all eyes on US February inflation rate and retail sales. Elsewhere, a series of economic data will also be released out of China to provide a better gauge of its recovery progress, along with key interest rate decision out from the European Central Bank (ECB).

Here are some of the key events to watch next week:

14 March 2023 (Tuesday): US February inflation rate

With the ongoing debate on whether we will see a 25 basis-point (bp) or 50 basis-point hike in the March FOMC meeting, the upcoming US Consumer Price Index (CPI) release will be one of the last few key data to drive policymakers’ views. Having witnessed an upside surprise in the previous reading, another round of above-expectation read will pressure the Fed to revert to larger hikes, which could come as further trade-off for equities’ gains. Current expectations are for both headline and core CPI to come in at 0.4% month-on-month, which will indicate some moderation in headline pricing pressures.

The US dollar will be on watch, still trading on its higher high, higher low narrative as an indication of a near-term upward trend. That said, its key 200-day moving average (MA) just lies up ahead, with more persistent pricing pressures needed to drive another round of hawkish recalibration in market expectations.

15 March 2023 (Wednesday): US February retail sales

US retail sales have roared back to life in January, with the 3% year-on-year growth smashing expectations. That said, stronger-than-expected consumer spending does not bode well for the current environment, where worries are for the Fed to do more to tame inflation. Another blowout figure at the upcoming retail sales data could add to recent jitters for a higher peak rate from the Fed, by suggesting that demand has not been moderating in line with the central bank’s aim. A higher-than-expected figure may be supportive of higher bond yields and stronger US dollar, which could be a challenge for the risk environment.

15 March 2023 (Wednesday): China’s January-February fixed asset investment, industrial production, retail sales data

Optimism surrounding China’s reopening has been dampened recently, with a disappointing gross domestic product (GDP) growth guidance at the Two Sessions, while inflation and trade data have also pointed towards a more modest domestic recovery. Nevertheless, expectations are for China’s retail sales to reflect a move back into positive growth after three consecutive months of contraction, while industrial production may also see some recovery to 2.6% (from the previous 1.3%).

For the Hang Seng Index, recent risk-off environment has led to the formation of a new lower low, suggesting that the bears remain in control for now. Further downside will place the 18,500-18,700 range on watch next, where a Fibonacci confluence zone resides.

16 March 2023 (Thursday): ECB interest rate decision

The ECB has stepped up its hawkish rhetoric in recent months on sticker-than-expected inflation, with a 50 basis-point hike fully priced by markets into the upcoming meeting. The focus will be what comes after the March meeting, with expectations still split on whether we can see a downshift in rate hikes thereafter. The macro projections at next week’s meeting will provide some clues, with any upward revisions in inflation forecasts or more resilient growth outlook likely to be looked upon with a hawkish view.

The EUR/USD has held up relatively well compared to other risk-sensitive pairs such as the AUD/USD. After being forced into a near-term ranging pattern, any break below the 1.052 level could reflect bears retaining control. Greater conviction for further upside could come with a break above the 1.068 level.