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

This week’s overview

Following the recent post-Fed meeting rally, this week is largely met with a struggle in risk assets to move higher, as the holding up of the US dollar thus far seems to be keeping risk sentiments in check. Treasury yields have also found some renewed upside, leaving behind doubts on whether recent ‘dovish’ market expectations have been overblown. That said, the near-term upward bias in US equity indices remain intact, which may leave any formation of a new higher low on watch in the event of further retracement. Looking ahead, the upcoming week will provide further clues on Federal Reserve (Fed)’s monetary policies, with the key risk event being the release of US consumer price index (CPI). Closer to home, Singapore’s 2023 budget statement will be in focus.

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

14 February 2023 (Tuesday): US CPI

Markets may have been accustomed to seeing downside surprises in US inflation figures over the past months, but the upcoming US CPI will be another key test for risk sentiments. While the core reading are expected to show further moderation in pricing pressures from a year ago (estimated 5.5% from previous 5.7%), the month-on-month impact could present more of a tricky situation. Month-on-month, US core CPI is expected to deliver a 0.4% increase, up from 0.3% in December. Likewise, headline inflation is also expected to come in at a 0.5% increase from the previous month, reversing from the 0.1% contraction in December. That may challenge recent ‘dovish’ expectations by reiterating a higher-for-longer rate stance and pushing back the timeline for a rate pause.

The US dollar will be in focus. Recent resilience has seen the US dollar consolidating at a channel resistance, seemingly in preparation for an upward breakout. Further move above the 103.20 level will be on watch to pave the way towards the 105.00 level next, which could translate to downside risks for equities in the near term.

14 February 2023 (Tuesday): Japan’s Q4 GDP growth rate (preliminary)

The preliminary Q4 gross domestic product (GDP) number from Japan may reveal an improvement in economic conditions, with annualised growth rate expected to come in at 2% compared to previous quarter’s 0.8% contraction. A follow-through recovery from previous reopening efforts may be supporting private consumption for services, but that will have to be pitted against weak exports from global economic uncertainty, with the upcoming figure to reveal more on the overall net impact. The Nikkei 225 index has been resilient over the past weeks, largely riding on renewed dovish bets on the Bank of Japan’s (BoJ) monetary policies. That said, upward momentum has been moderating with a bearish crossover on moving average convergence/divergence (MACD) upon a retest of a 50% retracement level. Any downside may leave the 26,900 level in focus, where the 38.2% Fibonacci retracement level resides.

14 February 2023 (Tuesday): Singapore’s 2023 budget statement

In Singapore, all eyes will be on the upcoming 2023 budget statement, which may reveal measures to help the country navigate through the current inflationary environment, along with challenges to its open economy from downside risks in global conditions. Economic resilience thus far suggests that the timeline for Goods & Services Tax (GST) hike in 2024 may remain, but more targeted fiscal measures could be delivered to retrenched workers and the lower-income groups to alleviate cost of living concerns. Singapore’s January non-oil domestic exports (NODX) figure will also be released in the same week (17 February 2023, Friday). Coming after three consecutive months of year-on-year contraction, a lower-for-longer growth picture may remain as uncertainty in global economic conditions lingers.

After a period of consolidation, the Straits Times Index has failed to sustain above its key 76.4% Fibonacci retracement. This may leave the 3,320 level on watch as a potential resistance-turned-support in the near term.

15 February 2023 (Wednesday): US retail sales

Current expectations are for US retail sales to revert back into positive growth at 0.9% month-on-month, overturning the past two consecutive months of contraction (-1% in November, -1.1% in December). There could be mixed views on any robust figure, with market bulls tapping on it to support ‘soft landing’ calls while the bears will argue for tighter policies in reaction to potential persistence in pricing pressures. Risk sentiments may have to take its cue from the US inflation print to be released a day before. Any failure for the inflation data to reassure market participants of moderating inflation risks could see the retail sales figure being looked upon as a reflection of overblown consumer demand. If that occurs, it could drive a more hawkish recalibration in market peak rate expectations, with further build-up to the 5.25-5.5% range from current 5.0-5.25%.