Good morning traders, welcome to Monday.
This week’s economic calendar gives us a much lighter dance card compared to last week, but we will be examining the aftermath of Wednesday’s FOMC announcement and updated economic projections monthly through the lens of public comments from Fed officials at home and abroad. With the quieter schedule of hard data, we’ll also take time to watch for any developments from Washington or Beijing in regard to ongoing trade negotiations as well as news from London or Brussels as both try to find a path forward through the Brexit briar patch.
At the time of writing, gold has started the week of on the strong foot and currently trades just below $1320/oz in spot markets.
You’ll see that, aside from the known-unknowns that Fed Speak presents, there is a dominant theme for this week’s economic data: without a strong upside surprise somewhere, this week’s reports are unlikely to provide much of a tailwind to the US Dollar. Instead, the data is expected to set up a solid baseline to keep the Greenback from falling sharply as it did last week. Conversely, this would put a pause on gold’s recent upward trend.
Fed Speak This Week
As is typical, especially following impactful Fed meetings which last week’s certainly was, you won’t be able to throw a rock this week without hitting an FOMC member standing behind a lectern. (Don’t do that, though; there are better ways to protest monetary policy you disagree with and besides, I hear Bullard’s got reflexes like a cat.)
The list bellow is not even comprehensive, but I’ve tried to keep it to those who are scheduled to discuss relevant topics like inflation, or overall monetary policy. I can’t say for sure that most, or even any, of this week’s scheduled public comments will have meaning or impact on metals markets, but the potential is certainly there for each one.
- Monday, March 25 at 6am EDT; Philadelphia Fed President Patrick Harker (non-voter)
- Tuesday, March 26 at 3:45am EDT; Philadelphia Fed President Patrick Harker (non-voter)
- Tuesday, March 26 at 6:30am EDT; Chicago Fed President Charles Evans (FOMC voter)
- Tuesday, March 26 at 3pm EDT; San Francisco Fed President Mary Daly (non-voter)
- Thursday, March 27 at 9:30am EDT; Federal Reserve Vice Chairman Richard Clarida (FOMC voter)
- Thursday, March 27 at 1:15pm EDT; New York Fed President John Williams (FOMC voter)
- Thursday, March 27 at 5:20pm EDT; St. Louis Fed President James Bullard
US Economic Data to Watch
Tuesday, March 26 at 8:30am EDT // Housing Starts; Building Permits (Feb)
[Starts consensus expectation: -0.8% MoM // previous: +18.6%]
[Permits consensus expectations: -1.3% MoM // previous: +1.4%]
January’s surging Housing Starts data will be expected to come back to earth a bit in the February number, but even a slight reduction month-to-month should still be a bullish signal for the American economy’s health.
Tuesday, March 26 at 9am EDT // Case-Shiller Home Price Index (Jan)
[consensus exp.: +0.3% MoM // prev.: +0.2%]
While other core data for the US housing market has oscillated throughout the first quarter of 2019, Case-Shiller has remained fairly stable and flat month-to-month. It may be time to take it off the must-watch list for a bit, but we’ll give it one more chance to surprise us.
Wednesday, March 27 at 8:30am EDT // Trade Balance (Jan)
[consensus exp.: -$57.5bb // prev.: -$59.8bb]
For as long as the current administration is in the White House and pushing a, let’s call it “combative,”
stance on trade with allies and adversaries alike, monthly trade balance updates will be important in trying to divine how trade policy (and by “policy” right now, I kind of mean “tweets”) might proceed in the coming months and how that could impact US Dollar value. (And, as a correlated asset, gold prices.)
Thursday, March 28 at 8:30 EDT // Initial Jobless Claims
[consensus exp.: 225k // prev.: 221k]
Similar to Case-Shiller, Initial Jobless Claims have been complete inert of late. The difference here being that Initial Claims has the potential in any given week to swing wide enough to influence forex and commodity pricing.
Thursday, March 28 at 10am EDT // Pending Home Sales (Feb)
[consensus exp.: -0.3% MoM // prev.: +4.6%]
Like Tuesday’s Starts/Permits data, market analysts expect to see February’s Pending Home Sales revert to the mean after a big upswing in January.
Friday, March 29 at 8:30am EDT // Personal Income (Feb) & Spending (Jan)
[Income consensus exp.: +0.3% MoM //prev.: -0.1%]
[Spending consensus exp.: +0.3% MoM // prev.: -0.5%]
This time, between the two I suspect that January’s spending number will be the most important to watch given the ugly drop in December data. Overall Retail Sales were up in January vs. December, so analysts expect to see a similar function in Personal Spending. Following the developing theme for this week’s data, without a strong surprise to the upside there isn’t much for the US Dollar in the expected numbers but rather a firm base of support.
Friday, March 29 at 8:30am EDT // PCE Price Index (Jan)
[headline CE consensus exp.: flat MoM // prev.: +0.06%]
[core PCE consensus exp.: +0.2% MoM // prev.: +0.15%]
The FOMC last week did nothing to remove focus from inflation as the key economic input to the Fed’s near- to medium-term outlook for the path of interest rates. Extrapolating from January’s CPI and PPI reports, look for Personal Consumption to be more the same: moderate inflation just below 2%. In other words, nothing that would compel the Fed to move off the current pause.
Friday, March 29 at 10am EDT // New Home Sales (Feb)
[consensus exp.: +2.1% MoM //prev.: -6.9%]
Mirroring a drop in mortgage applications, New Home Sales from the month of February should print as a month-to-month decline. The delivered-late-Friday-morning component of this number should nullify any market impact, but I will still contribute to our picture of the US housing market and the economy overall.
Global Economic Data to Watch
Thursday March 28 – Friday March 29 // European Inflation
With all the hand-wringing over faltering industrial data coming out of Europe these last couple weeks, it would be easy to forget that weak inflation was already a serious problem facing the Euro Area and consequently—as FOMC Chairman Jerome Powell pointed out in last week’s post-meeting Q&A—the global economy as a whole. Spread across Thursday and Friday we’ll be paying particular attention to the latest inflation data from the EU’s workhorses in Germany and France as well as the composite of inflation for the whole common-currency area. Most of the updates are expected to show a decrease in inflation, none of them are expected to be remotely near the 2% target. If the Euro or the US Dollar happen to be trading at an inflection point (support or resistance) as this data is released, we could see strong moves in reaction to the inflation data. With expectations for muted inflation, expect that potential move to be Euro down, Dollar up (and gold down.)
And that’s your calendar for the week, traders. Best of luck out there this week; I’ll see you back here on Friday for a recap of the economic calendar and this week’s gold market.