Market movers today
US PCE core inflation for January is due to be released today. PCE inflation has been quite flat at around 1.7% since August with no clear trend. We estimate PCE core was 0.25% m/ m and 1.7% y/y in January. The release will be particularly interesting in light of the recent repricing of the probability of a hike at the coming March meeting – now at 70%.
US ISM manufacturing for February is also due out today. The preliminary manufacturing PMI showed a small decline and the same may be true for ISM given that ISM has recently been a bit higher than PMI. However, regional PMIs have been quite strong.
Today EIA will report on US crude stocks last week. Yesterday, API was said to report that stocks rose 2.5mb last week. Hence, the market will be positioned for a similar rise in the official numbers from EIA.
In Scandies, we expect the Norwegian PMI for February to confirm the tendency for gradual improvement in manufacturing. The market will also focus on Riksbank Minutes.
Selected market news
US President Trump failed to deliver much new information on his policies at his speech to the Congress yesterday. He reiterated some of the key parts of this economic programme, e.g. his plans on spending USD1tn on public infrastructure and taxing imports. He also mentioned intensions of lowering taxes for persons and corporations. He did not provide much further details than what has already been presented. In turn, the market reaction to the speech was relatively muted.
Instead two speeches from members of the Federal Reserve attracted more attention. Dudley (voter, dovish) said that the case for tightening has become ‘a lot more compelling’ and that the ‘risks to the outlook are now starting to tilt to the upside’. Williams (non-voter, neutral) said that he expects the Fed to consider a March hike seriously. The hawkish comments sent US rates higher and EUR/USD lower.
Activity in the Chinese manufacturing sector continues to progress. February’s manufacturing PMIs surprised on the upside. The official PMI rose to 51.6 from 51.3 and the Caixin PMI rose to 51.7 from 51.0. Both were expected to drop slightly.
Finally, API was said to report yesterday, that US crude stocks rose 2.5mb last week. It indicates that the upwards trend in US crude stocks continues despite recent production cuts from OPEC trying to force them lower.