ECB and Euro in the middle of the war!
The week ahead will be very important for most economies with more important data to come, however, it will be much more important for Europeans with the ongoing war between Russia and Ukraine, its effects, and ECB to decide what to do? Choose the higher inflation or stagflation? Anyway, what happens in the economic calendar and data, investors will be focusing mostly on the war news and its different scenarios to end or to continue.
War and global effects!
Why it happened and how it will end, or who is right, is a political matter which is out of our scope of activity. But whatever happens there, directly affects the global economy. Continuing war will increase the market risk with lifting price of many raw materials, including energy prices, which will end with higher inflation. At the same time, it will decrease the economic improvements also, especially in Europe. For the week ahead, it will be the most important market mover. And for any direction in the Stock Markets, it will be a game-changer.
Chinese Trade Balance
China is the biggest global factory, therefore its trade balance can give us more data bout the global economy and not just about China. Increasing imports, especially in the raw materials and energy sector, means that factories in china got more orders for the coming months and higher export also will tell us that which economies will have more retail sales. February trade surplus for China is expected to increase to $99.50bln from $94.46 bln in January.
Eurozone GDP - Tuesday
Ahead of Thursday's ECB meeting, we will have the final Q4 2021 GDP numbers. For the final numbers of Eurozone GDP, we are not expecting any changes in the 0.3% estimate. However, even if the GDP is the most important economic figure, still with no expected surprise and focuses on ECB and war, it is not expected to make any changes in the market. With the current situation, Euro is still expected to remain under pressure.
ECB Monetary Policy meeting - Thursday
As I mentioned earlier, central banks will have very important decisions to make. We have almost the same situation as the February meeting, with a bit more risk in the economic improvement. In the February meeting, Mrs. Lagarde expressed that inflation risks are increasing faster, and had an unexpectedly hawkish tone in her speech. And now we can see that increasing market risk can slow down the economic improvement, therefore wait and see policy is the most expected decision by holding the current rates. This expected policy should be a bit positive for European stock markets.
US inflation - Thursday
Inflation is still increasing and is expected to be seen in higher levels for February numbers, while with ongoing tensions and increasing raw material and energy prices, it must increase even more in the following months. The consumer price index is expected to increase by 0.8%, and 0.5% for the headline core numbers. These numbers will be important for the next week's FED meeting. At the same time, the reflection of inflation numbers will depend on geopolitical tensions. If tensions increase, the market will have less reaction to the inflation, while if peace talks can end the war, then economic data will have its real effects. Therefore, higher inflation will be negative for the stock markets and vice-versa.
Canadian Employment data - Friday
Last week Bank of Canada did not surprise the market with a 0.25% rate hike. Now employment numbers will be in the spotlight. In January, with some more restrictions that we had because of Covid cases, employment numbers were weaker than expectations, but for February we are expecting to see unemployment again fall to 6.2%, and it must be positive for the Canadian Dollar.
