Executive summary: Our guide to this week’s global macro risk events and trading opportunities.
This week in trade ideas, we turn long EUR-USD on a strategic basis and stay engaged in long SPX and VIX where correlations recently moved strongly positive. We add long SGD-CNH to our watchlist.
Monday: Markets will begin the week with US reports on core PCE deflator as well as consumer income and spending. Colombia’s BanRep meets.
Tuesday brings Trump’s State of the Union address, New Zealand trade, Japan retail sales, Eurozone GDP, German CPI and a Catalan parliamentary vote. In EM, we have Mexican GDP and the Hungary's MNB.
Wednesday features the Fed FOMC meeting as well as BOJ minutes, Australian quarterly CPI, Eurozone CPI as well as the US Treasury's quarterly refunding statement. In EM, China NBS PMIs and Taiwan GDP will be released.
Thursday has PMI releases (including Japan, China Caixin, Germany and US ISM). In EM, the Czech CNB and Chilean BCCh will decide on rates and India presents it budget.
Friday rounds out the week with US jobs and UMich sentiment.
During the week, tech names Facebook, Microsoft and Paypal report earnings on Wednesday, while Apple, Alphabet, Amazon and Alibaba are up on Thursday.
Visual of the Week:
North America: US monetary and fiscal policies will be in focus this week. First, Janet Yellen presides over her last FOMC meeting as Chair on Wednesday, which is sandwiched between two important data releases: core PCE deflator - the Fed's preferred inflation gauge - will be released on Monday, while jobs and average wage earnings are out on Friday. Consensus expects core PCE to stay unchanged at 1.5% in December - drifting higher only from Q2 towards 1.8% during 2H18. Given FX volatility over the past week, any extension of US Dollar weakness would be monitored for its potential inflationary impulse through higher global commodity prices and US import prices. That said, whilst the market i