US OUTLOOK/OPINION: Airlines The Key PCE Relevant Category To Watch In PPI
The February PPI release at 0830ET will mainly be scrutinized to shape core PCE inflation expectations for the month. Analysts' consensus for February core PCE rose to 0.32% M/M vs 0.24% prior to yesterday's CPI release, which would mark an 11-month high (0.28% prior).
- Recall that the downside surprise in core CPI (0.23% M/M vs 0.27% expected) was largely due to softer-than-expected airfares (-4% M/M in CPI) and auto insurance (0.3% M/M in CPI) - categories that don't feed from CPI into PCE, but do feed in from PPI.
- In the PPI report, they are are expected to show less benign readings than in the CPI report (private passenger auto insurance was +0.1% M/M in Jan PPI, airline passenger services were -0.3%).
- Other key categories to watch are portfolio management/investment advice (expected to grow at a steady pace vs Jan's 0.4% in PPI), physician services prices (expected to see a bounceback after January's 0.5% decline in PPI), and health insurance (-1.1% in Jan's PPI)
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MNI: FINAL REMINDER: MNI Webcast with ECB Frank Elderson On Feb 12
You are invited to listen to an MNI Webcast with Frank Elderson, Member of the Executive Board of the European Central Bank.
Details below:
- TOPIC OF DISCUSSION: 'Climate Change: Impact on Monetary Policy & Bank Supervision'
- DATE: Wednesday 12 February
- TIME: 10 am to 11:15 am London time / 11 am to 12:15 pm Frankfurt time
- This event is on the record and will run as a Zoom Webinar
To register please go to: MNI Webcast Registration
JPY: Higher Core Yields Continuing to Weigh on Japanese Yen
- Pressure on core fixed income and the associated higher yields on Tuesday are supporting the latest recovery for Cross/JPY, as USDJPY rises to a fresh session high of 152.38. Price action narrows the gap to Monday’s peak, which comes in at 152.54.
- Plenty of room for USDJPY to correct further to the topside, given the powerful move lower last week and additional profit taking dynamics potentially in play ahead of tomorrow’s US CPI release. Above Monday’s high, 152.89 (Jan 6 high) and 153.72 (Jan 27 low) are levels to watch.
- In similar vein, EURJPY is trading on the front foot following last week’s near 3% plunge. We have noted that the short-term trend is oversold, and today’s gains are allowing this condition to unwind.Initial resistances are located at 157.97 (Feb 3 low) and 158.86 (Feb 6 high), however firm resistance is not seen until the 20-day EMA and the significant pivot level of 160.00.
NATO: Anti-Gov't Strikes Could Impact NATO Defence Ministers' Meeting
Belgium's three major trade unions will hold nationwide strikes on 12 and 13 February in protest of the new 'Arizona' coalition's governing agreement. The strikes, which are set to affect public transport, postal services, refuse collection, and eductation are also set to result in no flights being able to depart Belgium's two busiest airports on 13 Feb. This strike could have knock-on effects for talks regarding European security.
- Previous strikes in Jan came on the back of leaked information speculating on cuts to welfare and pension reforms from the five-party 'Arizona' coalition that was in the final stages of agreeing on a plan for gov't. Having now come to power and outlined its plans, Günther Blauwens, president of the Flemish railway union ACOD Spoor, told Brussels Times that "There is even more anger now; many feel cheated."
- Defence ministers from Ukraine's allies meet in the Ukraine Defense Contact Group format (also known as the Ramstein format) tomorrow (12 Feb) at NATO's HQ in Brussels. The talks are the first in the format since US President Donald Trump took office, and for the first time will not be chaired by the US but instead by the UK. After this on Thursday 13 Feb, a NATO defence ministers' meeting takes place. A significant number of these defence ministers are planning to attend the 14-16 Feb Munich Security Conference in Bavaria. It remains to be seen whether ministers will commit to attending in person if they risk missing events later in the week.
