US: Key events ahead - Scotiabank

Analysts from Scotiabank, point out that key events from the US next week include Chair Yellen testimony and important macro releases on Tuesday and Wednesday. 

Key Quotes: 

“Fed Chair Yellen then delivers her semi-annual monetary policy testimony to Congress before the Senate Banking Panel on Tuesday and the House Financial Services Committee on Wednesday. So far in her recent public appearances, Yellen has been reluctant to offer updated views on the economy and markets in terms of fiscal, regulatory and trade policy developments (…) Whether she repeats that the Fed will evaluate incoming data “over coming months” or not will be carefully watched to reaffirm that the Fed is on hold until our forecast for a hike no earlier than June (our base case).”

“Retail sales (Wednesday) in January could face the risk of a dip given what we know happened to vehicle sales and gasoline prices over the month. Gas prices were up by 4% m/m in January over December and they carry about an 8% weight. This translates into roughly a 0.3% addition to headline retail sales assuming that the volume of gasoline was little changed. Auto sales were down -4.4% m/m in January over December with about a 21% weight so that translates into roughly a -0.9% drag to headline retail sales. On net, assuming flat gasoline volumes and auto prices, these two components would drag 0.6% off of headline retail sales. That would require a large gain in sales ex-autos and gas to put growth in headline sales in the black for the month, and/or much higher gasoline sales volumes and/or much higher auto prices.”

“Also on Wednesday, CPI is expected to be a non-event—which probably means watch out. Consensus expects headline CPI to remain at 2.1% y/y and core CPI ex-food-and-energy to also remain unchanged at 2.2% y/y. Whether the latest prints tick up or down, the Fed prefers the price deflators on total consumer expenditures because the PCE price deflator dynamically adjusts for changes in what consumers spend money on and where, whereas CPI uses periodic updates to fixed weights and thus CPI more slowly adjusts to substitution and income effects in response to relative price changes.”

“Other macro reports will concentrate upon the industrial sector and will include regional manufacturing reports (Empire Wednesday, Philly Fed Thursday), industrial production (Wednesday) and producer prices (Tuesday). Housing starts (Thursday) and real wages (Wednesday) round out the hits.”

“Five regional Fed Presidents also speak during the week including voters (Harker, Kaplan) alternates (Lacker, Lockhart) and a nonvoting FOMC member (Rosengren).”