FX Daily

In the euro area the preliminary German consumer prices released Friday suggest that deflation in the euro area eased more than the current consensus expectations in February. We expect euro area HICP inflation to increase to -0.2% y/y (consensus: -0.4% y/y) from -0.6% y/y in January mainly on the back of the rebound in the crude oil price in the past month. As usual core inflation deserves particular attention for possible second-round effects from the decline in the crude oil price and headline inflation.

Across Europe there will be focus on manufacturing PMIs. Most interesting will be the first estimates for Italy and Spain. In the UK we expect a slight decline but it should be remembered that the service PMI scheduled for release on Wednesday is more important and there we expect to see a slight improvement.

In the US the main event is the manufacturing ISM for February. The regional manufacturing surveys for February have been on the soft side, so we expect to see a slight decline. There will also be considerable focus on the core PCE-inflation measure (Fed’s preferred measure) for January after the larger than expected increase in CPI core. We expect the increase in core PCE to accelerate in January but it is too early to call a reversal of the downward trend in core inflation.

Looking further ahead the most important events this week are the ECB meeting on Thursday and the US labour market report for February on Friday

We look for a decline in Norwegian PMI.

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