The Economic Week

Key Developments: 


• Today, North American data releases are the following:
o In Canada:
o Wholesale sales are expected to increase by 0.40% MoM. 
o In the U.S.:
o The NAHB Housing Market Index will be released at 9:00am CT. The index rose to 29 in February. 


Bottom Line: In the U.S., the absence of Tier 1 economic data means market participants will closely watch NY Fed Dudley’s speech on the economy in Long Island. In Canada, investors will closely watch the result of the Wholesale trade report as it is a leading indicator of consumer spending. The report is expected to show another increase MoM after gaining 0.90% in December. 
     
RBCCM Macro Monday Memo – The three things you need to know this week…


This week’s report covers three areas from a forward looking, macroeconomic point of view. The topic’s and RBCCM opinion are as follows:


• US Rates: The big one or just a carry-trade unwind? For the past two years there has been a lingering fear that rates were artificially low and had the potential to move dramatically higher. In the wake of this week’s abrupt sell-off, the most common question has been whether this is simply an extension of the range, or whether this is finally the big one. At least for the next few weeks, RBCCM is firmly in the extended range camp.


• Bearish bond trend reversals: An evolution in risk dynamics. The sharp spike higher in US 10-year yields has taken out a number of key resistance levels. From an intermarket perspective, ripple effects have been felt through the various asset classes that have highlighted a breakdown in some of the traditional “risk on” relationships. This suggests that an evolution in the risk theme may be underway. 


• China Slowdown Continues – All Part Of The Plan! RBCCM updates the outlook for Chinese growth, the yuan, and policy rates after the release of key data, public comments from the top Chinese leadership, and our own discussions with officials in Beijing.


RBCCM US Market Economics - Weekly Economic Dashboard


• RBCCM adds to the Weekly Economic Dashboard the Data Lab. The Data Lab highlights how the upcoming hi-frequency data have performed vs. consensus over the last 6 months.  It also shows the average miss relative to consensus, the standard deviation of the indicator and the frequency within which the indicator comes within 1 and 2 standard deviations. 


• The coming week is devoid of data but it is filled with Fed speakers.  Bernanke speaks a few times but the topic suggests we are likely to get little new information from the Chairman.  The Dudley speech on the other hand should be watched closely.  Given recent price action he could use this as an opportunity to talk down yields with a dovish speech.


The Weekly Economic Dashboard aggregates the key economic data being released this week with the most important economic theme being housing. Market participants will pay close attention to these economic releases and any deviation from consensus would likely bring an added degree of volatility.