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After a bullish first week of trading in the new month of February, there was increased profit-taking on the stock and crypto markets in the past week. In addition to divergent statements from different members of the US Federal Reserve as a result of which the US dollar continued to expand its comeback of the previous week, critical statements by the US government caused a course damper on the crypto market. At the end of the week on Friday, the US Bureau of Labor Statistics retrospectively adjusted the inflation rates published in recent months, which revived fears of inflation among investors. Increased key interest rates for a longer period of time therefore seem inevitable in order to counteract the inflation problem. In addition, initial jobless claims were above analyst estimates for the first time since the beginning of the year. Given the strong February 3rd Non-Employment Report (NFP), market participants were caught flat-footed by this surprise rise.
The following economic data are in focus this week
In this trading week, market players will first look at the announcement of the gross domestic product (GDP) in the euro area for the final quarter of 2022 on Tuesday. The eagerly awaited publication of the final US consumer price indices for January will follow in the early afternoon. In the middle of the week, fresh US retail sales will then be the focus of investors. Several relevant economic data will be presented on Thursday. In addition to the number of building permits in the US, investors are primarily looking at the updated US producer prices.
Gross domestic product in Europe
Tuesday, February 14, 2023: Investors are looking to Europe first this week. At 11:00 a.m. (CET), Eurostat will publish the gross domestic product for the euro area in the final quarter of 2022. In contrast to the previously published figures from January 31, the latest data also include the values for Germany transmitted by the Federal Statistical Office. The analysts forecast growth of 1.9 percentage points. Market experts can use the GDP data to draw conclusions about the current economic strength in the euro zone. The expected value is thus below the most recently published increase of 2.3 percent. If the forecasts are exceeded and are in the range of the final data for the third quarter of 2022, this would be an indication that the economy in the euro area is developing better than expected despite rising key interest rates. A solid gross domestic product would encourage the European Central Bank (ECB) to continue raising interest rates consistently when the next interest rate decision is made. However, a significantly weaker gross domestic product would restrict the ECB’s monetary policy measures and are likely to have a negative impact on the strength of the euro. The US dollar index DXY would thus continue its recovery of the past few weeks, which could mean further headwind for the Bitcoin price.
US inflation data this afternoon
At 2:30 p.m. (CET), the US Bureau of Labor Statistics will then present the final US inflation data for the past month of January. In December, the inflation rate was unchanged at 6.5 percent year-on-year. For the month of January, the experts are now expecting a decline to 6.2 percentage points. If the analysts’ expectations are confirmed, the recovery movement on the stock and crypto markets that has been ongoing since the beginning of the year could continue. On the other hand, if consumer price indices are above estimates, the US dollar should continue to gain ground in the short term and weigh on risky asset classes. This scenario must currently be classified as more likely, since last Friday, February 10, the figures for the last three months of trading were subsequently corrected upwards. Instead of the published -0.1 percent compared to November, the inflation rate in the US rose loudly a report by Reuters news agency by 0.1 percent month-on-month due to seasonal adjustments. This could be an indication that the US inflation rate could rise again slightly in the coming months and would thus underpin the hawkish statements made by several US central banks in the previous week.
US retail sales in focus
Wednesday, February 15, 2023: Midweek at 2:30 p.m. (CET) the updated US retail sales for the month of January are presented. They are considered an important measure for calculating the purchasing mood of private households. In the last two months of trading, US retail sales declined again and turned negative. In the Christmas month of December, the value was -1.1 percent, well below the analysts’ estimate of -0.8 percent. For the month of January, however, the experts expect a recovery to 1.6 percentage points.
If the buying mood of private households can stabilize again above the limit of 0 and reach the forecast value, this could ensure a price recovery on the stocks and crypto market. If, on the other hand, the published retail sales are below the estimates of the experts and remain in the negative range below 0, this would be a further indication of a weakening US economy. Recently, weak retail sales have had a negative impact on stock market prices as well as in the crypto sector.
US building permits and producer prices in the second half of the week
Thursday, February 16, 2023: At 2:30 p.m. (CET) the number of building permits for the month of January in the USA will be published. If the number of building permits granted falls short of expectations, as in previous months, another price correction in the US share indices could follow. The most recent forecast by the experts is 1.337 million. The analysts have again reduced their expectations. If, on the other hand, the building permits are above the forecast value, investors should take this as a sign of stabilization in the housing market, which has recently cooled down significantly, and could start a recovery rally on the stock market. The crypto sector should also benefit from this.
Also at 2:30 p.m. (CET) the current US producer price indices (PPI) for the previous month of January will be presented. The market experts expect a month-on-month increase of 0.4 percent. In December, production prices fell more sharply than analysts had assumed, at -0.5 percent. If the price increases after the recent fall in producer prices increase, as expected by the experts, the US dollar should continue to gain strength and create headwinds on the stock and crypto market. As in the previous week, the price of gold would also come under pressure again. If, on the other hand, the producer price indices are below the market experts’ estimates, this would reduce the pressure on Bitcoin and Co. and could lead to a bullish price reaction on the crypto market.
