The Week Ahead: Monetary Policy in Focus, with the PBoC, BoJ, BoC, and the ECB in Action
On the Macro
It’s a busy week ahead on the economic calendar, with 47 stats to monitor. In the previous week, 63 stats had been in focus.
For the Dollar:
It’s a particularly quiet week ahead on the economic calendar.
With the U.S markets closed on Monday, the markets will need to wait until Wednesday for the first set of numbers.
December’s existing-home sales figures are due out on Wednesday, which will likely have a muted impact on the Dollar.
Existing home sales figures tend to be volatile due to inventories. There has been a pickup in real estate sector activity, supported by mortgage rates and labor market conditions. We can, therefore, expect the markets to be able to stomach any minor falls in the month.
On Thursday, the weekly jobless claims figures are due out, which will also have a muted impact on the Dollar, barring any jump above 220k.
Prelim private sector PMI numbers for January due out on Friday wraps things up. The service sector PMI will have the greatest impact on the day.
Outside of the numbers, geopolitics will remain in focus. With the impeachment trial expected to get underway, expect Trump to attempt to distract…
The Dollar Spot Index ended the week up by 0.26% to 97.606.
For the EUR:
It’s a busy week ahead on the economic data front.
Key stats include January’s ZEW Economic sentiment figures for Germany and the Eurozone, due out on Tuesday.
The focus will then shift to prelim January private sector PMI numbers due out on Friday.
While December PMI numbers showed some improvement, the figures were still unimpressive.
Friday’s numbers will need to show a slower contraction in the manufacturing sector and pickup in service sector activity.
The China Automobile Association Manufacturers’ outlook for the auto sector was not what the doctor orders last week. A further slowdown in demand for autos in China would add pressure on the manufacturing sector, and Germany’s in particular.
On Friday, Germany’s IFO Business Climate Index figures will also influence on the day.
On the monetary policy front, the ECB’s first monetary policy decision of the year is due on Thursday.
While the ECB is unlikely to make a move, the Lagarde press conference will garner plenty of attention…
In the week, ECB President Lagarde is also scheduled to speak late on Monday and on Friday afternoon.
Outside of the numbers, geopolitical risk will continue to influence as the markets look towards chatter on Brexit and news from the impeachment trial.
The EUR/USD ended the week down by 0.26% to $ 1.1092.
For the Pound:
It’s another relatively busy week ahead on the economic calendar. Employment figures are due out on Tuesday. Expect the wage growth and claimant count numbers to have the greatest impact.
With sentiment towards BoE monetary policy turning more dovish, another jump in claimant counts would turn the screw.
On Wednesday, the CBI Industrial Trend Order numbers for January will also influence. Expect weaker numbers to pressure the Pound further.
The focus will then shift to the all-important January prelim private sector PMI numbers due out on Friday. We would expect the service sector numbers to have the greatest impact. Forecasts are GBP negative…
Outside of the numbers, Brexit will continue to be the main area of focus. 11-days remain until Britain enters the transition period.
The GBP/USD ended the week down by 0.37% to $ 1.3016.
For the Loonie:
It’s a particularly busy week ahead on the economic calendar.
At the start of the week, manufacturing sales figures for November are due out. Another fall will pressure the Loonie early.
The focus will then shift to December inflation figures due out on Tuesday, which are due out ahead of the BoC’s first monetary policy decision of the year.
There have been plenty of disappointing numbers that would support a more dovish BoC statement. With the BoC expected to stand pat on policy, the press conference will likely have the greatest impact.
It remains to be seen whether better employment figures for December and the USMCA will give the BoC reason to maintain the status quo…
November retail sales figures due out on Friday wrap things up, with the numbers forecasted to be Loonie positive.
The Loonie ended the week down by 0.12% to C$ 1.3066 against the U.S Dollar.
Out of Asia
For the Aussie Dollar:
It’s a relatively quiet week ahead.
Key stats include consumer confidence figures due out on Wednesday and December employment numbers due out on Thursday.
While we expect both sets of numbers to influence, the employment figures will have the greatest impact.
The fires continue to burn in Australia and are expected to have a material impact on consumption and output.
Weak employment numbers will add further support to an RBA rate cut next month.
The Aussie Dollar ended the week down by 0.32% to $ 0.6879.
For the Kiwi Dollar:
It’s a quiet week ahead, with key stats limited to the 4th quarter inflation figures due out on Friday.
The markets are expecting the RBNZ to stand pat at the start of the year. Any dire numbers could question the outlook…
The Kiwi Dollar ended the week down by 0.24% to $ 0.6615.
For the Japanese Yen:
It’s a relatively busy week on the economic calendar. Key stats include December trade data due out on Thursday and inflation and private sector PMI figures due out on Friday.
Expect the trade and PMI figures to have the greatest influence in the week. While the phase 1 agreement is expected to ease pressure on trade terms, demand may be another issue altogether…
After all, it’s going to take some time for the effects of the phase 1 agreement to trickle through.
On the monetary policy front, the Bank of Japan will deliver its first policy decision of the year. Last week BoJ Governor Kuroda had assured the markets that the BoJ would act if required. Will the BoJ stand pat but raise the prospects of a move?
The Japanese Yen ended the week down by 0.63% to ¥110.14 against the U.S Dollar.
Out of China
It’s a quiet week on the economic data front. There are no material stats due out ahead of the Chinese NY Holidays.
With the phase 1 agreement signed, sealed and delivered, it now comes down to compliance and near-term impact on the economic indicators.
Tariffs remain and a full trade agreement is going to be needed to support extended growth.
On the policy front, the PBoC will deliver its loan prime rate decisions for January on Monday. Expect any easing to support riskier assets.
The Yuan ended the week up by 0.86% to CNY6.8598 against the Greenback.
Impeachment: Trump’s impeachment trial will be in full swing in the week. We can expect plenty of chatter, though the chances of being ousted from office remain slim to none.
Trade Wars: With the phase 1 trade agreement signed, the markets will be looking for some guidance on when phase 2 talks will commence. Will Trump look to distract the markets from the impeachment trial and find a new target?
UK Politics: It’s the week before Brexit. With Britain leaving the EU on 31st, it enters into an 11-month transition period and plenty of uncertainty. There are two ways to spin it, however. Swift progress in forming trade agreements with partners beyond EU borders should ease pressure on the Pound.
Iran and the Middle East: After the escalation and de-escalation, it was relatively quiet last week. It is not expected to remain so, however. Expect any chatter from Washington and Tehran to have a material impact on risk appetite.
It’s a relatively busy week ahead on the corporate earnings calendar. From the U.S: Amex (Mon). Netflix (Tue). Lockheed Martin (Thurs), and Microsoft (Thurs) are amongst the big names scheduled to release in the week ahead.
This article was originally posted on FX Empire
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