UPCOMING EVENTS:
- Tuesday: Japan PPI, UK Labour Market report, Switzerland CPI, German ZEW, US NFIB Small Business Optimism Index, US CPI.
- Wednesday: UK CPI, Eurozone Industrial Production.
- Thursday: Japan GDP, Australia Labour Market report, UK GDP, UK Industrial Production, Switzerland PPI, US Retail Sales, US Jobless Claims, US Industrial Production, US NAHB Housing Market Index, New Zealand Manufacturing PMI, PBoC MLF.
- Friday: UK Retail Sales, Switzerland Industrial Production, US PPI, US Housing Starts and Building Permits, US University of Michigan Consumer Sentiment.
Tuesday
The UK Unemployment Rate is expected to tick higher to 4.0% vs. 3.9% prior. The markets are likely to focus on wage growth with the Average Earnings ex-Bonus seen at 6.0% vs. 6.6% prior, while the Average Earnings including Bonus expected at 5.7% vs. 6.0% prior. The data will influence the market’s pricing with a miss bringing rate cuts forward.
The Switzerland CPI Y/Y is expected at 1.6% vs. 1.7% prior. The inflation rate has been is the SNB’s 0-2% target range since last summer and although the central bank expects a short term increase, Chairman Jordan said that their base case scenario is that inflation should average below 2% this year.
The US CPI Y/Y is expected at 3.0% vs. 3.4% prior, while the M/M measure is seen at 0.2% vs. 0.2% prior. The Core CPI Y/Y is expected at 3.8% vs. 3.9% prior, while the M/M reading is seen at 0.3% vs. 0.3% prior. This is going to be the most important report for the week and, as it’s been the case for the prior releases, it will influence the market’s pricing with a miss bringing rate cuts forward and a beat pushing them backword.
Wednesday
The UK CPI Y/Y is expected at 4.2% vs. 4.0% prior, while the M/M reading is seen at -0.3% vs. 0.4% prior. The Core CPI Y/Y is expected at 5.2% vs. 5.1% prior. The last report surprised to the upside which prompted a hawkish repricing in interest rates expectations. The BoE is particularly focused on services inflation, so that would be the most important metric to watch for. Again, a downside surprise should bring rate cuts forward, while another upward surprise is likely to push them backword.
Thursday
The Australian Unemployment Rate is expected to tick higher to 4.0% vs. 3.9% prior with 30K jobs added in January vs. -65.1K in December. The last report surprised to the downside with a hefty contraction in full-time employment. Citing RBA’s Governor Bullock, the central bank is “very, very focused” on employment but unless we get some notable surprise, it’s unlikely to change much for the RBA.
The US Retail Sales M/M are expected at -0.1% vs. 0.6% prior, while the ex-Autos M/M measure is seen at 0.3% vs. 0.4% prior. The last report surprised to the upside with the Control Group coming in at a strong 0.8% vs. a previous positively revised 0.5% reading. US Retail Sales have been strong for several months, but they are expected to be weaker in January due to negative weather effects.
The US Jobless Claims continue to be one of the most important releases every week as it’s a timelier indicator on the state of the labour market. Initial Claims keep on hovering around cycle lows, while Continuing Claims remain firm around cycle highs. This week the consensus sees Initial Claims at 220K vs. 218K prior, while Continuing Claims are seen at 1878K vs. 1871K prior.
The PBoC is expected to keep the MLF rate unchanged at 2.50%. The central bank surprised recently by cutting the RRR by 50bps vs. 25 bps expected and sparked a rally in the stock market (although most of the gains were erased in the following weeks). The PBoC will have an opportunity to surprise the markets again with a cut and this time trigger a more sustained and positive reaction.
Friday
The US PPI Y/Y is expected at 0.7% vs. 1.0% prior, while the M/M measure is seen at 0.1% vs. -0.1% prior. The Core PPI Y/Y is expected at 1.6% vs. 1.8% prior, while the M/M reading is seen at 0.1% vs. 0.0% prior. This report is unlikely to be that much market moving given that the focus will be on the US CPI on Tuesday.
