Events to Look Out for Next Week

The economic agenda ahead is expected to be a massive one, as the Fed, BoE,  SNB, ECB and BoJ’s officials are heading for a lively debate at next week’s rate decision and monetary policy meetings. In the meantime the numerous uncertainties that have made for a painful couple of weeks in the markets, which were whipsawed by seemingly ever changing and conflicting risks from Covid, supply dislocations, and monetary policy, are expected to remain. The new Omicron variant added to the overall turbulence, and monetary policy pivots further exacerbated the confusion, while the new variant and the erratic responses will keep the markets skittish into the holidays.

Tuesday – 14 December 2021

Employment change & ILO rate (GBP, GMT 07:00) – UK Earnings with the bonus-included figure are expected to decline at 5.6% (3 Mo/y) from 5.8% in the three months to November. The UK ILO unemployment rate is expected to fall at 4.2% from 4.3%.
Producer Price Index (USD, GMT 13:30) – November’s PPI headline is expected at 0.5% gains for both the headline and core, following respective gains of 0.6% and 0.4% in October. As-expected readings would result in the y/y headline PPI metric bouncing to 9.2% from an 8.6% pace in October and September, leaving an eighth consecutive all-time high. The headline and core y/y metrics look poised to peak in November and December respectively

Wednesday – 15 December 2021

PPI and CPI (GBP, GMT 07:00) – More UK data, with Inflation from producer and consumer spending, are both expected to show a dip for November, with a growth at 1.1% m/m from 1.4% m/m and 0.3% m/m from 1.1% m/m respectively.
US Retail Sales (USD, GMT 13:30) – Expectations are for a 0.3% November retail sales headline climb with a 0.4% ex-auto increase, following October increases of 1.7% for both. A continued unwind of the lift from Q1 stimulus is anticipated, and restraint from the end of extended jobless benefits that have capped Q4 disposable income growth.
Consumer Price Index and Core (CAD, GMT 13:30) – Canada’s CPI surged to a 4.7% (y/y, nsa) pace in October from the 4.4% growth rate in September. CPI grew 0.7% (m/m, nsa). Figures are expected unchanged in November.
Interest Rate Decision, Statement and Conference (USD, GMT 19:00-19:30)The FOMC is fully expected to announce an acceleration in the QE taper at the policy meeting. The Fed began trimming its asset purchases last month at a $15 bln clip, and ongoing inflationary pressures along with the strengthening in the Q4 economy and labor market (according to a number of measures) should see policymakers speed up the pace, and likely double it, which could see the program finish by the end of Q1 instead of mid-2022 as first contemplated. The inflation threat has picked up, and the pop to multi-decade highs and the persistence of pressures resulted in the decision to “retire” the transitory characterization. The Committee now wants to end this phase of accommodation to gain more flexibility on rate actions next year. Assuming an end of QE in March, the FOMC is unlikely to commence liftoff as soon as May, as the markets are pricing, especially if inflation starts to decelerate by then. September seems to be a more likely time as it will provide some time to better assess the economy.
Gross Domestic Product (NZD, GMT 21:45) – GDP is the economy’s most important figure. The preliminary Q3 GDP for New Zealand is expected to contract to -4.3%q/q from 2.8% q/q.

Thursday – 16 December 2021

Interest Rate Decision, Statement and Conference (CHF, GMT 08:30-09:00)The Swiss data has showed so far that the recovery remains on track, although the pick up in virus cases across the border in Austria and Southern Germany could throw a spanner in the works. Hence the SNB rate decision and statement are expected unchanged. For the SNB the focus remains on forex developments and the ECB’s action.
Interest Rate Decision, Statement and MPC Voting (GBP, GMT 12:00)   Like the ECB, the BoE has flagged the possible risk of second round effects from the spike in inflation, but with Omicron overshadowing the short term growth outlook, the chances are that the BoE will push the flagged rate hike into next year. The government is pushing the booster program while struggling to give a clear guidance on restrictions over the holiday period, but it is likely that virus developments will weigh on consumption trends, which have been a key driver of the recovery so far. The BoE’s inflation survey shows a further spike in inflation expectations, increasing the pressure on the BoE to push the rate hike debate into 2022, as it flags the risk of second round effects as inflation expectations continue to move higher. 
Interest Rate Decision, Statement and Conference (EUR, GMT 12:45 & 13:30) – Next week’s meeting will come with updated staff projections and ECB vice president de Guindos has already flagged that the inflation forecast will be lifted – at least in the short term. Omicron may have a thrown a spanner in the works and heightened uncertainty on the growth outlook, but comments from Guindos, hardly a hawk, have already signaled that the central scenario is that the latest variant may lead to a temporary disruption, but won’t derail the overall recovery. That means the central scenario on the growth outlook hasn’t changed too much, which will keep the ECB on course to phase out net asset purchases under the emergency PEPP program through the first quarter and end it in March next year. The important decisions will centre on what happens with the older APP program and how to deal with the loss of flexibility on the distribution of bond purchases, which allowed the ECB to keep in spreads through the crisis.

Friday – 17 December 2021

Interest Rate Decision, Statement and Conference (JPY, GMT 03:00 & 06:00)  BoJ’s Kuroda vows ongoing easing even if CPI hits 1%. BoJ’s Kuroda said “stress on corporate financing stemming from Covid-19 seems to have become limited to firms in industries facing subdued sales as well as small and medium sized ones”, which some have seen as a sign that the BoJ could be scaling back the funding program, which currently is due to finish at the end of March 2022. At the same time Kuroda stressed the need for ongoing monetary easing, and added that there is no plan at all for less easing even if CPI is at 1%, which the bank expects it to hit in the middle of next year.
Consumer Price Index and Core (EUR, GMT 10:00) – Eurozone’s CPI is expected to decline in November to 0.5% m/m from 0.8%, while headline figures and core are seen steady.

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Andria Pichidi

Market Analyst

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