Events to Look Out For Next Week

The FOMC,  BoE and ECB policy meetings and press conferences are the central bank highlights next week in the wake of a possible escape from a technical recession for Eurozone, while in UK the recession may not be quite as bad as feared initially.  These factors will keep the markets volatile as the new month kicks-off along with the OPEC+ meeting and US NFP data as the Q4 earnings season rolls-on.

Have a look at the most important events of the coming days in our usual weekly publication.

Tuesday – 31 January 2023

Retail Sales (AUD, GMT 00:30) – Australian Retail Sales are expected to contract by -1% m/m in December.
Manufacturing PMI (CNY, GMT 01:00) – The December NBS Manufacturing PMI in China is expected to improve slightly at 48.9 from 47.
Gross Domestic Product (EUR, GMT 07:00 & 10:00) – German GDP for Q4 is expected lower at -1.1% q/q from 0.4% q/q, while Euozone’s at 0.2% q/q from 0.3% q/q.
Gross Domestic Product (CAD, GMT 13:30) – GDP for November is expected steady at 0.1% m/m.
CB Consumer Confidence (USD, GMT 15:00) – Consumer confidence is expected to fall to 107.0 from 108.3 in December, versus a 17-month low of 95.7 in July. We expect the present situation index to fall to 146.0 after rebounding to 147.2 in December from a 19-month low of 138.3. We’ve seen a modest confidence updraft since mid-year, though all of the measures have deteriorated sharply from mid-2021 peaks. The surveys face headwinds from mounting recession fears and a mortgage rate surge through an October peak, before the ensuing pull-back.
Labour Market Data (NZD, GMT 21:45) – Employment change for Q4 is expected to grow by 0.7% from 1.3%, with the unemployment rate steady at 3.3%.

Wednesday – 01 February 2023

OPEC-JMMC meeting attended by representatives from the 13 OPEC members and 11 other oil-rich nations.
Consumer Price Index (EUR, GMT 10:00) – Eurozone’s preliminary CPI for January is expected to tick slightly lower at  9.1% y/y  from 9.2% y/y.
ADP Employment Change (USD, GMT 13:15) – The key private payrolls number is expected to grow by just 86K (a quarter from last month’s reading).
ISM Manufacturing PMI  (USD, GMT 15:00) – The ISM index is expected to fall to a 3-year low of 48.0 from a prior low of 48.4, versus an 18-year high of 63.7 in March ’21, an 11-year low of 41.6 in April of 2020, and an all-time low of 30.3 in June of 1980.
Event of the Week – Interest Rate Decision & Statement & Press Conference (USD, GMT 19:00) – This week’s data extend the policy dilemma for the FOMC in terms of how much higher to boost rates, and how long to keep them there. Key for the outlook is the overriding fear of ending the tightening too soon. Another hike is a done deal for February 1, and it is widely seen to be a further stepdown to a 25 bp increase to 4.625% given the pronouncements from most policymakers. However, unlike the BoC which declared a pause, we expect a hawkish message from Chair Powell in his press conference, warning that the Fed is not “there” yet. The Fed has clearly engineered a slowing in inflation and growth. But the gains of 3.5% on the headline GDP chain price index and 3.9% on the core PCE price gauge are well above the 2% goal. Additionally, the labor market remains too tight. Those will keep the Fed on course for a tighter stance in word and deed next week. But we do see growth and inflation coming down markedly this quarter that is likely to see the FOMC move to the sidelines and hold the line at 4.625%. That would be well short of the 5.1% median dot for 2023, but would also make it unlikely the FOMC would be cutting rates later this year.

Thursday – 02 February  2023

Event of the Week – Interest Rate Decision & Statement & Press Conference (GBP, GMT 12:00) – BoE looks likely to slow down the pace next week. Inflation in the UK remains very high, but continues to trend lower, and PPI numbers show output price inflation is also continuing to decelerate. With the policy rate already much higher than in the Eurozone and the BoE likely to downgrade its inflation projection next week we see a good chance that a majority of MPC members will opt for a 25 basis point move next week. The fact that the Fed is also likely to switch to 25 basis point steps makes this even more likely, as a downshift in the UK won’t change policy differentials. Cable may still be hit initially if markets are wrong-footed, but the fact that the Fed is also turning more cautious should help Sterling to recover.
Event of the Week – Interest Rate Decision & Statement & Press Conference (EUR, GMT 13:15) – The ECB remains on course to deliver another 50 basis point rate hike next week, but there are also signs that the March meeting will likely bring at least a discussion on a slow down in pace and a switch to 25 basis point moves. ECB’s Visco stressed yesterday that “in evaluating the intensity and timing of monetary transmission, the best path to avoid mistakes both ways is to take a cautious approach that takes into account each time all the elements available to identify the most appropriate steps”. Fellow dove Stournaras also stressed the need for caution and gradualism. The two won’t have voting rights next week, but are likely to opt for 25 basis point moves in March.

Friday – 03 February 2023

Event of the Week – Non-Farm Payrolls (USD, GMT 13:30) – A  170k January nonfarm payroll increase is anitcipated, after gains of 223k in December and 256k in November. Annual revisions should raise the level of payrolls through last March by an estimated 462k, though payroll growth is slowing into 2023. A tightening in claims into January implies some upside payroll risk. The jobless rate should tick up to 3.6% from the 3.5% cycle-low that was also seen in September. Hours-worked are assumed to rise 0.1% after a -0.1% December dip, while the workweek holds at 34.3 for a third month. Average hourly earnings are assumed to rise 0.4% after a 0.3% gain in December, while the y/y wage gain should slow to 4.6% from 4.8%. In the last expansion, we saw a 3.5% peak for y/y wage gains in both February and July of 2019, before the pandemic-boost to an 8.0% peak in April of 2020. The ensuing strength in wage gains has allowed continued robust y/y increases in 2022, though the return of low-paid workers to the workforce is likely restraining wage increases.
ISM Non-Manufacturing PMI  (USD, GMT 15:00) – The ISM-NMI index should bounce to 50.5 from a 3-year low of 49.6 in December, versus an all-time high of 68.4 in November of 2021, an 11-year low of 41.8 in April of 2020, and an all-time low of 37.8 in November 2008. We’re seeing a 14-month producer sentiment pull-back from robust peaks in November of 2021, with many of the various component categories now in contraction territory.

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Andria Pichidi

Market Analyst

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