Tag: The Week Ahead

  • Weekly Market Outlook (20-24 January)

    Weekly Market Outlook (20-24 January)


    UPCOMING
    EVENTS
    :

    • Monday: PBoC LPR,US Presidential Inauguration
      Day, BoC Business Outlook Survey, New Zealand Services PMI.
    • Tuesday: UK Employment report, German ZEW, Canada CPI, New
      Zealand Q4 CPI.
    • Thursday: Canada Retail Sales, US Jobless Claims.
    • Friday: Japan CPI, BoJ Policy Decision,
      Australia/Japan/Eurozone/UK/US Flash PMIs.

    Monday

    The PBoC is
    expected to keep the LPR rates unchanged at 3.1% for the 1 year and 3.6% for
    the 5 year. Chinese officials pledged strong monetary and fiscal support in
    2025, but we have yet to see that. Deflationary forces are still in place and
    real rates remain too high for the economy to recover.

    PBoC

    Tuesday

    The UK Employment
    report is expected to show 35K jobs added in the three months to November vs.
    173K to October and the Unemployment Rate to remain unchanged at 4.3%. The
    Average Earnings including Bonus is expected to pick up to 5.6% vs. 5.2% prior,
    while the ex-Bonus measure is seen at 5.5% vs. 5.2% prior.

    Wage growth
    remains too high and that’s something that’s been keeping the BoE more cautious
    but the central bank officials continue to see four rate cuts by the end of the
    year. The market sees an 82% probability of a 25 bps cut at the upcoming
    meeting and a total of 65 bps of easing by year end.

    UK Unemployment Rate

    The Canadian CPI
    Y/Y is expected at 1.8% vs. 1.9% prior, while the M/M measure is seen at -0.4%
    vs. 0.0% prior. The Trimmed Mean CPI Y/Y is expected at 2.4% vs. 2.7% prior,
    while the Median CPI Y/Y is seen at 2.4% vs. 2.6% prior.

    As a reminder, the
    BoC cut interest rates by 50 bps at the last policy meeting but dropped the line saying “if the economy evolves broadly in line with
    our latest forecast, we expect to reduce the policy rate further”, which
    suggests that we reached the peak in “dovishness” and the central
    bank will now switch to 25 bps cuts and will slow the pace of easing.

    The market sees an
    81% chance of a 25 bps cut at the upcoming meeting and a total of 58 bps of
    easing by year end.

    Canada Inflation Measures

    The New Zealand Q4
    CPI Y/Y is expected at 2.1% vs. 2.2% prior, while the Q/Q measure is seen at
    0.4% vs. 0.6% prior. As a reminder, the RBNZ cut interest rates by 50 bps as expected at the last
    meeting. The market is pricing a 61% chance of a 50 bps cut in February and a
    total of 103 bps of easing by year end.

    New Zealand Q4 CPI YoY

    Thursday

    The US Jobless
    Claims continue to be one of the most important releases to follow every week
    as it’s a timelier indicator on the state of the labour market.

    Initial Claims
    remain inside the 200K-260K range created since 2022, while Continuing Claims
    continue to hover around cycle highs although we’ve seen some easing recently.

    This week Initial
    Claims are expected at 218K vs. 217K prior, while Continuing Claims are seen at
    1861K vs. 1859K prior.

    US Jobless Claims

    Friday

    The Japanese Core
    CPI Y/Y is expected at 3.0% vs. 2.7% prior. The data will be released before
    the BoJ decision, so the market might not react to it too much given that the
    focus will be on the central bank decision.

    Japan Core CPI YoY

    The BoJ is
    expected to hike interest rates by 25 bps. We had a quick turnaround in
    expectations in the last couple of weeks following some usual “leaks” and
    especially Governor Ueda’s comments which suggested that a rate hike was in
    serious consideration. The market responded by pricing in the rate hike and
    bidding the JPY into the decision which also raised the risk of a
    disappointment in case the BoJ were to keep rates steady.

    Bank of Japan



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