BoC and FED Policy meetings and press briefings are central bank highlights this week. Rising inflation and slowing economic growth from robust Q4 pace could be exacerbated by Omicron proliferation and renewed mitigation measures, not to mention the impact of the move away from monetary easing and fiscal support.
How central banks deal with this dynamic will keep markets jittery. These factors will continue to keep markets volatile next week. Additionally, the big dose of global data releases includes next week
global PMIs, Australian CPI, US GDP and PCE.
Monday – January 24, 2022
Services & Manufacturing PMI (EUR, GMT 09:00) – January advance. Eurozone services and manufacturing PMIs are expected at 52.1 and 57.6 respectively, with German services PMIs set to decline at 48.0, indicating Omicron is largely off demand, particularly in the service sector as the virus restrictions in most countries against the background of an increase in case numbers, there is hope that as it leads to fewer hospital admissions, Omicron will help end the pandemic phase, especially in conjunction with vaccination. Also encouraging is the fact that employment growth has continued even in the service sector. However, inflationary pressures also remained very high, with input cost and output price inflation slowing only slightly.
Markit PMIs (GBP, GMT 09:30) – Services activity continued to expand and with the composite also revised to 53.6 the data adds to the evidence that Omicron will delay but not derail the recovery.
Tuesday – January 25, 2022
Consumer Price Index (AUD, GMT 00:30) – Australian inflation looks more durable. Inflation is expected to be higher in the fourth quarter, with headline inflation expected to come in at 3.2% yoy from 3.0% yoy.
IFO Business Climate, Assessment & Expectations (EUR, GMT 09:00) – German IFO business values are expected to fall slightly to 94.5 from 94.7 in January.
Consumer Confidence (USD, GMT 15:00) – Consumer confidence is likely to fall to 110.0 in December after a rebound to 115.8 from a 7-month low of 109.8 in September. We expect the current situation index to slip to 142.7 from 144.1 in December. The expectation index is expected to fall to 88.2 from 96.9. Confidence is weighed down by rising prices due to supply chain disruptions and Omicron variant proliferation, as well as the continued decline in the 2020-21 confidence surge from stimulus.
Wednesday – January 26, 2022
– The bank continues to expect CPI inflation to remain high in the first half of 2022, before falling back to 2 percent in the second half. The bank closely monitors inflation expectations and labor costs to ensure that price drivers are not embedded in persistent inflation. The Bank of Canada is expected to keep interest rates steady at 0.25% and maintain its ‘extraordinary forward guidance on the overnight rate path’. Rate Decision, Monetary Policy Statement (CAD, GMT 15:00)
– The chorus of hawkish Fedspeak from Powell onwards has largely confirmed that the rebound will follow in March with a string of rate hikes, along with an earlier balance sheet reduction. While the declines in retail sales and industrial production were seen primarily as functions of the advance of holiday sales, rising prices, inventory shortages, reduced fiscal stimulus measures and now headwinds from Omicron, there are concerns that the decline could herald a broader slowdown ahead, which could spell trouble for the aggressive policies of the FOMC. While the rise in jobless claims and the slump in existing home sales were somewhat affected by distortions, the data nonetheless added to speculation of a slowing economy that could dampen the FOMC’s monetary policy stance. Rate Decision, Monetary Policy Statement and Press Conference (USD, GMT 19:00-19:30)
Consumer Price Index (NZD, GMT 21:45) – Q4 inflation is expected to be higher, with headline inflation expected to come in at 5.6% yoy from 4.9% yoy.
Thursday – January 27, 2022
Durable Goods (USD, GMT 13:30) – Durable goods orders are expected to decline by -0.4% in December, with a -2.5% drop in transportation orders, after a 2.6% increase in November, which saw a rise in transportation orders by 6.5%.
Gross Domestic Product (USD, GMT 13:30) – GDP growth is expected to be 6.2% in Q4 after 2.3% in Q3. Consumption growth in Q4 is set at 3.8%, alongside 5.2% growth in corporate fixed investment and 4.1% growth in home investment. The economy faced continued headwinds from supply chain disruptions as well as increasing headwinds from the Omicron variant through the turn of the year. The economy will also face significant headwinds from the “fiscal cliff” into 2022 as the budget deficit narrows to -$1.1 trillion in FY22 from -$2.8 trillion in FY21. The economy is facing tailwinds from corporate efforts to reverse a major two-year inventory decline.
Friday – January 28, 2022
Personal Income/Consumption (USD, GMT 13:30) – After headlining 0.4% in November, personal income is expected to rise 0.6% in December.