The BoC and FED policy meetings and press conferences are the central bank highlights this week. Surging inflation and the slowing in economic growth from the robust Q4 pace could be exacerbated by the spread of Omicron and renewed mitigation measures, not to mention the impact from the shift away from monetary policy accommodation and the runoff of fiscal support. How central banks navigate these dynamics will keep the markets choppy. These factors will keep the markets volatile next week as well. On top of all this, next week’s heavy dose of global data releases includes global PMIs , Australian CPI, US GDP and PCE .
Monday – 24 January 2022
Services and Manufacturing PMI (EUR, GMT 09:00) – January prelim. Eurozone Services and Manufacturing PMIs are anticipated at 52.1 and 57.6 respectively with German Services PMIs presenting a contraction at 48.0, reflecting that Omicron is largely to Although demand is ebbing, especially in the services sector as virus restrictions return across most countries against the background of a spike in case numbers, there is hope that with Omicron leading to fewer hospitalisations it will help to end the pandemic phase, especially coupled with vaccinations. The fact that jobs growth continued even in the services sector is also encouraging. Inflation pressures, though, also remained very high, with rates of 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 up to 53.6 the data adds to signs that Omicron will delay, but not derail the recovery.
Tuesday – 25 January 2022
Consumer Price Index (AUD, GMT 00:30) – Australian inflation looks more long lasting. In Q4, Inflation is seen higher with overall inflation expected to stand at 3.2% y/y from 3.0% y/y.IFO Business Climate, Assessment & Expectations (EUR, GMT 09:00) – The German IFO business reading is expected to decline slightly to 94.5 in January from 94.7.Consumer Confidence (USD, GMT 15:00) – The Consumer confidence is expected to fall to 110.0 after a rebound to 115.8 in December, versus a 7-month low of 109.8 in September. We expect the present situation index to slip to 142.7 from 144.1 in December. The expectations index is expected to fall to 88.2 from 96.9. Confidence is being pushed down by soaring prices due to supply chain disruptions and the spread of the Omicron variant, alongside the ongoing pull-back in the 2020-21 confidence lift from stimulus.
Wednesday – 26 January 2022
Interest Rate Decision, Monetary Policy Statement (CAD, GMT 15:00 )Interest Rate Decision, Monetary Policy Statement and Press Conference (USD, GMT 19:00-19:30) Consumer Price Index (NZD, GMT 21:45) – Q4 inflation is anticipated higher with overall inflation expected to stand at 5.6% y/y from 4.9% y/y.
Thursday – 27 January 2022
Durable Goods (USD, GMT 13:30) – Durable goods orders are expected to fall -0.4% in December with a -2.5% transportation orders drop, after a 2.6% headline increase in November that included a 6.5% transportation orders bounce.Gross Domestic Product (USD, GMT 13:30) – GDP growth is expected at 6.2% in Q4, after the 2.3% Q3 gain. Consumption growth in Q4 is pegged at 3.8%, alongside 5.2% growth for business fixed investment and 4.1% for residential investment. The economy faced an ongoing headwind from supply chain disruptions into the turn of the year, alongside a mounting headwind from the Omicron variant. The economy will also face a substantial headwind through 2022 from the “fiscal cliff,” as the budget deficit contracts from -$2.8 tln in FY21 to -$1.1 tln in FY22. The economy faces a tailwind from efforts by businesses to reverse a big two-year inventory pull-back.
Friday – 28 January 2022
Personal Income/Consumption (USD, GMT 13:30) – A 0.6% rise is anticipated for December personal income after the 0.4% November headline.
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Andria Pichidi
Market Analyst
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