Events to Look Out for Next Week

• Gross Domestic Product (CNY, GMT 02:00) – Gross Domestic Product should advance in Q4 and reveal headline growth of 6.1% y/y and 3.2% q/q.

Tuesday – 19 January 2021

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• Harmonized Index of Consumer Prices (EUR, GMT 17:00) – The German HICP inflation for December is anticipated to remain unchanged at -0.7% y/y. Initial expectations had been for a slight lift in the annual rate, but national data out of Germany already indicated that the number would remain stuck at a very low level. Germany’s temporary VAT cut and base effects from energy prices are largely to blame for the negative rate.
• ECB Bank Lending Survey (EUR, GMT 09:00)
• Economic Sentiment (EUR, GMT 10:00) – European January ZEW economic sentiment is seen to have declined at 45.5 compared to 54.4 last month.

Wednesday – 20 January 2021

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• The inauguration of Joe Biden as the 46th President will dominate headlines around the world!
• PBoC Interest Rate Decision (CNY, GMT 01:30) – The People’s Bank of China in this meeting should provide guidance on the next move in Loan Prime Rates. It is expected to continue to maintain flexibility in the exchange rate, stabilize market expectations, and keep the yuan basically stable at reasonable and balanced levels.
• Consumer Price Index and Retail Sales Index (GBP, GMT 07:00) – UK inflation data for December is anticipated higher at 0.5% y/y, after falling more than expected, to just 0.3% y/y in November, with the biggest downward contribution coming from food and non-alcohol beverages, along with clothing and footwear. The UK-wide Covid-19 lockdown in November suppressed price pressures. Inflation is likely to remain subdued over the next several months, but should pick up notably from spring, when base effects impact on year-on-year price comparisons. There is potential for pronounced reflation as 2021 progresses, assuming vaccine programs prove effective, which would facilitate a return towards societal and economic normalcy, and in turn trigger a possible consumer spending boom fuelled by ‘lockdown savings’. The Retail sales are seen at 1.1% y/y in December from 0.9% y/y last month.
• Consumer Price Index (EUR, GMT 10:00) – The final CPI headline and core are expected to show 0.3%m/m December gains, with core declining to 0.5% m/m.
• Consumer Price Index (CAD, GMT 13:30) – The CPI inflation accelerated to a 1.0% y/y pace in November, however, it is expected to decline in December to 0.8% y/y below the Bank’s target of 2% until 2023.
• Interest Rate Decision and Statement (CAD, GMT 15:00) – The BoC is expected to hold rates steady at 0.25% after December’s meeting in which extraordinary forward guidance remained in place as anticipated — the bank reiterated that it expects to hold rates at the effective lower bound until “economic slack is absorbed so that the 2% inflation target is sustainably achieved.”

Thursday – 21 January 2021

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• Interest Rate Decision and Statement (JPY, GMT 03:00) – The BoJ is expected to hold rates steady at -0.1% after December’s meeting in which extraordinary forward guidance remained in place as anticipated — the bank reiterated that it expects to hold rates at the effective lower bound until “economic slack is absorbed so that the 2% inflation target is sustainably achieved.” The speculation is growing that the BoJ will scale back its ETF stock buying programme – given the strength in equities and the BoJ’s substantial ownership of this ETF sector.
• Interest Rate Decision, Statement and Conference (EUR, GMT 12:45) – The ECB to add more stimulus at the moment seems unlikely unless current restrictions remain in place much longer than anticipated. Hence, ECB is expected to keep policy steady at January meeting. The central bank’s focus is on maintaining very favourable financing conditions for both governments and companies, against the background of a pandemic that not only has weighed heavily on the growth outlook, but also contributed a further fragmentation of economies and markets. With the advent of vaccination programs there clearly is no appetite to cut rates again. Not that the ECB rules out such a step — if the situation deteriorates again, or an overshooting currency undermines the inflation outlook, the ECB won’t shy away from using that instrument if necessary.

Friday – 22 January 2021

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• Markit PMI Composite (EUR, GMT 08:30-09:0) – Final December PMI readings brought downward revisions. The manufacturing PMI was revised to 55.2 from 55.5, while the services PMI came in at 46.4, versus 47.3 in the preliminary report, although still up from 41.7 in the previous month. The composite PMI was revised down to 49.1 from 49.8, again still an improvement from the 44.3 reported for November, but no signalling ongoing contraction, rather than the stabilisation the flash reading suggested. Social distancing measures and restrictions continued to weigh on the services sector and while the outlook in December was brightened by the prospect of vaccination programs, it is pretty clear now that restrictions won’t go away any time soon and that despite vaccines it will still be a very difficult winter. That means that while the downturn in overall activity in Q4 was less severe than thought at some point, the outlook for the first quarter looks very difficult and as Market highlighted the risk of a technical recession is greater now.