The central banks are out of the way for now, after confirming that they are moving out of crisis modes and that omicron won’t prevent a gradual withdrawal of support. The clarity on rate hikes and central bank support was supportive for the markets, and it is expected to remain supportive for a while especially in Eurozone and the US. Bigger picture, the banks’ announcements this week injected some certainty into the policy outlook, which overall should remain positive for the equity market. In the meantime, the economic calendar ahead includes GDP releases from the UK and the US, Retail sales from the UK and Canada and US Durable goods.
Monday – 20 December 2021
PBoC Interest Rate Decision (CNY, GMT 01:30) – The People’s Bank of China in its latest report, announced that they will take measures, including purchases of foreign exchange from banks and more quotas for outbound investments, implying that authorities have grown less comfortable with the yuan’s strength and attempted to slow its rapid rise.
Tuesday – 21 December 2021
RBA Minutes (AUD, GMT 00:30 ) – The RBA minutes should provide guidance as to whether the RBA members will move on inflation risks to achieve a return to full employment in Australia and inflation consistent with the target. The RBA maintains relatively optimistic on the virus front, which for some signalled that an early exit from QE is on the cards.Retail Sales (GBP, GMT 09:30) – UK Retail Sales are expected to give a further glimpse into Covid-19 damage. Retail sales for November are expected to grow to 1.0% m/m and core at 0.8% m/m while core headline is seen at contraction at -3.1% y/y.Retail Sales (CAD, GMT 13:30) – Canada’s October Retail Sales are expected to show that domestic sales continue to struggle amid global supply shortages for semiconductor chips. Release is seen at a contraction of -1.7% m/m.BoJ Monetary Policy Meeting Minutes (JPY, GMT 23:50) – The BoJ minutes should provide further guidance for 2022. In December the BoJ left rate settings unchanged, but also signaled albeit cautious reduction of stimulus.
Wednesday – 22 December 2021
Gross Domestic Product (GBP, GMT 07:00) – The UK GDP is expected to confirm a growth rate of 1.3% q/q, down from 5.5% q/q in the second quarter of the year and compared to Bloomberg consensus expectations for a rise of 1.5%. This explains why the BoE held off hiking rates last week and was eager to dampen tightening expectations for the coming years.Gross Domestic Product (USD, GMT 13:30) – The Q3 GDP growth should remain at 2.1% with boosts from nonresidential construction, factory inventories, residential construction and government spending. Severe supply chain and port bottleneck disruptions account for the big Q3 net export subtraction alongside the big inventory liquidation for a 3rd consecutive quarter, and for 5 of the last 7 quarters. The sharp Q3 consumption slowdown reflected the unwinding of early-2021 stimulus spending, though we also saw a big Q3 sales hit from vehicle shortages. Trade remains depressed by limited international travel, which may recover somewhat into year-end.Consumer Confidence (USD, GMT 15:00) – Consumer confidence is expected to fall to 107.0 after a drop to 109.5 in November from 111.6 in October. The expectations index is expected to fall to 83.7 from 87.6 in November. The confidence updraft with stimulus and vaccines has dissipated since April, and sentiment is being pushed down now by soaring prices.
Thursday – 23 December 2021
Durable Goods & Personal Income/Consumption (USD, GMT 13:30) – Durable goods orders are expected to grow 2.5% in November with a 7.5% transportation orders bounce, after a -0.4% headline drop in October that included a -2.6% transportation orders decline.Michigan Consumer Sentiment & New Home Sales (USD, GMT 15:00) – Michigan sentiment bounce to 70.4 from a 10-year low of 67.4 in November but a higher 71.7 in October, leaving the index just above the prior 10-year low of 70.3 in August. New Home sales are anticipated at 4.7% in November. The sales rate posted a 6-month stretch through October below the high from the last cycle of 756k in January of 2020, but an 11-month stretch before that of overshoots that all marked the highest rates since a 778k figure back in July of 2007. We’re seeing rapid growth in demand for new homes in 2021. Construction has lagged sales, and the market is heavily inventory-constrained. A steady climb is expected in starts and completions into 2022 in the face of unprecedented home demand, though the sector is pressing against capacity constraints, and growth in sales beyond lofty late-2020 levels has proven hard to sustain.
Friday – 24 December 2021
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Andria Pichidi
Market Analyst
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