UPCOMING EVENTS:

• Monday: PBoC
  LPR, New Zealand Services PMI.
• Tuesday: BoJ
  Policy Decision, New Zealand CPI.
• Wednesday: Australia/Japan/Eurozone/UK/US
  Flash PMIs, BoC Policy Decision.
• Thursday: ECB
  Policy Decision, US Durable Goods Orders, US Jobless Claims, US Q4 Advance
  GDP.
• Friday: Tokyo
  CPI, US PCE.

Monday

The PBoC is expected to keep the LPR rates
unchanged at 3.45% for the 1-year and 4.20% for the 5-year following the MLF
decision last week. Deflationary forces
remain present, and the Chinese stock market is on a free fall with the general
sentiment being utterly dismal. It will likely require a strong catalyst to
turn things around and aggressive rate cuts might do it, so it’s worth to
keep an eye for eventual surprises.

Tuesday

The BoJ is expected to keep rates
unchanged at -0.10% with the 10-year JGB yield target at 0% with 1% as a
reference cap. The latest Japanese
CPI eased further across all measures and the
Average
Cash Earnings were a big
disappointment. The BoJ will likely reiterate once again that they are
focused on wage growth and the spring wage negotiations and that they will
not hesitate to take additional easing measures if needed.

The New Zealand CPI Y/Y is expected at
4.7% vs. 5.6% prior,
while the Q/Q measure is seen at 0.6% vs. 1.8% prior. The data will have no
bearing on the February rate decision but will certainly influence the
market’s pricing with the first rate cut seen in May.

Wednesday

Wednesday will be the Flash PMIs day with
a particular focus on the Eurozone, UK and US data:

• Eurozone Manufacturing
  PMI 44.8 vs. 44.4 prior.
• Eurozone Services PMI
  49.0 vs. 48.8 prior.
• UK Manufacturing PMI 46.7
  vs. 46.2 prior.
• UK Services PMI 53.5 vs.
  53.4 prior.
• US Manufacturing PMI 48.0
  vs. 47.9 prior.
• US Services PMI 51.0 vs.
  51.4 prior.

The BoC is expected to keep rates
unchanged at 5.00%. The data out of Canada supports the central bank’s patient
approach as the underlying
inflation measures surprised to
the upside for the second consecutive month and the latest wage
growth figure spiked to the
highest level since 2021. The Bank of Canada has
been highlighting that it places a lot of focus on those two measures and
although it expects rate cuts to come this year, the timing is much more
uncertain and data dependent.

Thursday

The ECB is expected to keep interest rates
unchanged at 4.00%. The central bank officials have been consistently pushing
back against the aggressive rate cuts expectations with consensus for the first rate cut leaning for
June compared to the market’s April forecast. The latest data saw the Core
CPI Y/Y easing further although the M/M
measure showed a worrying 0.6% increase. The Unemployment
Rate continues to hover around record
lows and wage growth remains elevated, which is something that the ECB doesn’t
see as favourable for a return to their 2% target.

The US Jobless Claims continue to be one
of the most important releases every week as it’s a timelier indicator on the
state of the labour market. Initial Claims keep on hovering around cycle
lows, while Continuing Claims after reaching a new cycle high started to trend
lower. This week the consensus sees Initial Claims at 200K vs. 187K prior,
while Continuing Claims are seen at 1840K vs. 1806K prior.

Friday

The US PCE Y/Y is expected at 2.6% vs.
2.6% prior, while the M/M measure is seen at 0.2% vs. -0.1% prior. The Core PCE
Y/Y is expected at 3.0% vs.3.2% prior, while the M/M figure is seen at 0.2% vs.
0.1% prior which would make the 3-month and 6-month annualised rates fall to
1.5% and 1.9% respectively.

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• Source: https://www.forexlive.com/news/weekly-market-outlook-22-26-january-20240121/