Banks and GDP!
In the week ahead, central banks meeting in China and New Zealand, Inflation in Euro and important data from the United States including GDP, Durable goods orders with Personal Income, and Spending will be the most important economic data to watch. On the other hand, geopolitical tensions will be the main market driver. Last week ended with a little bit of peace, after the report that Secretary of State Blinken will meet with Russian Foreign minister Lavrov next week. Let's review the most important data and events of the week, remaining that Monday, US and Canadian markets will be closed, respectively due to Presidents' and Family Day.
Chinese interest rate decision - Monday
People Bank of China will update the interest rates on Monday. Unlike other central banks that planning for more tightening policies, PBoC increasing its support levels. Last month they cut the 14-days repo rates by 10 basis points and repeated the same action last Monday for the one-week repo and 1-year mid-term lending rates. For this meeting, we are not expecting any new change. This policy is supposed to lift the Chinese stock markets and put more pressure on the Chinese Yuan.
PMI's data- Monday
While Monday is a holiday in the US and Canada, it is a busy day in other economies. Japanese Service PMI, Eurozone Manufacturing, Service and Composite PMI, in line with the same data from New Zealand, Germany, and United Kingdom, altogether creating a very important and busy day. Overall, we are waiting to see the progress in January, as we saw last week in the Retail Sales numbers. Expected positive data and regardless of possible geopolitical tensions, should be welcomed by the stock markets. US PMI data will be out on Tuesday.
US consumer confidence - Tuesday
Consumer confidence is one of the most important economic indicators. Higher confidence means more spending, increasing retail sales, and GDP as the final result. For January, mostly because of geopolitical tensions and uncertainty in the market ahead of the FED meeting, we are expecting to see that falling back under 110. Weaker than expected data will put pressure on the US dollar against its crosses and vice-versa
RBNZ meeting - Wednesday
The Reserve Bank of New Zealand will announce its monetary policy decisions on Wednesday. The market expectation is that the central bank will raise rates another 25 basis points to 1.00%. The latest published data in New Zealand show a solid rebound in Q4 2021, and now with the Q4 inflation numbers seen at 5.9%, more tightening policies are getting more likely. However, as the RBNZ governor mentioned, moving towards hawkish policies should be a little more cautious, therefore a 50 basis points rate hike is unlikely. This policy will lift the Kiwi against its crosses.
UK and EU inflation. - Wednesday
After fast increasing inflation in January, continuing increasing energy prices, including Oil, Gas, and Electricity, confirming the continuing of increasing prices. Higher inflation will increase the expectations of the European central bank to raise interest rates and should support the Euro to increase against its crosses. And, in the UK, the BOE Governor and some MPC members will testify on inflation and the economic outlook before Parliament’s Treasury Committee.
Friday and US important economic data
Friday data will be very important in the US economy and clarify expectations from the central bank. Both personal income and spending are expected to increase. This gain in prices helped the PCE deflator to raise 0.6% over the month, and 6.1% on the annual scale. On the other hand, we will have durable goods orders as well. Orders are expected to increase a bit. However, it will be thanks to 77 Boeing orders. These expected data will increase the inflation concerns and expectations from FED for faster reaction. Mentioned data should not be in the favor of US stock markets.
