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A Look At Global Economic Events In The Upcoming Week: China GDP, CPI And Retail Sales; US TIC Data
Week in review
The markets last week were squarely focused on European sovereign issues again and EM inflation risks. Decent Portuguese and Spanish auctions accompanied by hints from European policymakers that there would be further initiatives to resolve the ongoing crisis in EMU peripheral debt markets provided a bid to the Euro. In anticipation of sovereign risks dissipating, strong Euroland growth and higher interest rates in Euroland we recommended clients to consider long EUR/USD positions.
Continued elevated agricultural prices on the back of supply constraints and increased demand kept the EM inflation theme alive and kicking. However central banks appear to ready to contain such pressures as evidenced by the surprise hike from the Bank of Korea. China hiked the RRR rate by 50bps on Friday largely for the same reason, but with anecdotes suggesting that credit growth is already running strongly in January, China needs to do more to tighten policy in our view.
Week Ahead
Probably more of the same. The Econfin meeting on Monday will keep the focus on the Eurozone periphery and the governments' ability to enhance the framework already in place. Inflation data out of Malaysia, UK, New Zealand and of course China will keep the issue of inflationary pressures on the agenda. Of these prints, the most critical is China’s CPI and the question of China tightening. We do expect inflation to have softened in December to 4.2%, but rising food prices through January so far suggest this softness will be short lived. We expect the Central Banks of Poland and Brazil to hike rates by 25 and 50bps respectively in response to inflationary pressures. Rates are likely to be kept on hold in Canada, Mexico and South Africa. The Turkish central bank is expected to cut rates by 25bps.
The November TIC data will be dissected to determine foreign appetite for US assets.
Monday 17th
Singapore non-oil exports (Dec). Consensus expects a rise of 12.9%yoy up from 10% previously.
Philippines overseas remittances (Nov): Remittances grew 9.3%yoy in October, after rising 10.6%yoy in September.
Euroland: Ecofin Meeting.
Tuesday 18th
UK CPI (Dec): Consensus expects a rise of 3.3%yoy on headline and 2.6%yoy on core, not much difference to the previous reading.
German ZEW (Jan): Consensus expects an unchanged print of 82.6.
Bank of Canada rate decision: Consensus expects no change.
US Empire Manufacturing Survey (Jan): The last reading was 10.57, consensus is expecting a rise to 13.0.
US TIC data (Nov): Foreign appetite for US assets outside of fixed income has been relatively lackluster in recent months.
Wednesday 19th
Australia consumer confidence (Jan)
Malaysia CPI (Dec). Consensus expects a rise of 2.3%, up from 2.0% previously.
Euroland Balance of Payments (Nov)
Poland Central Bank Meeting: Consensus expects a 25bp hike given recent strong data prints and more hawkish central bank commentary recently.
Bank of Canada Monetary Policy Report
Brazil Central Bank Meeting: Consensus expects a 50bp hike.
Thursday 20th
New Zealand CPI (Q4): Consensus expects a reading of 2.3% and the previous reading was 1.1%.
China GDP (Q4): consensus expects a rise of 9.4%yoy slightly down from 9.6% previously.
China CPI (Dec): Consensus expects a rise of 4.6% yoy down from 5.1% previously.
China Industrial Production (Dec): Consensus expects a rise of 13.4%yoy, almost unchanged on the previous reading of 13.3%.
China Retail Sales (Dec): Consensus expects a rise of 18.8% yoy, slightly up from 18.7% previously.
Taiwan Export Orders (Dec): Export orders increased 1.9% mom in November, after rising 0.8% mom. Consensus expects a rise of 12.35%yoy.
Turkey Central Bank Meeting: We expect a 25bps rate cut given Governor Yilmaz’s recent more cautious commentary, consensus expects a 50bps cut from 6.5% presently. Rates may remain on hold if the CBRT ‘pauses’ its current policy mix of reducing uncovered interest rate differentials while attempting to moderate growth in domestic credit.
South Africa Central Bank Meeting: We and the consensus expect rates to remain unchanged at 5.50%.
US Weekly Claims
US Philadelphia Fed Survey: Consensus expects a print of 21.5, which is a slight fall on the previous month’s reading of 20.8.
Friday 21st
New Zealand Retail Sales (Nov): Consensus is looking for 1.2%mom and the previous reading was -2.5%mom on headline.
Germany IFO (Jan): Consensus expects a print of 109.6, marginally down on the previous reading of 109.9 which was a record high.
UK Retail Sales (Dec): The consensus reading ex autos is 1.3% and the previous reading is 1.8%.
Canada Retail sales (Nov): Consensus expects a rise of 0.4%mom on the headline down from 0.8% previously.
Mexico Central Bank Meeting: Banxico is likely to keep the TdF unchanged at 4.50%, consensus agrees. Statement neutral.
From the same guys at GS who told you to double down on the EURUSD
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The drum beat of more China rate hikes grows louder but yet it only bring more inflation in the end even if she does. What to do, what to do ....
Nationalize part of too productive capitalist enterprises and send part of middle class to work camps. De-capitalist. That is the only alternative China has, other being losing power of Communist party and splitting up as country- this second alternative will not solve the inflation problem, I guess, and most likely is not the one Communists will opt for.
Sell McDonalds meals and KFC to China, do NOT invest in modern technology like car manufacturing or chips. That will all be used against the USA and others in a military usage when the time comes ( not too far away).
I meant, Chinese communists are not going to waste the weakening of the West during the long crisis at the very early beginning of which we are.
Communists are not known for wasting their rare opportunities to make harm to the West. Ideology comes before economy, wellbeing of the Chinese people comes distant last.
INFLATION AND COMMODITY PRICE INCREASES HAVE NOTHING TO DO WITH THIS!!!