Weekly Recap, And Upcoming Calendar - All Eyes On Europe

Tyler Durden's picture

Goldma's FX research team summarizes the events of the week that just passed and looks at the key events in the upcoming 7 days.

Week in review

Markets traded the first week of the New Year with relative optimism--most equity markets around the world ended up for the week. The focus was on the improving US cyclical recovery as ISM (both manufacturing and services) showed robust growth, further fueled by the much higher than expected ADP print mid-week, which in turn raised expectations for the US jobs report on Friday. In the end, payrolls came in weaker than expected and the sharp drop in unemployment rate contained mixed messages as well--about half of it reflecting a drop in the labor force.
 
The theme of a possibly stronger US recovery also reverberated in FX markets. CAD and MXN performed relatively well. Note also that we have revised stronger our MXN and CAD forecasts recently as well as some currencies in NJA including CNY and TWD. Elsewhere, $/JPY ended the week over 2% higher, mainly driven by the mid-week US fixed income sell-off triggered by the ADP print. EUR/$ traded heavily, now back down to almost 1.29 as concerns over European sovereign issues continue to linger.
 
Week ahead
 
US data Keeping track of the pace of US recovery will probably be the main focus of markets. The key US data releases are retail sales, industrial production and CPI, which are all out on Friday. We expect a robust retail sales print for both headline and ex-autos, after the indications from the autos and the same store sales report last week. For CPI (and PPI the day before), we expect a relatively sharp rise on a headline basis, but much more muted gains ex food and energy.
 
Eurozone periphery bond auctions As mentioned, concerns in the Eurozone continue to rumble in the background. The Portuguese and Spanish bond auctions planned for this Wednesday and Thursday respectively will be important to monitor.
 
Central bank meetings We have the ECB, BoE, Korea and Thailand central bank meetings this week. We expect a 25bps hike in Thailand, in-line with consensus. For Korea, we expect a shift to a more hawkish tone, but stopping short of a rate hike. No changes or major surprises are expected from either the ECB or BoE.
 
Monday Jan 10th
 
China trade (Dec) We expect exports growth to moderate to 20.0%yoy from 34.9% yoy in November. We expect yoy imports growth to fall to 23.5%, from 37.7% in November. The trade balance will likely stay at a high level of around US$18.1 billion but lower than the US$22.9 billion in November.
 
China money and credit (Jan 10-15) (Dec) We expect the amount of CNY loans made in December to be around Rmb400 billion and its yoy growth to fall to 19.7% in December from 19.8% yoy in November.  M2 growth will likely fall to 19.1% yoy in December from 19.5%.
 
 
Tuesday Jan 11th
 
Wednesday Jan 12th

Thailand central bank meeting We expect a 25 bp hike in the upcoming policy meeting, taking the policy rate to 2.25%, in-line with consensus
 
India Industrial Production (Dec) We expect industrial production to grow 7.2% yoy in November, after rising 10.9% yoy in October due to a weaker infrastructure index and PMI data.
 
Euroland Industrial Production (Nov) German IP registered a -0.7%mom drop in November after its outsized gain in October which holds down growth in the Euro-zone aggregate IP number. Assuming the other major EMU IP prints come in as we expect (+0.4% in France, +0.2% in Italy), Euro-zone IP in November should be roughly flat on the month.
 
Portugal bond auctions
 
Thursday Jan 13th
 
Australia employment report(Dec)We expect more modest jobs growth in December than consensus (+15k vs consensus at +25k), though enough to keep the unemployment rate unchanged at 5.2%.
 
Korea central bank meeting We expect the January meeting to turn to a hawkish tone albeit stopping short of a rate hike. We maintain our view of a 25-bp rate hike in the February meeting.
 
ECB meeting No change to rates or major announcements expected. Trichet may be asked about sovereign purchases, but he’ll almost certainly not answer anything with respect to magnitudes or countries where they might buy
 
Spanish bond auctions
 
Bank of England meeting No change to rates or major announcements expected
 
US jobless claims Consensus expects initial claim at +406k, down slightly from +409k in the previous week.
 
US PPI (Dec) We expect a rise of +1.0% and +0.2% for headline and core, versus consensus of +0.8% and +0.2% respectively.
 
US Trade balance (Nov) We expect the US trade deficit to come in at around $39bn, almost unchanged from the previous month, versus consensus of $41bn.
 
 
Friday Jan14th
 
India WPI (Dec) We expect December WPI inflation to come in at 8.4% yoy, significantly higher than the 7.5% yoy in November, mainly due to the rise in prices of primary articles, especially food and petrol.
 
Euroland CPI (Dec) We already know from the flash estimate that the headline Euro-zone CPI rate rose from 1.9%yoy to 2.2% in December, but this appears to have been largely due to the energy price component. The full breakdown of components should confirm that core inflation was either broadly stable or slightly higher due to indirect tax hikes in Spain.
 
US CPI (Dec) We expect a rise of +0.59% and +0.14% for headline and core, versus consensus of +0.4% and +0.1% respectively.
 
US retail sales (Dec) The auto and same-store retail sales figures posted last week suggest that retail sales posted another solid gain in December. Our forecast is for a gain of +0.9% and +0.8% for headline and ex-autos, slightly above consensus of +0.8% and +0.7% respectively.
 
US Industrial production (Dec) We expect a rise of +0.5% mom, in-line with consensus.