Key Macro Events And Developments In The Coming Week
One-stop summary of the key events and issues in the week ahead.
Monday 4 February
- European Services PMIs (Jan)
- US Factory Orders (Dec): GS: 2.7%, Consensus: 2.3%, Previous: 0.0%
- Also interesting: UK Construction PMI
Tuesday 5 February
- RBA Meeting: We expect no change to the Cash Rate at 3.00%, in line with consensus. The market is pricing a cut of approximately 10bp.
- US ISM Non-manufacturing Index (Jan): GS: 55.0, Consensus: 55.0, Previous: 55.7
- China HSBC Services PMI (Jan): Previous: 51.7
Wednesday 6 February
- Germany Factory Orders (Dec): Consensus: 0.9% mom, Previous: -1.8% mom
- Czech Central Bank Meeting: GS: 0.05%, Consensus: 0.05%, Previous: 0.05%.
- Poland Central Bank Meeting: In line with consensus we expect a 25bp cut to 3.75%.
- Also interesting: Czech Industrial Output, Czech Trade Balance
Thursday 7 February
- ECB Meeting: We expect no change to either the re-fi or deposit rate.
- BoE Meeting: We expect no change to either the Bank Rate or the £375bn asset purchase program, in line with consensus.
- Peru Central Bank Meeting: We expect the MPC to keep the policy rate unchanged at 4.25% but the post meeting policy statement could turn slightly more dovish.
- Germany Industrial Production (Dec): Consensus: 0.2% mom, Previous: 0.2% mom
- UK Industrial Production (Dec): Consensus: 0.9% mom, Previous: 0.3% mom
- UK Trade Balance (Dec): Consensus: -£8.9bn, Previous: -£9.2bn
- Brazil IPCA Inflation (Jan): GS: 0.80% mom, Previous: 0.79% mom
- Also interesting: US Initial Claims, US Nonfarm Productivity, US Unit Labour Costs, Australia Labour Market data, Swiss Foreign
- Exchange Reserves, Mexico Inflation, Chile Trade Balance (Jan).
Friday 8 February
- China CPI (Jan): Consensus: 2.0% yoy, Previous: 2.5%.
- China Exports (Jan): Consensus: 14.9%, Previous: 14.1%.
- US Trade Balance (Dec): GS: -$45bn, Consensus: -45.8bn, Previous: -48.7bn
- Also interesting: Sweden Industrial Production
Key issues in the coming days, via SocGen
EUROPE’S GROWTH CHALLENGE
As the ECB Governing Council convenes in Frankfurt, European leaders will be gathering in Brussels for a two-day European Council. Both will be concerned about the continued economic weakness and recent euro strength will no doubt be a topic of discussion at both venues. In our opinion, the ECB will remain on hold this week, but any hints of a more dovish tone will raise hopes that the March meeting – when the ECB presents it new staff forecasts – could see a rate cut. While not unwelcome, a rate cut alone is unlikely to bring about any significant change to the euro area’s growth outlook. Fast-tracking fiscal and banking union would have a much more significant impact on the euro area economy; unfortunately progress remains slow to date. This week European leaders will seek to tackle the EU’s 2014-20 budget and while we do not see a material immediate growth impact from an agreement, this would lift confidence on the ability of the EU to resolve issues. Trade is also likely to figure on the agenda, with the idea that strengthening trade relationships will promote investment, jobs and growth medium term. Note, Chancellor Merkel is due to meet Prime Minister Rajoy early this week and President Hollande on 6 February.
MARKET ISSUES: With no action seen at this week’s ECB meeting, focus will be on the press conference and any hints of a more dovish tone, which would raise hopes for a March rate cut (albeit not our baseline scenario).
UK TRIPLE DIP RECESSION CALLS PREMATURE
Overall, weak economic data add to the risk of easing, but we believe that the MPC will opt to stay on hold this week. A bounce back up in December manufacturing output – we look for +1.2% mom – would confirm our view that cries of a triple-dip recession are premature. The upcoming Inflation Report (13 February) will shed further light on the Bank’s analysis of the economic situation.
MARKET ISSUES: The bank remaining on hold and slightly better data could bring some near-term respite for sterling. Market attention remains centred on the arrival of Mark Carney on 1 July, who is widely seen as being willing to take aggressive action to boost the UK economy. He will appear before the Treasury Select Committee on 7 February.
SEASONAL BOUNCE IN CHINESE DATA
The timing of Chinese New Year often brings some distortion to the data early in the year. 2013 is no exception as the Lunar New Years falls on 10 February, 3 weeks later than last year and adding 4 working days to January 2013 compared to January 2012. This seasonal effect should bring an extra boost to January trade data, lifting both exports (21% after 14.1% yoy) and imports (14% after 6.0% yoy). January loan data should also see a boost.
MARKET ISSUES: Overall, we continue to see a cyclical bounce in the Asia data, but we do urge caution when interpreting the January data from China.