RANsquawk Week Ahead Video: Focus remains on China while ECB and BoC rate decisions loom

The rocky start to 2016 continued last week, with oil one of the key centre points as the commodity looks close to freefall, while equities and commodity linked currencies also saw continued downside. In terms of where the focus this week will lie, further attention will likely fall on China. With the softening of the CNY appearing, at least temporarily, to have been halted, attention will instead move to the equity markets to see what the PBoC do, if anything, to stem the outflows in the indices. Oil will also remain in focus, with the USD 30/bbl level now broken. Some commentators noted that USD 30 may be a floor for OPEC and be the catalyst that the cartel needed to call an emergency meeting to cap production. However, with the sanctions against Iran now lifted and tensions between OPEC nations at a high level, there are no immediate signs of an emergency OPEC meeting and a halt to the downside in oil.

In terms of scheduled events, two central banks take focus this week. The ECB are set to meet for the first time since cutting the deposit rate in December, disappointing markets and sending the EUR soaring higher. Very few are anticipating further action from the central bank at this meeting and sources have suggested the ECB want to see the impact of last month’s cut before acting further. However, the meeting could still hold importance for financial markets, with participants looking for any details on how the ECB has interpreted the market turmoil and economic developments since their last meeting, while also looking for clues as to what are the thresholds for further action from the central bank and what this may entail. The other central bank rate decision of note this week comes from the BoC, with the continued softness in oil a significant factor. Analysts have pointed to the decline in CAD in recent months and suggested as while this does help the BoC, the continued fall in oil prices may see the Canadian economy require another rate cut, with almost half the surveyed analysts for this week’s meeting forecasting a cut.

In terms of the US, the week will kick off with a quiet start due to Martin Luther King Day, however from a macro perspective data picks up throughout the week. The latest CPI reading will be one of the key focuses this week, with Fed’s Bullard reinforcing last week that the pace of future Fed rate hikes will be determined by inflation. Other data highlights this week include manufacturing PMI and Philly Fed. On a more equity specific note this week also sees a pickup in earning season, with the banking sector the notable reporters including BofA, Morgan Stanley and Goldman Sachs, after Wells Fargo and Citi kicked off last week by both beating expectations for their EPS.

Comments

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Please close the door!  The screaming from investors whose life savings are being wiped out is annoying.