The Week Ahead - BOJ, BOC, and ECB to keep rates on hold as markets focus on global PMI readings and earnings
|The debates on how much of an impact the Phase One trade deal will have on the global outlook will continue as market concerns fall on the Davos forum, central bank rate decisions and earnings season. The upcoming week is shortened since US equity and bond markets will be closed on Monday for the observance of the Martin Luther King Jr. holiday. A good amount of attention will fall on Davos, Switzerland as world leaders and the biggest business billionaires will be addressing a wide-range of topics.
- Disappointing UK PMI data could cement expectations for the BOE to cut rates at the end of the month
- Euro could stabilize if the Eurozone manufacturing PMI readings have better than expected rebounds
- Wall Street may finally start fading the US-China trade deal euphoria as the focus shifts to tech earnings
A few big rate decisions will occur this week with no changes in policy expected from the BOJ, BOC, and ECB. ECB Chief Lagarde will also begin to outline the beginning of a complete outline of the monetary strategic review. We could see some broad strokes but don’t expect any major hints on changes to their current tools in place. The overall mood for risk appetite will take some queues from the German ZEW Survey and the euro zone flash PMI readings. With some clarity being delivered from the phase-one trade deal, expectations are high for improving sentiment with manufacturers in Europe. This week, the fate of the dollar will likely be more reliant on macro story from Europe than from any US economic data points.
UK data starting to warrant faster action from BOE
The topic of conversation has very much changed this week from the election result and Brexit to the Bank of England and an imminent interest rate cut. A series of weak data points combined with some dovish commentary from policymakers Silvana Tenreyro and Gertjan Vlieghe have ramped up the odds of a cut later this month from around 5% to above 70%. The timing looks a little peculiar given the period the data covers but there has clearly been a shift within the MPC towards a rate cut. The meeting on 30 January is now very much live and therefore the jobs data on Tuesday and PMIs on Friday, not to mention commentary from various policy makers, will be very closely followed next week.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.