UPCOMING EVENTS:
- Tuesday: Japan Unemployment Rate, Eurozone Q4 GDP, US Job Openings, US Consumer Confidence.
- Wednesday: BoJ Summary of Opinions, Japan Industrial Production and Retail Sales, Australia CPI, Chinese PMIs, Switzerland Retail Sales, UST Quarterly Refunding Announcement, US ADP, Canada GDP, US ECI, FOMC Policy Decision.
- Thursday: China Caixin Manufacturing PMI, Switzerland Manufacturing PMI, Eurozone CPI, Eurozone Unemployment Rate, BoE Policy Decision, US Challenger Job Cuts, US Jobless Claims, Canada Manufacturing PMI, US ISM Manufacturing PMI.
- Friday: Australia PPI, US NFP.
Tuesday
The US December Job Openings are seen falling to 8.750M vs. 8.790M prior. Job Openings have been falling steadily since the peak in 2022 as the labour market continued to get into better balance. As a reminder, the last report surprised to the downside with both the hiring and quits rate falling below the pre-pandemic levels. It will be interesting to see how the Fed’s pivot and the aggressive easing in financial conditions influenced the data.
The US Consumer Confidence has been falling steadily in the last quarter of 2023 amid a weakening labour market but surprisingly jumped in December to levels last since in July. Compared to the University of Michigan Consumer Sentiment, which shows more how the consumers see their personal finances, the Consumer Confidence shows how the consumers see the labour market. The consensus sees the index increasing to 115.0 in January vs. 110.7 in December.
Wednesday
The Australian quarterly inflation data is seen easing across all measures. The CPI Y/Y is expected at 4.3% vs. 5.4% prior, while the Q/Q reading is seen at 0.8% vs. 1.2% prior. The RBA is more focused on the underlying inflation measures and those are expected to fall as well. In fact, the Trimmed Mean CPI Y/Y is seen at 4.4% vs. 5.2% prior, while the Q/Q figure is expected at 0.9% vs. 1.2% prior. We will also get the Monthly CPI indicator which is expected to ease further to 3.7% vs. 4.3% prior. The data will have no bearing on the February RBA meeting, but it will influence the market’s pricing which currently expects the central bank to start cutting rates in August.
The US Q4 Employment Cost Index (ECI) is expected at 1.0% vs. 1.1% prior. This is the most comprehensive measure of labour costs, but unfortunately, it’s not as timely as the Average Hourly Earnings data. The Fed though watches this indicator closely. Wage growth has been easing in the past two years, but it still remains relatively elevated.
The Fed is expected to keep the FFR unchanged at 5.25-5.50%. Given that the 3-month and 6-month annualised rates are now below the 2% target, the central bank might also acknowledge the progress by changing the line in the statement from “any additional policy firming” to something like “sufficiently restrictive”. Beyond that we shouldn’t see many changes and the attention will turn to the Press Conference where Fed Chair Powell will be certainly questioned about the aggressive easing in financial conditions since the December meeting, the falling inflation rate and the change for their quantitative tightening policy.
Thursday
The Eurozone CPI Y/Y is expected at 2.8% vs. 2.9% prior, while the Core Y/Y measure is seen at 3.2% vs. 3.4% prior. The market continues to expect the ECB to cut rates in April although the central bank keeps on pushing back against such forecasts seeing the first cut coming in summer. If the data continues to miss though, it will be very hard for the ECB to maintain its patience. We will also see the latest Unemployment Rate which is expected to remain unchanged at 6.4%.
The BoE is expected to keep the Bank Rate unchanged at 5.25%. The data leading up to the meeting has been mixed with some more cooling in the labour market and wage growth but a surprisingly hot CPI report. Moreover, the Retail Sales saw a big plunge in December while the PMIs improved in January. The central bank will likely maintain its patient approach reaffirming that they will keep rates high for sufficiently long to return to the 2% target.
The US Jobless Claims continue to be one of the most important releases every week as it’s a timelier indicator on the state of the labour market. Initial Claims keep on hovering around cycle lows, while Continuing Claims after reaching a new cycle high started to trend lower. This week the consensus sees Initial Claims at 210K vs. 214K prior, while there’s no consensus for Continuing Claims although the prior release saw an increase to 1833K vs. 1806K prior.
The US ISM Manufacturing PMI is expected at 47.3 vs. 47.4 prior. Last week, the S&P Global Manufacturing PMI for January jumped back into expansion at 50.3, which was the highest reading since October 2022. Maybe the recent aggressive easing in financial conditions after the Fed’s pivot triggered a renewed growth impulse and if that’s so, it will be hard for the market to justify the six rate cuts currently priced for this year.
Friday
The US NFP is expected to show 173K jobs added in January compared to 216K seen in December and the Unemployment Rate to tick higher to 3.8% vs. 3.7% prior. The Average Hourly Earnings Y/Y is expected at 4.1% vs. 4.1% prior, while the M/M measure is seen at 0.3% vs. 0.4% prior. The last report had some notable underlying weaknesses with the household survey for example showing the largest jobs decline since April 2020 lockdown, so some more weakness under the hood might start to unnerve the market.
