Key Events: UK Data Landslide
- By Macro Hive
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Key Events
G10
In the US, there is only one key data point:
- S&P PMIs – Friday. These are more a trading than an economic event as PMIs have decoupled from GDP. Please see our event monitor for market impact. Otherwise, this is a data-lite week. Market-moving surprises will more likely come from President Trump’s initiatives than from the data.
In the Eurozone and UK, the main events will be:
- UK labour market data – Monday. Expectations are for a rise to 5.9% in regular pay. There could be upside risk based on timely PAYE data. Unemployment is expected to rise to 4.5%. The number has been volatile, so I read little into it. More important is the PAYE employment flows numbers – there I expect continued stagnation/decline.
- UK January CPI – Tuesday. The market is looking for +2.8% YoY headline, +3.7% core and +5.2% services inflation. I expect downside in all three, but an important factor will be the pass-through of one-offs. January re-weightings will also add volatility.
- UK January public finance data – Friday. January sees large income tax receipts. They will determine whether the DMO’s estimates of issuance requirement remain valid (PSNB is overshooting, but CGNCR and CGNB align with OBR forecasts).
- Eurozone final January CPI – Friday. January services inflation came in hotter than typical, as we had feared. It will be important to see the detail.
Elsewhere in G10:
- Switzerland GDP – Monday. We expect the rebound in survey data to be realised in the Q4 growth data.
- Australia Wage Price Index – Wednesday. We expect wages to be weaker than the RBA’s forecast, in line with a looser labour market.
- Australia Labour Force Survey – Thursday. Seasonality could continue to play havoc with a newly emerging ‘wait to start work in February’ theme playing out in recent years.
- Japan GDP – Monday. Following a robust Q3, Q4 GDP is expected to be weaker. Within the details, we expect consumption to fall, but net trade to provide a boost.
- Canada CPI – Tuesday. CPI has beat expectations over the past three months, and we think risks are tilted higher again. Stay focused on the BoC’s preferred measures of core inflation, which appear to be stabilising around 2.5%.
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- South Africa CPI – Wednesday. Inflation is set to climb further from the recent lows but to remain well below the target’s midpoint. Basket changes and rebasing compound uncertainty.
- South Africa budget – Wednesday. No major policy announcements are expected with the finance minister instead maintaining commitment to fiscal consolidation and debt reduction. Last year’s announcement to tap unrealized gains on FX reserves in the GFECRA allowed debt reduction and reduced fiscal risks. But without budgetary measures to improve growth and revenue-generating potential, South Africa’s fiscal woes are set to remain.
Central Banks in Action
- Fed minutes – Wednesday. The minutes are likely to stress that the Fed is still confident that inflation is headed back to the Fed target, that the strong economy implies the Fed is in a good wait-and-see position, and that it needs more data to assess short term inflation trends.
- RBA – Tuesday. We expect the RBA to cut the cash rate by 25bps, to 4.10%, in line with all but four of the 32 expectations submitted to Bloomberg. We expect a lack of forward guidance with plenty of reservation.
- RBNZ – Wednesday. We expect the RBNZ to deliver their last 50bps cut of their easing cycle. Given green shoots in the economy, we believe the markets have priced too low of a terminal rate.
- PBoC 1-Year and 5-Year Loan Prime Rate – Wednesday. No change. Given still-high pressure on the RMB, the PBoC will keep the interest rates stable in the near term.
Markets to Watch
- GBP positioning is at extremes. It will take a strongly dovish outturn in next week’s data to push the currency lower. We think GBP/JPY can reach 200.
- AUD/NZD could come under pressure as the RBA finally kicks off its cutting cycle, with dovish forecast updates, while the RBNZ reach peak dovishness. We remain short.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)