Following a tumultuous start to the year, next week will feature some important economic statistics and events, although these will be vying for attention with events out of China. The oil market should also continue to be a major theme, while speeches from a number of Fed officials should provide clues as to how the US central bank sees recent developments and market turbulence.
Starting from the United States, the week will be relatively quiet in terms of economic data until Thursday’s weekly jobless claims and Friday’s retail sales. Retail sales are expected to post yet another strong performance during December. Industrial output for the same month will be released a little later on Friday and then January’s preliminary University of Michigan consumer sentiment. The survey could be useful in showing whether consumers were affected by the volatility in the markets as consumer confidence often moves together with the stock market index.
Tuesday, Wednesday and Thursday will be riddled with Fed speakers. Lacker, Rosengren, Kaplan, Evans and Bullard are all speaking and they are expected to give their views on the economy, monetary policy and perhaps the likely timing of the next interest rate hike. Recent statements from Fed officials have stuck to the relatively hawkish line of around 4 rate increases during 2016, but the market and most economists don’t see as many hikes with 2-3 the most probable outcome.
Staying on the subject of central bankers, the Bank of England will meet on Thursday and it is expected to keep rates on hold at 0.50%. Given the recent turbulence in markets, the uncertainty surrounding the in/out referendum for Britain’s membership of the European Union and the deflationary impact of the lower oil price, the Bank is expected to remain firmly on hold despite some analysts seeing that it will follow the Federal Reserve in raising rates later in the year. A single dissenter is expected during the vote – the same as the previous meeting. In economic statistics concerning the UK economy, industrial and manufacturing output will come out on Tuesday.
There is little data on tab concerning the Eurozone, with the possible exception of industrial output for November – which can be argued comes a little late to affect market action. The Sentix investor sentiment index for January may provide some more up-to-date clues. There will not be any ECB officials scheduled to speak, as the week after next will feature an ECB meeting and no speeches will take place before that.
In Asia, which is the focus of attention after the turmoil in China, there will be some numbers worth taking into consideration. Firstly, Chinese trade data on Wednesday will be scrutinized – both exports and imports. On Thursday, Japanese machinery orders and Australian unemployment will be key for some indication of economic strength in those two key economies.
Even after taking all the above data and events into account, the main focus of market participants next week will be whether Chinese markets – the stockmarket and the yuan – have become stable enough to allay concerns that the world’s second largest economy is going to face a deep crisis of confidence and a worse-than-expected slowdown.
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