Feb 13 • Morning Roll Call • 2089 Views • Comments Off on MORNING ROLL CALL

Inflation is the main focus on the economic calendar this week, as is the ECB’s statement and Janet Yellen’s testimonybetween-the-lines1

Inflation in: China, the U.K. and the USA. The job numbers in Australia. Janet Yellen’s semi annual testimony of 2017 and the ECB’s report, form the bulk of the economic calendar events that will dominate the fundamental analysis landscape for FX, gold and the major indices this week. Whilst a busy week for economic data from the UK, will reveal if the weakening pound (after the June referendum decision) is beginning to detrimentally effect the UK’s economy, which has remained remarkably resilient so far.

Inflation data will take centre stage this week as the UK, China and the USA publish monthly CPI data, whilst Japanese GDP metrics will be published on Monday, coming immediately after the Japanese prime minister Abe returns from his weekend visit to the USA to meet president Trump.

Japan is predicted to have grown by 1.1% annually, a fall from 1.3% previously recorded in quarter three 2016. This would represent the continuation of growth, many analysts suggesting that the trillions of yen poured into asset purchase schemes (as part of the Abenomics programme), are finally beginning to bear fruit, as has the weakened yen/low interest rate.

The RBA (Reserve Bank of Australia) reported a quarterly drop in GDP in the third quarter of 2016. Consequently focus will be on unemployment numbers on Thursday. The unemployment rate is forecast to remain static at 5.8%, when the data is published on Thursday.

The People’s Bank of China raised short term interest rates at the start of February, perhaps tighter monetary policy is now forthcoming. Inflation data printed on Tuesday is expected to reveal that CPI has risen. Annual CPI is forecast to print at 2.4%. PPI is estimated to have risen to a five year high of 6.3%.

The UK publishes inflation, unemployment and retail sales figures this week. The weakened pound is bleeding into fuel and import costs, thereby increasing CPI, which is forecast to rise to 1.8%, from 1.6%. The unemployment rate is predicted to remain static at 4.8%.

Retail sales in the UK fell by 1.9% in December. In such a services led, consumer driven economy and society, only experiencing wage rises at circa 2.5%, with inflation forecast to rise to that level by the end of 2017, the UK economy could come under pressure during 2017. Retail sales are forecast to have recovered modestly, rising by 1% in January.

Janet Yellen’s semi annual Congress testimony, the first in the Trump era, will be watched closely for any clues as to the timing of the first interest rate rise in 2017. As a consequence the dollar could strengthen, if there’s forward guidance suggesting a rise is imminent in March.

USA producer prices published on Tuesday will be followed by inflation numbers on Wednesday; expected to reveal CPI rising to 2.4% in January, possibly adding more ammunition to Yellen’s justification to raise rates in March. Retail sales in the USA are forecast to have risen by 0.2% in January. Building permits, housing starts and the Philly Fed manufacturing index, to be released on Thursday, will also be closely monitored.

Greece’s ongoing creditor battles have once again reappeared, the familiar word of “troika” has been replaced by the “IMF” as the key opponent. For the Eurozone area the standard metrics have been encouraging lately; inflation, GDP, unemployment and employment data have all been positive, whilst the Deutsche Bank wobbles and Italian banking system cracks, have been papered over during recent months. The Eurozone publishes the second estimate of GDP growth for the fourth quarter of 2016, it’s forecast to remain static at 0.5%. Industrial output data and the critical German ZEW business survey are published on Tuesday.

Thursday sees the ECB (European Central Bank) publishing the accounts of its January policy meeting, Mario Draghi dampened down any expectation of a tapering of the ECB’s asset purchase scheme during his conference last week, therefore investors and analysts will be scrutinising the policy meeting minutes for any evidence of a potential change in policy, with regards to QE and interest rates.


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