After a rollercoaster in January, the first week of February has a lot in store. Firstly, the BoE monetary policy report on Thursday. The ECB will also announce its monetary policy on Thursday. We have a busy week from the US, with NFP on Friday.
So, what can these events bring for the overall markets?
BoE’s decision stands out
The Bank of England’s rate decision stands out on the economic calendar. The Old Lady is scheduled to boost interest rates again, this time from 0.25 percent to 0.50 percent. Such a change is completely priced in, and investors are eager to see what comes next.
Rate rises and a potential constraint on the bank’s bond-buying plan, presently worth £895 billion, would support the pound. If the Bank of England does not convey clear signals, its inflation predictions in the Monetary Policy Report will stand out.
It is important to remember that this is a Super Thursday event with a press conference, which increases the likelihood of significant volatility.
Focus on politics also
The attention remained on politics in the United Kingdom as well. Prime Minister Boris Johnson has faced calls to resign and a police inquiry.
Sue Gray, a civil servant, is due to publish her investigation of the PM’s political parties, although the exact date is unknown. There may be anxieties if she reveals a bombshell that forces Johnson to resign, but there may be delays given the simultaneous police probe. Political news, however, would be meaningless in the absence of significant actions.
Busy week on the US docket
Assuming no significant safe-haven flows due to developments in Eastern Europe, the dollar’s emphasis will remain domestic, with a busy week ending in Nonfarm Payrolls.
The ISM Manufacturing Purchasing Managers’ Index kicks off the buildup on Monday. It is expected to continue at the 58-handle, indicating a solid expansion in the modest but significant industry.
However, if the Prices Paid component, which indicates inflation, climbs faster than projected, it may steal the show.
Despite the absence of correlation in the previous data, ADP’s private-sector jobs report on Wednesday remains significant.
America’s largest payroll business claimed an increase of 807,000 jobs, but the NFP recorded a meager 199,000. A smaller rise of 250,000 is expected.
On Thursday, the ISM Services PMI stands out. In this case, the employment component is more important because it has a good association with the NFP. The comparatively low 54.9 level in December largely reflected the lackluster job increase.
Finally, nonfarm payrolls for January 2022 are due out on Friday, and they are expected to show a 238,000 gain.
Wall Street will also be watching a busy earnings season week in which numerous European banks, technology companies, automakers, and industrials will report results.
Keep an eye on the European calendar also
There will be a lot of economic data coming out of Europe next week, with each day providing a variety of key figures that might impact currency markets.
But there’s little doubt about what will make headlines, with flash CPI numbers due the day before the ECB meeting.
The central bank is one of the few left on the transitory side, and they are likely to stick there, which will be aided by a weaker inflation figure the day before.
Markets are once again ahead of the curve, with at least one 10-basis-point increase factored in by October and maybe another by the end of the year. Last time, Christine Lagarde pushed back to no avail; if the CPI data isn’t nice to them, a similar conclusion might be on the way.
