There isn't a mountain of key data on the calendar for this week, but there are nonetheless some key points that could move currency direction.
STRONGER POST-ELECTION DATA WOULD EASE RATE CONCERNS
We’ve got 11 days until the United Kingdom leaves the EU, but right now the focus for sterling is more on the Bank of England. After some soft monthly GDP data and weaker inflation last week, tomorrow’s jobs and wages data as well as Friday’s Manufacturing and services PMIs are going to be under scrutiny. We’ve had plenty of chatter talking up the potential for a rate cut from the BoE if data doesn’t improve – none of which has done much to give support to GBP. However, bear in mind that much of the weaker data we’ve seen has come from pre-election sampling and so for that reason the January PMIs released on Friday will be particularly important. We’ve said before that the BoE would be prudent to hold off until after the Budget in March before any rate decision and some more robust data this week would help to support that case.
BoJ COULD GIVE LESS BAD OUTLOOK
For JPY, tomorrow we have the Bank of Japan’s policy statement and its quarterly outlook. It’s universally expected that the BoJ will hold rates, however markets will be looking to see some signs of improved optimism in the Bank’s economic outlook. The Japanese central bank is a very long way from moving away from its dovish stance, but signs that they see some waning of the risks posed by a global slowdown will be seen as holding off further easing for the time being.
NO FIREWORKS FROM LAGARDE
In Europe, the ECB releases its monetary policy statement and holds its press conference on Thursday following its monetary policy meeting. The ECB has leaned heavily on concerns over US-China trade wars and global economic concerns in recent meetings, but it is expected that we’ll see a more positive outlook. Despite this, don’t expect a return of the heady days of 2018 when Christine Lagarde’s predecessor talked of a potential for a rate hike. For about three days. We don’t foresee any hike from the ECB this year, but as with the BoJ, “not as bad” will be read as “good” by markets.
TWITTER COULD BE BIGGEST MARKET MOVER. AGAIN.
The US has a shortened week, with markets closed for Martin Luther King Jr Day. Domestically, there’s not a huge amount going on this week to move markets, with Friday’s private sector PMI data the highlight of a quiet week. However, with opening arguments in the Senate tomorrow set to begin President Trump’s impeachment trial, Twitter could do more to move USD than economic data does.
To discuss any of the items we have covered in today's market update, contact us via info@labardemanagement.com or call us on (+44) 0203 3488 1169