The Weekly Wrap Up, the Loonie and Brexit

It was a busy start to the week ahead of a particularly busy end to the week. Expect plenty of moves as the markets digest a heavy economic calendar.
Bob Mason
Light Board

After a busy first half of the week on the Economic Calendars, what can we expect for the rest of the week and is there anything specific we should be looking out for?

It’s a busier 2nd half of the week.

On Thursday, Eurozone consumer confidence figures are due out after the ECB delivers its first monetary policy decision of the year.

Any updates on the ECB policy framework and revisions and outlook towards growth will remain the key drivers, with the ECB expected to stand pat on policy.

The focus will then shift to a busy Friday. Key stats include prelim private sector PMI numbers out of Japan, the Eurozone, the UK, and the U.S.

For the Eurozone, the markets will be looking for improved numbers to support the ECB’s view that private sector activity had bottomed out last year.

Following a string of weak numbers for the Pound, service sector activity will need to provide support.

Expect the markets to also zoom in on U.S service sector activity late in the day.

For the Kiwi Dollar, 4th quarter inflation numbers are due out, with inflation numbers also due out of Japan.

The RBNZ is expected to hold on policy near-term, so the inflation numbers will need to support that.

For the Bank of Japan, the BoJ delivered a more optimistic outlook on inflation and growth. This would need to be reflected in Friday’s stats.

Finally, the Loonie and retail sales figures out of Canada will also be in focus.

It was a big day for the Loonie on Wednesday, with the BoC opening the door to a rate hike. What can we expect over the rest of the week?

We saw the Bank of Canada open the door to a rate cut on Wednesday. The BoC Governor had previously stated that interest rates were at the right level to support the economy.

Recent GDP numbers suggested otherwise, forcing the BoC to change tact.

The BoC noted that growing slack in the economy threatens to dampen inflationary pressures.

While concerns over household debt levels left the BoC in pause mode, a rate cut will come should the current economic slowdown persist.

That makes the Loonie all the more sensitive to November retail sales figures due out on Friday.

The date for the UK leaving the EU is almost upon us. What data is coming out of the Eurozone? And what effect is it having on the pound?

For the Pound, employment numbers on Tuesday delivered a much need boost.

It may not be enough to prevent a BoE rate cut next week, however.

Much will likely depend on January’s prelim private sector PMI numbers due out on Friday.

A contraction in the services sector could be the green light for the BoE to make a move next Thursday…

Not much happening in terms of the Aussie and the Kiwi, can we expect any movement in the 2nd half of the week?

There are no further stats due out of Australia to provide the Aussie with direction.

In spite of the bushfires, employment figures for December gave the Aussie a boost on Thursday. The boost did come from part-time employment, however, which could reverse in the months ahead.

It remains to be seen whether it’s enough to allow the RBA to stand pat next month.

Consumer confidence eased in January and should we see consumer spending slide, a rate cut would remain likely.

For the Kiwi Dollar, we’ve got 4th quarter inflation numbers due out on Friday morning. Forecasts are Kiwi Dollar positive.

That would then support the outlook on RBNZ monetary policy, which is status-quo.

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