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GBP/JPY recovered after dipping to 152.88 last week. Initial bias remains neutral this week first. Outlook is unchanged that fall from 157.74 should be the third leg of the corrective pattern from 158.19. Deeper decline is expected as long as 155.38 minor resistance holds. Below 152.88 will target 148.94 support next. On the upside, above 155.38 minor resistance will flip bias back to the upside for 157.74/158.19 resistance zone instead.

In the bigger picture, price actions from 158.19 are currently seen as developing into a consolidation pattern to up trend from 123.94 (2020 low). Downside should be contained by 123.94 to 158.19 at 145.10 to bring rebound. Firm break of 158.19 will resume the up trend to long term fibonacci level at 167.93. However, sustained break of 145.10 will raise the chance of trend reversal and target 61.8% retracement at 137.02.

In the longer term picture, as long as 55 month EMA (now at 147.03) holds, we'd still favor more rally to 61.8% retracement of 195.86 to 122.75 at 167.93. But sustained trading below 55 month EMA will at least neutralize medium term bullishness and re-open the chance of revisiting 122.75 low (2016 low).

EUR/JPY turned sideway after dipping to 128.23 last week. Initial bias stays neutral this week first. But outlook is unchanged that corrective pattern from 134.11 is extending with another falling leg. Further decline is expected as long as 129.76 resistance holds. Below 128.23 will target 127.36, and possibly further to 126.58 fibonacci level. On the upside, above 129.76 minor resistance will turn bias back to the upside to 131.59 resistance instead.

In the bigger picture, price actions from 134.11 are currently seen as a consolidation pattern only. As long as 38.2% retracement of 114.42 (2020 low) to 134.11 at 126.58 holds, up trend from 114.42 is still in favor to continue. Break of 134.11 will target long term resistance at 137.49 (2018 high). However, sustained break of 126.58 will raise the chance of bearish reversal. In this case, deeper decline would be seen to 61.8% retracement at 121.94, and possibly below.

In the long term picture, EUR/JPY is staying in long term sideway pattern, established since 2000. Long term outlook will remain neutral until breakout from the range of 109.03/137.49.

EUR/GBP's decline last week suggests that rebound form 0.8304 has completed at 0.8421 after rejection by 55 day EMA. Initial bias stays on the downside this week. Break of 0.8304 will resume larger down trend to 0.8276 key support. On the upside, above 0.8366 minor resistance will turn bias back to the upside for 0.8421 resistance first.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8598 resistance holds, towards long term support at 0.8276. We'd look for bottoming signal around there to bring reversal. Meanwhile, firm break of 0.8598 will now be an early sign of medium term bottoming and bring stronger rebound. However, sustained break of 0.8276 will argue that the long term trend has reversed.

In the long term picture, outlook will stay bullish as long as 0.8276 support holds. Break of 0.9499 is in favor at a later stage, to resume the up trend from 0.6935 (2015 low). However, sustained break of 0.8276 will indicate long term trend reversal, and target 61.8% retracement of 0.6935 to 0.9499 at 0.7917, and possibly below.

EUR/AUD's choppy rise from 1.5559 resumed last week. Initial bias is now mildly on the upside this week for retesting 1.6168 resistance. Break there will resume the rise from 1.5354 to 1.6434 resistance. On the downside, though, break of 1.5712 support will turn bias back to the downside for 1.5559 support instead.

In the bigger picture, rise from 1.5354 is seen as the third leg of the corrective pattern from 1.5250 low. Further rise cannot be ruled out, but even in that case, strong resistance should be seen at 38.2% retracement of 1.9799 to 1.5250 at 1.6988. Larger down trend from 1.9799 is in favor to extend through 1.5250 at a later stage.

In the longer term picture, fall from 1.9799 (2020 high) is seen as a long term down trend. Further decline will remain in favor as long as 38.2% retracement of 1.9799 to 1.5250 at 1.6988 holds. Break of 1.5250 will target 61.8 retracement of 1.1602 (2012 low) to 1.9799 at 1.4733

EUR/CHF's down trend resumed last week and dipped to 1.0298, but quickly recovered. Initial bias is neutral this week first. While stronger recovery cannot be ruled out, upside should be limited well below 1.0510 resistance. On the downside, break of 1.0298 will extend the down trend from 1.1149 to 161.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0200 next.

In the bigger picture, long term down trend from 1.2004 (2018 high) is still in progress. Next target is 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. On the upside, firm break of 1.0505 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish even in case of rebound.

In the long term picture, prior rejection by 55 month EMA (now at 1.0967) maintains long term bearishness. Down trend from 1.2004 is now in progress for 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. Firm break there will target 100% projection at 0.9650.

The FOMC meeting turned out to me more hawkish than expected and markets are now pricing in four to five hikes this year, instead of three. Dollar was given a strong boost and surged broadly to end as the strongest one. Nevertheless, reactions in the stock markets, while wild, were not pessimistic. Sterling followed as the second strongest, as inflation outlook is going to push BoE for a hike again this week.

Australian Dollar was the worst performing one as RBA is clearly lagging behind Fed on tightening, followed by New Zealand Dollar. Both were also weighed down by risk aversion in Asia, in particular in China and Hong Kong markets. Euro and Swiss Franc were mixed together with Canadian, but the latter was support by persistent strength in oil price.

Fed to deliver four or five hikes this year, starting March

The FOMC meeting last week came out more hawkish than expected. A March rate hike is pretty much confirmed as Fed said " it will soon be appropriate to raise the target range for the federal funds rate." Also, Chair Jerome Powell didn't rule out 50bps rate hikes, and indicated that every meeting is "live".

Based on latest fed fund futures pricing, a 25bps hike is fully priced in for March meeting. There is 74% chance of another rate hike in May. The third 25bps hike would come in June or July (more likely). The fourth 25bps hike would come in September or November (more likely). There could be a fifth hike in December or next January (more likely).

The more aggressive scenario could see five rate hikes in March, May, June, September, December. The less aggressive scenario could se four rate hikes in March, May, July, November. But then, every meeting is "live" and depends on preceding developments.

S&P 500 closed the week with gain, but correction not ended yet

The stock markets were indeed very resilient despite the massive volatility seen. S&P 500 dived to 4222.62 but rebounded to close at 4431.85, up 33.9 pts. Initial support was seen from 4278.94 structural level and 55 week EMA (now at 4291.10). But overall, 4818.62 is seen as a medium term top, on bearish divergence condition in daily and week MACD. Hence, the corrective pattern from there is not expected to end that soon.

Price actions from 4818.62 are seen as correcting the whole up trend from 2191.86 (2020 low). Hence, while more recovery could be seen in the near term, upside should be limited by 55 day EMA (now at 4590.49). There would be another decline through 4222.62 to 38.2% retracement of 2191.86 to 4818.62 at 3815.19 before the correction completes. Nevertheless, sustained break of 55 EMA will argue that it's unfolding as as sideway consolidation pattern, rather than a deep correction.

10-year yield failing to extend up trend, consolidation continues

10-year yield failed to break through prior week's high at 1.874 and extended near term sideway consolidations. Any pull back should be contained by 55 day EMA (now at 1.630). Current up trend should extend to 2.159/87 cluster level. This represents 61.8% retracement of 3.248 to 0.398 at 2.159, and 61.8% projection of 0.398 to 1.765 from 1.343 at 2.187. This is where the real test lies, and no break is expected until some dramatic underlying developments.

Dollar index extending up trend, 99/100 as next target

Dollar index resumed near term up trend by powering through 96.93 resistance and hit as high as 97.44. Based on current development the long term fibonacci level of 61.8% of 102.99 to 89.20 at 97.22 should be taken out with relative ease. The bigger test lies in 61.8% projection of 89.53 to 96.93 from 94.62 at 99.19, which is close to 100 psychological level. Sustained break there would open up the case for further rise back to 102.99/103.82 range top. In any case, outlook will stay bullish as long as 94.62 support holds, even in case of deep pull back.

NZD/USD resumed down trend to target 0.6372 projection level next

NZD/USD was the biggest mover last week, losing -2.61%. The strong break of 0.6700 support confirms resumption of larger down trend from 0.7463. Outlook will now stay bearish as long as 0.6700 holds. As 61.8% projection of 0.7217 to 0.6700 from 0.6889 at 0.6569 was taken out already, next target is 100% projection at 0.6372.

It should be noted that NZD/USD was rejected by a key long term cluster resistance level at 0.7557, with 61.8% retracement of 0.8835 to 0.5467 at 0.7548. It also had a strong break below 55 month EMA. Both developments are rather bearish from long term perspective. Fall from 0.7463 could in the end turn out to be resuming the down trend from 0.8835 high. But it's of course too early tell. Reactions to 61.8% retracement of 0.5467 to 0.7463 at 61.8% retracement of 0.5467 to 0.7463 at 0.6229 could reveal the long term trend.

GBP/AUD facing projection resistance as it tries to resume up trend

GBP/AUD surged through 1.9151 high last week and resumed the up trend from 1.7412. But it's no immediately facing 61.8% projection of 1.7412 to 1.9151 from 1.8123 at 1.9198. Sustained break of this level will but a strong affirmation to the underlying medium term bullish momentum. GBP/AUD could then target 100% projection at 1.9862. However, rejection by 1.9198, followed by break of 1.8757 support, will keep medium term outlook neutral and bring more range trading.

Meanwhile, the break of 55 month EMA, with monthly MACD turning positive, is promising for the long term outlook. GBP/AUD might on on track to head back to 2.084 high, as part of the long term range pattern. Yet, it will have to overcome the above mentioned 1.9198 level with some conviction first.

EUR/USD Weekly Outlook

EUR/USD's down trend from 1.2348 finally resumed last week by breaking through 1.1185 and hit as low as 1.1120. Initial bias stays on the downside this week. Next target is 61.8% projection of 1.1908 to 1.1185 from 1.1482 at 1.1035. Break will target 100% projection at 1.0759. On the upside, above 1.1243 minor resistance will turn intraday bias neutral first. But recovery should be limited well below 1.1482 resistance to bring down trend resumption.

In the bigger picture, the strength of the the decline from 1.2348 (2021 high) suggests that it's not a corrective move. But still, it could be the fourth leg of a sideway pattern from 1.0339 (2017 low), or resuming long term down trend. In any case, outlook will now stay bearish as long as 1.1482 resistance holds. Next target would be 1.0635 low.

In the long term picture, EUR/USD should have failed 1.2555 cluster resistance (38.2% retracement of 1.6039 to 1.0339 at 1.2516) again. The break below a flat 55 month EMA is keeping long term outlook bearish. That is, the down trend from 1.6039 (2008 high) is still in progress. Break of 1.0339 will open up further decline towards 0.8223 (2000 low).

Monday, Jan 31, 2022

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Tuesday, Feb 1, 2022

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Wednesday, Feb 2, 2022

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Thursday, Feb 3, 2022

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Friday, Feb 4, 2022

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Summary

United States: Moderating Growth and a More Aggressive Fed

• The economy had the wind at its back in 2021 with generous fiscal policy and an accommodative Fed. Inflation and supply chains were the key obstacles. In light of a more hawkish stance at this week's FOMC meeting, we now expect the Fed to hike rates 125 bps this year and that a balance sheet reduction will be announced at the July 27 FOMC meeting.
• That said, our updated forecast is more about base effects from the Q4 GDP report rather than a major change in our outlook due to a more aggressive Fed. We'll provide a more full-fledged forecast update in our U.S. Monthly after we get January's nonfarm payroll release.
• Next week: Construction Spending (Tues), ISM Manuf. & Services (Tues/Thurs), Employment (Fri)

International: European Economic Growth Sputters Around the Turn of the Year

• This week's news from Europe offered further confirmation of an economic soft patch. The Eurozone January services PMI fell more than expected, while Germany saw GDP contract in Q4. In the U.K., the manufacturing and services PMIs fell further in January. Elsewhere, the Bank of Canada held its policy rate steady this week, but signaled that rate hikes would be coming soon.
• Next week: Eurozone CPI (Wed), Brazil Selic Rate (Wed), BoE Policy Announcement (Thu)

Interest Rate Watch: The Hawks in Full Control at the Fed

• We forecast that the FOMC will raise its target range for FFR 125 bps between March and the end of the year. We continue to expect the Committee to raise rates 75 bps more over the course of 2023 with 25 bp rate hikes in the first, second and third quarters of the year.

Credit Market Insights: Consumers Are on a Spending Spree, Can It Last?

• Major players in the credit card business reported attractive Q4-21 earnings this week. But the revival in credit card spending conflicts with a time when consumers wallets are feeling a little lighter, as inflation and dwindling stimulus encroach on real income. Is such growth sustainable, or are consumers biting off more than they can chew when it comes to taking on credit card debt?

Topic of the Week: Build Back Better Still Stuck in Neutral

• A little over a month ago, we published a report that made the case that Democrats' efforts to pass their Build Back Better plan largely had stalled. One month into 2022 and not much has changed.

Full report here.

U.S. Highlights

• The Fed left the policy rate unchanged at this week’s FOMC meeting but signaled that a rate hike was imminent come March. Uncertainty on the pace of hikes post March remains elevated, contributing to stock market volatility this week.
• The U.S. economy grew at 6.9% (annualized) in the final quarter of 2021 – a notable acceleration from the 2.3% pace in the in the quarter prior. Powering growth was a buildup of inventories.
• Consumer spending ended the year on a soft note, with real spending down 1.0% (m/m) in December. Pending home sales also ended the year on weak footing, falling 3.8% last month.

Canadian Highlights

• The Bank of Canada held their policy rate steady this week, surprising markets. Still, the overall messaging was hawkish, as was Governor Macklem’s press conference, paring the dovish market reaction.
• The Bank of Canada emphasized that economic slack has been absorbed, all but teeing up a rate hike in early March. They will also initiate balance sheet roll-off, but only after the policy rate starts to move higher.
• The outlook for interest rates is highly dependent on inflation. Should it prove tougher to tame, the Bank could hike more aggressively.

U.S. - Fed Sets the Stage for Rates to Liftoff Soon

The last week of January was rich on data reports, but the FOMC meeting absorbed much of the limelight. While the Fed left its policy rate unchanged, it delivered its clearest warning yet of imminent rate hikes. A March rate hike is now almost guaranteed, with market odds currently pegged at over 95%. That is likely just the start in what is sure to be a sequence of hikes. Concerns about future monetary tightening contributed to stock market volatility this week. Ultimately, the pace of rate hikes will depend on the pandemic, global supply chains and how aggregate demand reacts to higher rates.

The economy ended last year on a solid note, with a 6.9% annualized jump in fourth quarter real GDP. The acceleration in growth was powered by substantial inventory restocking. Inventories contributed 4.9 percentage points to the headline tally – accounting for over 70% of growth in the quarter (Chart 1). The inventory buildup was led by the retail and wholesale trade industries, with retail auto inventories leading the charge. Business investment (+2% annualized) and consumer spending (+3.3%) also contributed to growth, while a decline in government spending (-2.9%) was a small detractor.

Last quarter’s strong showing largely reflects activity before the Omicron infection wave took hold. Other data this week also pointed to slowing economic momentum at the turn of the year. December’s personal income and spending report showed that real spending fell 1.0% on the month, due primarily to a pullback in goods spending. Services spending remained in positive territory, but spending at restaurants and bars declined, likely reflecting consumer caution due to the rapid increase in COVID-19 infections. Close-contact services are likely to see further weakness in January as high-frequency indicators point to softening in things like air travel.

Inflation is adding to consumer woes. Echoing the acceleration in the Consumer Price Index, inflation as measured by the personal consumption expenditures (PCE) price index rose to 5.8% year-on-year (y/y) in December. Meanwhile, core PCE – the Fed’s preferred inflation gauge – accelerated to 4.9% y/y, moving further away from Fed’s target (Chart 2).

Second-tier data reports also point to slower near-term growth. Pending home sales fell 3.8% in December, marking the second consecutive monthly decline for the series. Pending sales lead actual (closed) sales by 1-2 months, with the recent weakness pointing to a soft start to the new year. A dearth of housing inventory is a key factor behind the weaker year-end trend. Looking at the start of this year, higher mortgage rates and uneasiness among prospective buyers during a surge in COVID-19 infections, are also likely to weigh on activity.

The good news is that the Omicron wave is likely to prove a temporary hurdle to economic activity. New infections in the U.S. appear to have crested. As the economy clears this hurdle, growth should rebound from a modest sub-2% pace this quarter to a much faster clip come spring. Inflation, however, is likely to remain elevated through 2022, even as it decelerates from the current highs (see here).

Canada - Marching to a Hike

To the surprise of many, the Bank of Canada opted to hold its policy rate steady in this Wednesday's hotly anticipated interest rate decision. In the accompanying press conference, Governor Macklem noted the on-going (but improving) situation with Omicron and the Bank's preference to adequately prepare the public for higher interest rates as factors staying the Bank's hand. The desire to formally wrap up forward guidance, and the fact that the next meeting is only five short weeks away likely helped too.

All that said, this was the definition of a hawkish hold. The Bank emphasized in the statement and accompanying Monetary Policy Report (MPR) that economic slack is now absorbed, teeing up a hike at its next meeting in early March. What's more, the Bank left the door open for a rapid transition to balance sheet roll-off (i.e., quantitative tightening). While this is likely not in play for the March meeting, the Governor noted that the central bank will be "considering" that step once interest rates start to rise.

Critics of the decision note that a rate hike would have been entirely consistent with the Bank's forward guidance that it would not raise the overnight rate until economic slack was eliminated. However, the high degree of uncertainty around that estimate – the MPR put a range on its measure of the output gap of between -0.75% (positive slack) and +0.25% (negative slack) – made the case for some advanced warning. Omicron looks to have added to the caution as restrictions resulted in a downgrade to first quarter growth expectations to just 2%.

We know that the Bank will be taking rates higher soon, but how rapidly and how far will depend on the outlook for inflation. It is safe to say that with Omicron worsening supply disruptions, it will remain well above target over the foreseeable future, enough to justify beginning to reverse a deeply negative, emergency level, inflation-adjusted policy rate (Chart 1). We anticipate at least two moves over the next three meetings. If all goes well, a rate hike roughly every second meeting continuing through 2023 will bring the overnight rate back to its pre-pandemic level (Chart 2).

A slower cadence is also possible. After an initial round of moves, policymakers could very well opt to sit back for a few months and assess the balance of supply and demand. There is precedent for this. In 2017, the Bank hiked twice in the third quarter of the year and paused in the fourth before picking back up in early 2018.

However, should inflation prove more stubborn, the Bank is likely to take a more aggressive approach. We have become accustomed to policy increasing in 25 basis point increments (the last time the Bank raised more than this in a single meeting was May 2000), but this has been an environment of relatively low and stable price growth. At the same time, the Bank could simply raise interest rates for longer, ultimately taking the overnight above its estimated "neutral" rate. With inflation the highest in thirty years, drastic times may call for drastic measures.

After a rollercoaster January, Wall Street is now expecting the Fed to aggressively raise interest rates over the course of the year as they scramble to control inflation. The US dollar is once again king as most economists are now expecting the Fed to deliver anywhere between 3-7 rate hikes this year.

The upcoming week is filled with a few big rate decisions from the RBA, BOE, and ECB. The RBA may end its bond purchase program and could bring forward rate hike expectations, given the stronger-than-expected acceleration in inflation.  The BOE is expected to deliver a follow-up rate increase and possibly signal a couple more are coming. The ECB will try to stick to the script that it is unlikely they will hike in 2022, which surprisingly has not been tested despite eurozone inflation increasing at a record pace.  Financial markets don’t expect the ECB to move until September 2023, but that could shift as all the major central banks enter tightening mode.

After a sixth straight weekly gain, oil traders will pay close attention to the upcoming OPEC+ meeting that should not disrupt how tight this energy market has become.  Crude demand is outpacing whatever supply is coming from OPEC+ as they have been falling well short of their commitments.  Expectations are for the cartel to rubber stamp the 400,000 bpd increase in March, but no one expects them to actually reach those levels.

On Friday, the January US nonfarm payroll report will show that labor market recovery took a hit from omicron, while average hourly earnings continue to rise.  Wage pressures are not going away and that should support optimism for the outlook for the US consumer.

US

Hot inflation may be public enemy No.1 for triggering the Fed’s hawkish turn, but investors are still keeping a close eye on the whether slower job growth could complicate the Fed’s aggressive tightening strategy. The January nonfarm payroll report will show the labor market recovery continues to moderate as the Omicron variant disrupted hiring.  The consensus estimate for jobs created in January is 178,000, which would be a decrease from the 199,000 gain in December. Labor supply is still very tight and that may continue to be the driver behind average hourly earnings increases.

On Monday, Qatar’s emir will meet President Biden to discuss several issues, primarily focusing on the global energy crisis and security.  Thursday is a big day for Biden’s Fed nominees as Raskin, Cook, and Jefferson as they will appear before the Senate.  If confirmed, this will represent a landmark demographic overhaul of the Fed.

Wall Street will also pay close attention to a busy earnings season week as several European banks, technology, car manufacturers and industrials will report results.

EU

A lot of economic data to come from Europe next week, with every day offering a selection of important readings that could influence the currency markets.

But there’s no doubt what the headlines will be, with flash CPI readings coming a day before the ECB meeting. The central bank is one of the few remaining in camp transitory and they are expected to persist, something that will be helped by a softer inflation number the day before.

Markets are ahead of the curve once more with at least one 10 basis point hike priced in by October and maybe another by the end of the year. Christine Lagarde pushed back to no avail last time, a similar outcome could be on the cards if the CPI data isn’t kind to them.

Developments in Ukraine appeared to hit European markets harder than the US on Monday so we could see similar sensitivity should the situation continue to deteriorate.

UK

Next week is all about the BoE meeting, with markets pricing in a more than 90% chance of a second consecutive rate hike, taking the base rate to 0.5%. With up to three more priced in this year, there is scope for the central bank to follow the Fed in leading investors further down the hawkish path.

An unusual side note, the Prime Minister’s job looks far from safe as the Sue Gray investigation has turned into a full blown police inquiry into numerous alleged parties during lockdown. Boris can survive the embarrassment but will he survive an inquiry? The timing of the Sue Gray report remains unknown but could make life very difficult for the PM. Perhaps the oddest thing is how little markets seem to care (for now).

Russia

The ruble has had a rough time the last couple of weeks as tensions between Russia and the West have intensified. It’s down around 5% since the start of the year after a recovery on Thursday, with a diplomatic response still being sought, despite the wide gap that still seemingly exists. There remains the risk of invasion which could punish the ruble as the country gets hit with sanctions.

South Africa

The SARB raised interest rates for the second consecutive meeting, taking the repo rate to 4%. This comes as inflation was running at the upper end of its 3-6% target range and despite growth falling short of previous expectations last year. Growth is still expected to be 1.7% this year, with inflation at 4.9%, up from 4.3% previously.

No major events next week.

Turkey

The quarterly inflation report showed little sign of a change of course for the CBRT, with the central bank remaining bullish on the direction of the economy despite dramatically raising inflation forecasts for 2022 to 23.2%; driven by the lira, food prices, labour costs, and administered prices.

Next week we’ll get PPI and CPI data on Thursday which will offer some more insight into price pressures. Not that it will have an impact on the direction of travel for the enemy of interest rates. The lira remains stable, as it has for most of the year so far but when it comes to the currency, you can never expect it to last.

China

The trading week kicks off early in the weekend with China Manufacturing and Services PMIs for January. The PMIs are expected to show that China’s economy slowed down slightly at the start of the year and that manufacturing and services showed no growth in January.

Manufacturing had to deal with seasonal factors and the services sector was dragged down due to the government’s zero-Covid policy, which has meant strict lockdowns. China will likely continue to increase spending to support the economy.

Chinese markets will be closed for most of the week due to the Lunar New Year holiday.

A big focal point will be the start of the Winter Olympics in Beijing on February 4th.  President Xi is expected to meet President Putin at the opening ceremony.

India

India will continue to try to foster a recovery with modest fiscal consolidation in the annual budget for FY 2022-2023 on Tuesday. The country has been hit hard by Covid-19 and the recovery remains fragile. Tax revenues in FY 2021-2022 were higher than expected and the government is expected to use the windfall to fund Covid-19 programmes as well as reduce the ballooning deficit so as to cut borrowing costs.

Australia

The RBA policy meeting on Tuesday could be significant, as the central bank is expected to announce the winding up of its asset purchase program. Governor Philip Lowe has stated repeatedly that he will not raise rates before wages rise to 3%, so a rate hike is not happening until much later in the year. However, if the RBA announces that it is bringing forward the timing on eventual hikes, the Australian dollar could receive a boost.

New Zealand

New Zealand releases Q4 2021 employment data on Wednesday. The economy continues to improve despite the Omicron wave, and there are expectations for a slight increase in employment. The unemployment rate fell to a 14-year low in Q3 to 3.4%, and is expected to remain unchanged. The labour market remains tight, which could lead to acceleration in wage growth.

Japan

A decent amount of economic releases will include industrial production, labor, and housing data, but nothing that should move the needle for the Bank of Japan.

Markets

Energy

Natural gas prices have been a rollercoaster ride after a short squeeze on Thursday, and now a major snowstorm for the East Coast could pump up prices again. The Ukraine situation may see a short period of calm as diplomacy is entertained.

Crude prices have been on fire, rising for a sixth straight week as the demand outlook improves and over geopolitical fears could lead to severe disruptions. The supply side continues to support a tight market as OPEC+ is expected to stick to their plan of increasing output by 400,000 bpd in March, even though their compliance last month only hit 60% of plan.

Gold

Gold’s pain may last a little longer until the Fed’s aggressive pivot with tackling inflation is fully priced in.  The $1,800 level was a key support level for gold, so momentum selling has the potential to make this an interesting trade.  If it gets ugly quick and $1760 breaks, gold may not see much support until $1720.

Bitcoin

Bitcoin looks like it is stabilizing but many investors are still concerned about a crypto winter which could mean the current rebound might not last.  The biggest risk right now is if Bitcoin mining continues to lose key hubs as more countries battle surging energy costs.

The cryptoverse is eagerly waiting for President Biden’s executive action that will begin regulation of cryptocurrencies as a matter of national security.  This could be done in the coming weeks and could have an impact on stablecoins, NFTs and cryptos.

Key Economic Events

Sunday, Jan. 30

• Portugal holds an early general election after PM Costa‘s 4-year term ended early

Economic Data/Events:

• China Jan Manufacturing PMI: 50.0e v 50.3 prior; non-manufacturing PMI: 51.0e v 52.7 prior, Caixin manufacturing PMI: 50.0e v 50.9 prior

Monday, Jan. 31

Economic Data/Events:

• Qatari Emir Sheikh Tamim bin Hamad Al Thani meets with US President Biden to discuss global energy crisis.
• Informal meeting of EU ministers for industry and for the Internet market in Lens, France.
• Germany CPI
• Eurozone GDP
• Italy GDP
• Mexico GDP
• Poland GDP
• India GDP
• South Africa Trade data
• Turkey Trade data
• Japan Unemployment Rate
• Australia inflation gauge, private sector credit
• Singapore money supply
• Thailand capacity utilization, BoP
• India fiscal deficit, eight infrastructure industries
• Japan industrial production, retail sales, housing starts, consumer confidence index
• Norway credit indicator, foreign exchange purchases

Tuesday, Feb. 1

Economic Data/Events:

• US construction spending, ISM Manufacturing, light vehicle sales
• UK Nationwide house prices, mortgage approvals
• RBA Rate Decision: Expected to keep Cash Rate unchanged at 0.10%
• Australia retail sales, house prices, home loans, consumer confidence
• Hungary PM Orban meets Russian President Putin in Moscow as his government stresses the importance of maintaining close economic ties, even amid the tensions of the Ukraine crisis.
• Sweden Financial stability hearing with Riksbank, FSA in Parliament.
• India budget presentation
• Euro zone Manufacturing PMI, Unemployment
• Germany Manufacturing PMI, Unemployment
• India Manufacturing PMI
• UK Manufacturing PMI
• Australia Manufacturing PMI
• Thailand Manufacturing PMI
• Switzerland Manufacturing PMI
• New Zealand Trade, Unemployment, house prices
• Czech Republic GDP
• Japan jobless, PMI, vehicle sales
• Thailand business sentiment index
• Mexico international reserves
• Switzerland consumer confidence, retail sales
• South Africa PMI

Wednesday, Feb. 2

Economic Data/Events:

• OPEC+ meeting on output
• Eurozone CPI
• RBA Governor Lowe addresses the National Press Club.
• New Zealand unemployment
• Japan monetary base
• Russia industrial production
• Denmark foreign reserves
• EIA Crude Oil Inventory Report

Thursday, Feb. 3

Economic Data/Events:

• • US factory orders, initial jobless claims, durable goods
  • Fed Board of Governors confirmation hearing
  • ECB Rate decision: No changes expected on rates, but Lagarde could provide guidance on when rate hikes could happen

• BOE Rate decision: Expected to raise Bank Rate by 25bps to 0.50%
• Eurozone Services PMI, PPI
• German Services PMI
• UK Services PMI
• Australia Services PMI
• India Services PMI
• Turkey PPI
• Turkey CPI
• Singapore PMI, electronics sector index
• Australia trade balance, building approvals, private sector houses, business confidence
• Switzerland total sight deposits, UBS real estate bubble index
• Amazon reports earnings reports after the close

Friday, Feb. 4

Economic Data/Events:

• US Jan Change in Nonfarm payrolls: 178Ke v 199K prior; Unemployment Rate: 3.9%e v 3.9% prior
• President Putin meets President Xi at Beijing Winter Olympics opening ceremony
• Canada Employment Report
• France industrial production, manufacturing production, wages
• Germany factory orders
• Switzerland CPI
• UK new car registrations
• Eurozone ECB survey of professional forecasters, Retail Sales
• Singapore Retail sales
• New Zealand building permits
• Thailand CPI, forward contracts, foreign reserves, consumer confidence
• Turkey effective exchange rate

Sovereign Rating Updates:

• Norway (Fitch)
• EFSF (S&P)
• ESM (S&P)
• Sweden (S&P)
• Russia (Moody’s)
• Czech Republic (Moody’s)
• Sweden (DBRS)