The main focus next week will be the additional data from the United States, including data on employment, as well as industrial, consumer, and economic activity. In terms of employment, the JOLTS report should provide further indications on the health of the labor market by showing the amount of “churn” (hiring and separations), which has remained below prerecessions levels.
we expect The Beige Book on Wednesday to provide additional color on how the industrial sector has adjusted to various headwinds, as well as on price and wage growth across districts and how the unseasonably warm weather has affected activity. Retail sales are expected to be solid on a core basis, as low energy prices and solid labor market performance should continue to support the US consumer.
In Europe, there will be a few data points of interest. While the BoE will provide its policy rate, where we expect no change and for there to be little surprise as this is fully expected by the market.
In terms of data, both the UK and the Eurozone provide data on industrial production in November.On a m-o-m basis, we expect a somewhat higherthan-consensus increase in the UK of 0.2%, while in the Eurozone we are at -0.5%, a full 0.3pp below consensus. Also, of interest may be the ECB’s account of the meeting released on Thursday. This may provide additional insights into the decision for the specifics of the program announced in December. At the time, the package disappointed markets, and EUR/USD rallied 3% on the day, one of the largest moves on record, and the cross has yet to return to the levels seen prior to the announcement.
Given the concerns originating in China, there is likely to be additional attention paid to any and all data from China. This includes cross border flows, such as trade balance and FDI, where Nomura economists are expecting a slightly higher-than-consensus reading for trade balance and below-consensus FDI figure.
The reserves data for December showed the largest estimated intervention on record, highlighting further concerns about outflows. However, the outflows have largely been through the Other Investments line item in the Balance of Payments, particularly in the Loans and Currency and Deposits line items. Trade balance and FDI have tended to be more stable, and might therefore be less interesting from a flow perspective, and instead more interesting as an indicator of economic health and investor outlook.