Last week the market settled after the US Dollar touched 32 month lows to settling a relatively tight range. Unprecedented scenes in Washington dominated the newswires in the second half of the week with the ongoing debate and rumours of actions being taken to remove President Trump despite his tenure coming to end. In addition, the Democrats won the two Georgia Senate seats and effectively took control of Congress.

In the UK, the new variant of COVID is resulting in a very serious escalation in infections and hospitalisations, but vaccinations to the most vulnerable groups and frontline workers is underway. The government is targeting about two million jabs a week to reach about 13 million by mid-February, with the hope that lockdown restrictions can start to be eased soon after. Bank of England Governor Bailey stated that markets had broadly been expected the Brexit trade deal that was secured. He went on to comment that GDP could slide by 4% as a result of the Brexit trade deal; but only time will tell.  It was also reported that a report a negative interest rates to be published at Feb’s MPC meeting.

The key economic release and data focus was on the US labour readings. The economic data painted a bleak picture and highlight an economy on the slide; a challenge that President Elect Biden will have to tackle. The all-important nonfarm payrolls in the US fell by 140,000 in December, missing the market expectation of +71,000 by a wide margin. The market will be closely monitoring economic data from the region moving forward. There are concerns of negative real interest rates moving forward due to the way the FOMC have stipulated  they will be assessing inflation (average); growth data will be a key barometer with regards to this.

Looking to the week ahead the market will keep a close eye on rhetoric from Bank of England members following concerns that negative interest rates may become a reality The growth data, whilst backward looking in the form of the GDP will be also watched for clues on how deep the probable double dip recession is likely to be. Following Friday’s job losses, the market will keep a close eye on employment related data although the ongoing political situation is likely to dominate newswires.

Monday

  • ECB President Lagarde Speaks
  • MPC Member Tenreyro Speaks

ECB President Lagarde is due to moderate an online panel discussion at the One Panel Summit in Paris. Given the current situation with vaccines, new variants and the lockdowns, the market will look to see if Lagarde drops any hints on future policy. MPC Member Tenreyro is due to speak about the international evidence of the transmission of negative interest rates at an online event. Given the backdrop and the release of the central banks report on negative interest rate next month, the market will be looking for early clues.

Tuesday

  • MPC Member Broadbent Speaks
  • US JOLTS Job Openings

MPC Member Broadbent is due to deliver a speech titled “Covid and the composition of spending” at an online event. Given the current situation with vaccines, new variants, lockdown and the added complication of potential negative interest rates, the market will look to see if Broadbent drops any hints on future policy. Following last week’s negative reading on job creation, the market will be focusing on other labour metrics to see if it was a one off or the start of a wider trend, this come in the form of job openings.

Wednesday

  • ECB President Lagarde Speaks
  • US Consumer Price Index (inflation)

ECB President Lagarde is due to speak at the Reuters Next online event, the market will look to see if Lagarde drops any hints on future policy. Inflation is expected to remain tepid but will be monitored to see if there is any increase, what that increase or pick looks like.

Thursday

  • US Weekly jobless claims
  • FOMC Powell speaks

Following last week’s negative reading on job creation, the market will be focusing on other labour metrics to see if it was a one off or the start of a wider trend. The weekly jobless claims will be closely monitored as a component part of the jobs data. FOMC Chair Powell is due to speak at a webinar hosted by Princeton University. The market will pay particular focus on the Q&A session for clues on future policy.

Friday

  • UK GDP
  • UK Industrial and manufacturing data
  • US Retail sales

The UK November GDP data will be released on Friday. Although backward looking, the figures will reveal the extent to which the second national lockdown in England affected activity during the month, this is expected to show a decline of 4% whilst the manufacturing and industrial production data also set for releases. The US retail sales have fallen in the last two months after a strong summer and early autumn, primarily because of a slide in car sales. There are some tentative signs that they picked up in December, following the Black Friday and Cyber Monday holiday sales.

 

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