Outside of covid developments, much of the focus was on the Bank of England quarterly inflation report and policy meeting as well as the US employment data following last month’s negative reading.

Starting with the Bank of England (BoE) policy meeting, the central bank made no policy changes with interest rates held at 0.1% and total asset purchases at £895bn with both decisions unanimous. The was a cautious but optimistic tone.

The BoE now expects a Gross Domestic Product (GDP) contraction of 4.2% for the first quarter compared with slight growth expected in the November report because of lockdown. In terms of its unemployment outlook, they have not ruled out a potential extension by the Chancellor which could lower their peak estimates of 7.75% unemployment by the middle of the year. The other focus of the meeting was the topic of negative interest rates. The central bank revealed that it has asked banks to begin preparatory work for negative interest rates, including a tiered system of reserve remuneration. However, policymakers stressed that this was to add that to their policy toolkit and was not a policy signal. They went on to say that there would be six-month implementation period of such a policy move, which could rule out this option as they have also stated that they feel the economy could bounce back strongly in the second half of the year.

Across the pond, the focus was on US unemployment data following last month’s contraction. The headline figure disappointed for a second consecutive month in January, showing only modest job growth in the first few weeks of the new year. Nonfarm payrolls increased by 0.4%, or 49,000, month-on-month, following a downwardly revised 227,000; this was below the forecasted 85,000. The market will continue to watch the US labour market moving forward to understand if these softer numbers are the start of a wider trend.

Looking to the week ahead, the focus will continue to remain on covid developments in particular the vaccine rollout. The ‘Beast from the East’ cold front could hinder numbers in the UK. In the meantime, of particular interest will be both BoE Gov Bailey and Federal Open Market Committee (FOMC) Chair Powell’s speeches on Wednesday, the EU forecasts on Thursday and the UK GDP figure on Friday.


  • German industrial production

It is a quiet start to the week with only the German industrial production figures hitting the wires.


  • UK BRC retail sales monitor
  • US JOLTS job openings

It is no secret that the high street in the UK under immense pressure. The BRC retail sales monitor measures the change in the value of same-store sales and will therefore highlight the extent of the stress they face. Following the last two months of disappointing US labour data, the focus will be on leading indicators to signpost future developments. Today the US JOLTS data focuses on the number of job openings during the reported month, excluding the farming industry.


  • US inflation
  • BoE Gov Bailey speaks
  • FOMC Chair Powell speaks

The focus will be on the speeches from both BOE Governor Bailey and Federal Reserve (Fed) Chair Powell speaking at separate events. BOE Gov Bailey is due to speak (albeit virtually) at the Mansion House dinner, in London. Historically this has been a volatile event. In the meantime, Fed Chair Powell is due to speak at a webinar hosted by the Economic Club of New York. As both are respective heads of their central banks their speeches will be watched closely for clues on central bank policy.

In terms of economic data, the market will continue to focus on the direction of inflation in the US following the announcement last year that they will now monitor this using averaging approach in terms of interest rate developments.


  • EU economic forecast
  • US weekly jobless claims

The key event of the week for the eurozone comes in the form of the EU economic forecast. This report includes economic forecasts for EU member states over the next 2 years. It will be closely watched following the problematic roll out of vaccines and the strong currency. The market will be keen to articulate what this could mean for the growth. Following the last two months of disappointing US labour data, the focus will be on leading indicators to signpost future developments. The weekly jobless claims is set for release today.


  • UK GDP
  • UK manufacturing production
  • US UoM consumer sentiment

UK GDP will be closely watched to see, firstly on the quarterly basis, whether the UK may miss a technical recession (two consecutive quarters of negative growth) given the BoE has already forecast a contraction of circa 4% for Q1. Today’s figure is the first reading for Q4 and expected to show growth of 0.5%, however, there is downside risk as restrictions of the various tiers and a November lockdown were implemented. The US University of Michigan consumer sentiment is set for release and will be monitored following the transition of power from Trump to Biden.

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