Key Events In The Coming Week: New Fed Chair, BOE, RBA And Brexit

Original post

In the traditional post-payrolls data lull, traders will pay attention to central bank meetings out of the UK, Australia and New Zealand, the US non-mfg ISM and the swearing in of new Fed chair Jay Powell both on Monday, as well as ongoing Brexit negotiations.

Key Weekly Events courtesy of RanSquawk

  • Monday: Brexit Negotiations Round Begins
  • Tuesday: RBA Monetary Policy Decision, UK Services PMI (Jan)
  • Wednesday: New Zealand Labour Market Report (Q4)
  • Thursday: BoE Monetary Policy Decision & QIR, RBNZ Monetary Policy Decision, Chinese Trade Balance (Jan)
  • Friday: Canadian Labour Market Report (Jan), RBA Statement on Monetary Policy

As BofA notes, there are three central bank meetings on the calendar this week. The BoE meets on Thursday, with no change expected in terms of communication. The BOE’s Quarterly Inflation Report is expected to sign up to the market curve with three more hikes in three years, upgraded from November’s guidance of two in three.

Look out for the RBA rates meeting on Tuesday and quarterly statement on monetary policy on Friday. BofA economists expect the RBA to remain on hold with no major changes to forecasts. Given 4Q CPI data, the RBA can be patient before moving policy to more normal settings. The communications will be examined for any signal around the timing of rate hikes. Recent data suggests the RBA could be moving towards a more hawkish stance.

Lastly, the RBNZ holds a rates meeting and forecast update this week. Policy is expected to remain unchanged, with recent misses on inflation risks pulling down near-term forecasts. This is the last forecast update before Orr takes over the Governorship.

* * *

A breaking of key events by region:

North America

There are no tier one releases due from the US during the week. Across the border in Canada focus will fall on January’s labour market report due on Friday. Consensus looks for headline jobs growth to slow to 1K from December’s 78.6K, while the unemployment rate is expected to tick up to 6.0% from the 5.7% seen in January. Alongside its latest monetary policy decision (where it hiked as expected) the Bank of Canada noted that “labour force participation and hours worked are showing promising signs. Recent data shows that labour market slack is being absorbed more quickly than anticipated. Wages have picked up but are rising by less than would be typical in the absence of labour market slack.” On the wage front RBC notes that “wage growth has picked up but remains a bit low relative to the unemployment rate at 2.9% Y/Y for permanent workers. In any case, the BoC’s recently introduced wage-common measure discounted the LFS wage growth figure in favour of less timely values from productivity, national accounts, and establishment employment data.”

Other releases of note: Monday: US Services & Composite PMIs (Jan, F), ISM Non-Manufacturing PMI (Jan) Tuesday: US Trade Balance (Dec), Canadian Trade Balance (Dec), US JOLTs Job Openings (Dec), Canadian Ivey PMI (Jan)

Europe

There are no tier one releases due from the region during the week.

Other releases of note: Monday: Eurozone Services & Composite PMIs (Jan, F), Eurozone Retail Sales (Dec) Wednesday: German Industrial Production (Dec)

UK

Early focus will fall on Brexit negotiations, with EU chief negotiator Barnier due to visit UK Brexit Minister Davis in London as the next round of talks get underway on Monday.

The first Bank of England (BoE) monetary policy decision of 2018 will conclude on Thursday, with consensus looking for the BoE to stand pat, with a 9-0 vote. The noted risk to consensus is that either/both hawks within the MPC (Saunders and McCafferty) cast a dissenting vote in favour of another hike. The decision will be accompanied by the latest Quarterly Inflation Report (QIR). Since the BoE last convened, official statistics revealed that the UK economy expanded by 0.5% Q/Q in Q4 (against the BoE’s forecast of 0.4% in November). On the inflation front, CPI has peaked (for now), oil prices have risen by circa 13% and the GBP has moved higher on a trade weighted basis.

Citi suggests that “new BoE forecasts may reflect somewhat stronger growth and higher inflation rates, although the Bank will likely remain cautious due to Brexit uncertainty” (November’s QIR can be found here). Citi also posits that “the MPC’s supply assessment could lead to higher slack estimates, which would be dovish. But also lower potential growth. That would set a lower speed limit and thus be hawkish.”  BoE rhetoric since the last meeting has towed the line, in that it is consistent with the view portrayed in November’s QIR. Governor Carney has noted that wages are picking up, but conceded that they are not growing spectacularly, he also reiterated that he expects investment in the UK to pick up in 2019. The Governor has also suggested that inflation pass through due to the exchange rate shock has further to go, and that he expects inflation to remain above 2% in the near future. Carney also stressed that any unwind of QE will be well telegraphed when the time comes.

Elsewhere BoE hawk Saunders noted that it is likely that interest rates will need to rise further over time, but any further tightening will be limited and gradual. Saunders also noted that Brexit could push BoE policy in either direction and reiterated that he expects the labour market to continue to tighten. Finally, BoE newcomer Tenreyro stated that, at the December meeting, she saw ‘ample time’ before the BoE would need to raise rates again.

Asia-Pacific

Early focus in China will fall on Monday’s Caixin Services PMI. As ever, there are no expectations; the prior release stood at 53.9, while the latest official survey came in at 55.0. In December, survey collators Caixin noted that “the expansion in new business picked up for the second consecutive month. Prices charged increased at a slightly slower rate in December, while input prices rose at the joint-fastest pace since February 2013.”

The other release of note in China will come on Thursday in the form of the trade balance, with consensus looking for USD 54.00bln from USD 54.69bln last time out.

In Australia focus will fall on Tuesday’s Reserve Bank of Australia (RBA) monetary policy decision. Consensus looks for the RBA to stand pat, with only one of the 48 surveyed by Reuters looking for a 25bps hike. The recent Q4 inflation headline was slightly softer than expected, however, the RBA’s preferred trimmed mean metric held steady at 1.8% Y/Y, as it remained below the bottom end of the RBA’s 2-3% band.

The Reserve Bank of New Zealand (RBNZ) will convene and issue its first monetary decision of 2018 on Thursday, with all of those surveyed expecting the central bank to stand pat. Most believe that interim Governor Grant Spencer will act as a placeholder, before Adrian Orr assumes the role in March. As a result, consensus looks for the Reserve Bank to maintain its balanced assessment and to emphasise that interest rates are likely to remain low for a considerable period of time.

* * *

Courtesy of Deutsche, here is a summary of key daily events in the coming week:

  • Monday: The start of the week will see the remaining January services and composite PMIs released in Europe and the US. Also due in the US is the January ISM non-manufacturing while in Europe the February Sentix investor confidence reading and December retail sales data for the Euro area will be due. Of most interest however will likely be ECB President Draghi’s comments in front of the European Parliament.
  • Tuesday: A fairly quiet day all round with December factory orders data in Germany the only release of note in Europe, while in the US the December trade balance and JOLTS job openings data is scheduled to be released. Away from that it’ll be worth keeping an eye on Fed Bullard’s comments when he speaks in the afternoon on the US Economy and Monetary Policy, while the ECB’s Weidmann speaks in the morning. General Motors and Walt Disney are due to report earnings.
  • Wednesday: The data calendar continues to remain fairly sparse with December industrial production in Germany, December trade data in France and December consumer credit data in the US the only releases of note. China should  also release January foreign reserves data at some stage. However there is plenty of central bank speak due with the ECB’s Nouy and Lautenschlaeger speaking in Frankfurt in the morning, while the Fed’s Kaplan, Dudley, Evans and Williams are all due to speak throughout the day.
  • Thursday: The BoE should be the highlight on Thursday with the MPC meeting due around midday. The latest inflation report will be released alongside and Governor Carney will then follow with his press conference. Away from that the most signficant data due out is most likely to be the January trade numbers in China, while December trade data in Germany and the latest weekly initial jobless claims data in the US are also due. The Fed’s Kashkari and Harker are also slated to speak in the afternoon at separate events, while the ECB’s Mersch, Praet and Villeory will speak. AIGand CVS Health are due to report earnings.
  • Friday: We finish the week with more important data out of China with the January CPI and PPI prints due out in the early morning. In Europe we’ll get December industrial production data out of the UK and France, with trade numbers also due in the former, while across the pond in the US the only data of note is December wholesale trade sales. The Fed’s George is also due to speak in the early morning.

Finally, focusing just on the US, here is a chart summary of the key events this week from BofA:

And a detailed breakdown with consensus estimates from Goldman:

The key economic release next week is the ISM non-manufacturing survey on Monday. Federal Reserve Chairman Powell will be sworn into office Monday morning, and there are a few scheduled speaking engagements by other Fed officials this week.

Monday, February 5

  • 09:00 AM Federal Reserve Chairman Powell sworn in: Federal Reserve Board Governor Jerome Powell will be sworn in as Chairman of the Board of Governors at approximately 9 a.m. Monday in a private ceremony.
  • 09:45 AM Markit US Services PMI (consensus 53.3, last 53.3)
  • 10:00 AM ISM non-manufacturing index, January (GS 57.0, consensus 56.5, last 55.9): We expect the ISM non-manufacturing index rose 1.1pt in January. Regional non-manufacturing surveys were mixed in January, with moderate gains in the Dallas and New York Fed surveys while the Philadelphia and Richmond surveys deteriorated but remained in positive territory. Overall, our non-manufacturing tracker edged up 0.2pt in January to 57.2.
  • 02:00 PM Senior Loan Officer Opinion Survey, 2018Q1: The Fed will release results and a memo from its quarterly Senior Loan Officer Opinion Survey on bank lending practices. The 2017Q4 release showed little change in bank lending practices over the previous quarter, with a modest share of banks easing lending standards for commercial and industrial loans and commercial real estate loans. Since the last survey, US bank loan growth slowed with commercial and industrial loans growing at their slowest year-over-year pace since 2011.

Tuesday, February 6

  • 08:30 AM Trade balance, December (GS -$52.2bn, consensus -$52.0bn, last -$50.5bn): we expect the trade balance to widen by $1.7bn to -$52.2bn in December. The Advance Economic Indicators report last week showed a widening trade deficit in goods, and we expect a rebound in services imports in December.
  • 08:50 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will give a presentation on monetary policy and the US economic outlook at a conference in Lexington, Kentucky. Audience Q&A is expected.
  • 10:00 AM JOLTS job openings, December (last 5,879k)

 
Wednesday, February 7

  • 08:30 AM New York Fed President Dudley (FOMC voter) speaks: New York Fed President William Dudley will speak on a panel at an event titled “Banking Culture: Still Room for Improvement” in New York.
  • 03:00 PM Consumer credit, December (consensus +$19.7bn, last +$28.0bn)
  • 05:20 PM San Francisco Fed President Williams (FOMC voter) speaks: San Francisco Fed President John Williams will give remarks at a luncheon in Honolulu. Audience Q&A is expected.

 
Thursday, February 8

  • 04:50 AM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Robert Kaplan will participate in a Q&A session in Frankfurt. Audience and media Q&A is expected.
  • 08:30 AM Initial jobless claims, week ended February 3 (GS 230, consensus 232k, last 230k): Continuing jobless claims, week ended January 27 (consensus 1,933k, last 1,953k): We estimate initial jobless claims remained flat in the week ended February 3, as the trend appears to have declined as weekly readings remained low, even after the seasonally volatile start-of-year period. Continuing claims – the number of persons receiving benefits through standard programs – rose in the previous week, and claims in Missouri appear slightly elevated.
  • 09:00 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a Q&A discussion in Pierre, South Dakota. Audience Q&A is expected.
  • 09:00 PM Kansas City Fed President George (FOMC non-voter) speaks: Kansas City Fed President Esther George will speak on the economic outlook at an event in Wichita, Kansas. Audience Q&A is expected.

Friday, February 9

  • 10:00 AM Wholesale inventories, December final (consensus +0.2%, last +0.2%)

Source: Deutsche, BofA, Goldma, Ransquawk