Euro Flash inflation is expected to drop to -0.1% y/y for December from 0.3% y/y in November. It is mostly driven by energy prices as core inflation is expected to be flat at 0.7% y/y. We expect euro inflation to be in negative territory until this autumn, which clearly raises the risk of a de-anchoring of inflation expectations. It thus seems clear that the ECB has to respond and there is a rising probability that it will announce QE in government bonds at the coming meeting on 22 January.
US ADP payrolls will give a hint of the official payroll number on Friday. In November the ADP number deviated sharply from the official payroll number as it fell to 208k from 233k. This stood in sharp contrast to the rise in the official payrolls, which rose to 321k from 243k. This is part of the reason why we look for a downside surprise in Friday’s payrolls as it seems like an outlier compared to other indicators. The ADP number is expected by consensus to rise to 225k in December.
The latest Fed minutes are published tonight. It will be interesting given the removal of ‘considerable time’. For now, though, consensus of a June hike seems to be building, which should also be reflected in the minutes.
Danish property price data are published.
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