G10 Forex Week Ahead
The Riksbank is expected to keep policy on-hold, while the ECB releases its Jan meeting minutes and Chair Yellen testifies to Congress. GDP data in Japan, Eurozone and Germany and inflation prints for Eurozone, US, UK and Sweden are due for release. Lastly, UK employment data is also out.
JPY: Q4 Prelim. GDP (Feb. 12, 23:50 GMT)
Consensus expects the preliminary Q4 GDP to grow at 0.3% q/q (annualized 1.1% vs 1.3% previously), supported by strong exports and moderate rise in capex and housing investment.
EUR: German/EZ Q4 Prelim. GDP (Feb. 14, 07:00/10:00 GMT)
UBS and consensus expect preliminary estimates of Eurozone Q4 GDP to match advance estimates (0.5% q/q and 1.8% y/y). The upgrade in growth from our earlier expectations of 0.3% q/q and 1.5% y/y is due to robust domestic demand. For Germany, consensus expects Q4 GDP growth at 0.5% q/q (prev. 0.2%).
GBP: Jan. Inflation (Feb. 14, 09:30 GMT)
Consensus expects UK CPI to dip into negative territory at -0.5% m/m in January (prev. 0.5%) but rise to 1.9% y/y (prev. 1.6%), with core inflation at 1.7% y/y (prev. 1.6%). The BoE in its February QIR left the CPI forecast unchanged due to the recent sterling strength, rise in market rates, and a softening labour market.
USD: Fed’s Yellen Testifies to Congress (Feb 14/15, 15:00 GMT)
Yellen will present the Fed’s semi-annual monetary policy report to the Financial Services committee and Banking committee. Yellen’s comments are likely to be closely watched for any hints on future rates path. In the Jan FOMC statement the Fed marginally upgraded its economic assessments and sounded more confident about the momentum in the labor market and household spending.
SEK: Riksbank Rate Decision (Feb. 15, 08:30 GMT)
UBS expects the Riksbank to keep policy unchanged. We think the Riksbank is done easing for now after clear signs of reluctance to provide further easing in the last meeting, despite the extension of the asset purchase program. That said, a sharp appreciation of SEK could force the Riksbank to revert to a more activist stance.
GBP: Dec. Labour Report (Feb. 15, 09:30 GMT)
Consensus expectations are for a steady unemployment rate at 4.8% and a 3m/3m job gain of 23k (vs. last month’s contraction of 9k). The BoE sees the unemployment rate rising in the near term as labour demand softens.
USD: Jan. Inflation (Feb. 15, 13:30 GMT)
Consensus expects inflation to remain steady at 0.3% on a monthly basis, but tick up y-o-y (2.4% vs. prev. 2.1%). Core inflation is expected to remain steady at 0.2% m/m and 2.2% y/y. This is in line with our view that headline inflation is likely to trend up on y/y basis on the back of rising gasoline prices.
EUR: ECB Jan. Policy Meeting Minutes (Feb. 16, 12:30 GMT)
The minutes from the Jan ECB meeting will be scrutinized for details regarding Draghi’s message that the ECB remains firmly committed to its accommodative policies despite surprisingly strong sentiment and inflation data recently.
SEK: Jan. Inflation (Feb. 17, 08:30 GMT)
Consensus sees a mild slowdown in CPI to 1.5%y/y (prev. 1.7%), with CPIF at 1.7% y/y (prev. 1.9%). We expect inflation to inch up on the back of currency, energy-related base effect and a narrower output gap.
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Emerging Markets Forex Week Ahead
In EM, the release of the January CPI in China will shed some light on the direction of monetary policy while we also expect monetary policy decisions in Indonesia and Chile.
CNY: China January CPI and PPI (Feb 14)
UBS forecasts China’s CPI and PPI to have risen from 2.1%y/y and 5.5%y/y in Dec to 2.7%y/y and 6.4%y/y in Jan, respectively. The PBoC’s monetary policy stance has exhibited a moderate tightening bias recently. The data will be closely watched to pre-empt future policy moves. We do not, however, forecast any policy rate hikes in 2017 unless CPI breaks higher than 3% sustainably.
CLP: Overnight Target Rate (Feb 14, 21:00 GMT)
We expect a 25bp cut next week from Banco Central de Chile to 3.0% despite the upward inflation surprise in January that took the 12m print to 2.8%. The board will assess whether the spike is just a one-off and that the IMACEC indicator of economic activity for December was better than expected. On balance, we think the CB will deliver the 25bp cut and take a breather to see where inflation may be heading.
IDR: Indonesia January exports (Feb 15) and BI policy rate (Feb 16)
Indonesia’s Q4 exports rose sharply, with December exports rising by 15.6%y/y. With elevated commodity prices and a strong base effect, the January print should also show a robust increase. More importantly, Indonesia is one of the few regional countries that reported an increase in volumes as well. Overall, this should keep IDR relatively stable despite any broad protectionism fears. BI, like most other central banks, should stay pat at its February meeting, especially given some green shoots of investment recovery.
MYR: Malaysia Q4 GDP (Feb 16)
Consensus expects the full-year 2016 growth to have slowed from 5.0% to 4.1%, the slowest since the 2008-09 GFC. We believe domestic demand in Malaysia is likely to remain soft in 2017 given high consumer leverage and the maturing credit and commodity cycles. Fiscal impulse is expected to remain weak in 2017, in which we expect the BNM to offer support to the growth.
SGD: Singapore NODX exports (Feb 17) and Q4 GDP (Feb 17)
Singapore’s NODX rebounded sharply in Q4 (9.4% in Dec), and is expected to stay at elevated levels in January (cons: 9.8%). Our inclination is to expect the NODX gain from the jump in manufacturing activity to fade – we expect Chinese demand to slow in 2017, which should offset some of the gain in US demand that we forecast. Consensus expects the final estimate of Q4 GDP to have improved from the preliminary print of 9.1%y/y to 12.2%y/y.
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