- Busier day for data with UK and US Retail Sales, but central bank
deluge likely to rule the roost
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** EVENTS PREVIEW **
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For all that today is not short of major economic data points, via way of US Retail Sales, UK Retail Sales, the array of 'flash' PMIs from Japan, Eurozone and US Retail Sales ahead of tonights's Japan 4 Tankan, central banks and perhaps politics will likely 'rule the roost'. Central bank policy meetings start with digesting an as expected Fed decision, ahead of Norway & Switerland and the perceived "main events" in the UK and Eurozone, with rate decisions also due in Chile, Colombia & Peru. Govt bond supply comes via way of Spain. Equity markets will be eyeing tomorrow's 'quadruple witching' equity expiry.
** Central Banks:
- The ECB has been making every effort to play down this month's meeting, above all in terms of major policy announcements. It will however present a fresh set of staff forecasts, which may see some marginal tweaks to short-term inflation forecasts, but perhaps rather more substantial upward revisions to GDP forecasts. The ECB will also have to offer some indications on how it plans to weight its EUR 30 Bln per month QE purchases in terms of govts vs. other bonds, and this will almost certainly see the proportion of govt bond purchases lowered. The council will however be keen to emphasize that its reinvestment purchases of govt bonds will remain very substantial.
- The Bank of England's MPC is expected to 'stand pat' after last month's 25 bps rate hike, and stick to the very shallow rate trajectory signalled in November's inflation report meeting. It will be interesting to see whether it signals a modestly more sanguine view on inflation, though it will inevitably stick to the view that the growth outlook remains very uncertain, and contingent on the evolution of Brexit negotiations.
- Switzerland's SNB will also be very firmly on hold, and while it is relatively satisfied that the CHF is finally starting to edge down, it will doubtless retain the observation that it remains overvalued. That said, inflation as measured by CPI is at its highest level since 2011, and clearly trending firmly higher (see chart). As such some modest upward revisions to its CPI forecast would seem appropriate, and per se signal that while the SNB certainly does not intend to pre-empt the ECB, it is also gradually preparing the ground for a period when it will be less accommodative.
- Norway's Norges Bank is set to keep rates on hold at 0.50%, and there will be a lot of interest in whether the weakness in CPI (headline and core CPI both expected to be at 1.2% y/y when published this week) prompts any changes to its rate trajectory.
- Turkey's TCMB remains in the 'rock and a hard place' zone, with inflation sky high, growth respectable, but encumbered by colossal political pressure. It is expected to hike its 'late liquidity rate' by 100 bps to 13.25%.
- Banco de Mexico is expected to resume its tightening cycle with a further 25 bps to 7.25%, and more than likely endorse market expectations of a further 25 bps rate hike in February, given that the rebound in the MXN has not pushed down on CPI inflation as has been expected. Indeed November CPI posted a 1.0% m/m again (above all due to energy prices), which saw the y/y rate push up to its cyclical peak of 6.6%.
** U.K. - Nov Retail Sales **
Retail Sales will be the other highlight, with Black Friday sales seen providing a modest boost for a 0.4% m/m reading, which would edge the y/y rate back up to 0.2% from October's -0.3%, the risks given the Visa Consumer Spending report ealier in the week are modestly to the downside of the consenus.
** U.S.A. - Nov Retail Sales
Retail Sales report, above all ex-Autos (consensus 0.7% m/m), underlining a continued healthy pace of Private Consumption in Q4, obviously assisted by 'Black Friday' sales. PPI, Industrial Production, NFIB Small Business Optimism, NY Fed Manufacturing survey and Import/Export Prices are also due.
from Marc Ostwald