Weekly Market Outlook (27-31 January) ...Middle East

UPCOMING EVENTS:

Tuesday

The US Consumer Confidence is expected at 106.0 vs. 104.7 prior. Last month, consumer confidence dropped to 104.7 vs. 112.8 in November.

Dana M. Peterson, Chief Economist at The Conference Board said: “The recent rebound in consumer confidence was not sustained in December as the Index dropped back to the middle of the range that has prevailed over the past two years”.

“While weaker consumer assessments of the present situation and expectations contributed to the decline, the expectations component saw the sharpest drop. Consumer views of current labour market conditions continued to improve, consistent with recent jobs and unemployment data, but their assessment of business conditions weakened.”

This might have been just an outlier among lots of upbeat economic data. Overall, we are still in the range that has prevailed over the past two years, and we haven’t got any strong catalyst that could suggest a sudden weakening in the economy.

Wednesday

The Australian Q4 CPI Y/Y is expected at 2.5% vs. 2.8% prior, while the Q/Q measure is seen at 0.3% vs. 0.2% prior. The RBA is focused on the underlying inflation figures with the Trimmed Mean CPI Y/Y expected at 3.3% vs. 3.5% prior, while the Q/Q reading is seen at 0.6% vs. 0.8% prior.

As a reminder, the RBA softened further its stance at the last policy decision as it nears the first rate cut. The market is seeing a 54% chance of a 25 bps cut in February although the first fully priced cut is seen in April.

The latest Australian Employment report came in a touch softer than expected but didn’t change much in terms of market pricing which was influenced more by the recent Australian Monthly CPI that showed core inflation easing with the Trimmed Mean CPI Y/Y coming in at 3.2%.

A soft Q4 CPI report will likely see the market sealing a rate cut in February already, while higher than expected figures might keep it on the edge with the probabilities favouring an April action.

The BoC is expected to cut interest rates by 25 bps and bringing the policy rate to 3.00%. As a reminder, the BoC cut interest rates by 50 bps at the last policy meeting but dropped the line saying “if the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further", which suggests that we reached the peak in "dovishness" and the central bank will now switch to 25 bps cuts and will slow the pace of easing.

The recent Canadian Employment report was much stronger than expected, while the CPI report came mostly in line with forecasts showing once again that the central bank got inflation back under control.

The CAD hasn’t responded much to economic data recently as the focus switched to Trump’s tariffs threats and the negative economic impact they could have on Canada. Trump said that he intends to impose 25% tariffs on imports from Canada as soon as February 1st.

Despite the general US Dollar weakness on tariffs optimism triggered by soft Trump’s comments on China, the Canadian Dollar underperformed significantly its peers with the USD/CAD rate remaining stuck in a roughly 150 pips range.

The Fed is expected to keep interest rates unchanged at 4.25-4.50%. As a reminder, the central bank cut interest rates by 25 bps at the last meeting in December raising growth and inflation projections and lowering the expected rate cuts in 2025 from 100 bps to 50 bps (in line with market’s pricing at that time).

The central bank will likely stress the need to wait a bit more for the next rate cut to get more economic data and more clarity on Trump’s policies. As Fed’s Waller recently mentioned, the pace of rate cuts will depend on inflation progress. He didn’t even rule out completely a March cut which was taken as a dovish surprise by the market.

The recent US inflation data came in softer than expected and marked the peak in the inflation hysteria and the repricing in rate cuts expectations. Before the data, the market was even pricing in the chances on no rate cuts in 2025.

That was the signal that the pricing was getting too much aggressive and in fact we just needed a couple of benign inflation reports to get it back to price in almost two rate cuts by the end of the year (which would be in line with the latest Fed’s projections).

Overall, this decision is unlikely to influence markets expectations too much as the data in Q1 is what really matters. Despite the expected cautiousness, a bit more positive talk on inflation could see the US Dollar weakening further (as long as Trump doesn’t spoil the party).

Thursday

The ECB is expected to cut interest rates by 25 bps and bring the policy rate to 2.75%. The recent Eurozone CPI report showed core inflation remaining pretty sticky, especially on the services side.

Moreover, despite all the doom and gloom, the latest Flash PMIs showed a notable rebound in economic activity which might even get stronger if the Russia-Ukraine war gets settled.

Also, news on EU to push AI, advanced research and clean tech in bid to compete with the US and China got louder with pressures to reduce and simplify regulations and increase investment. The prospects of a great 2025 for the Euro and European equities strengthen by the day.

The US Jobless Claims continue to be one of the most important releases to follow every week as it’s a timelier indicator on the state of the labour market.

Initial Claims remain inside the 200K-260K range created since 2022, while Continuing Claims continue to hover around cycle highs although we’ve seen some easing recently.

This week Initial Claims are expected at 220K vs. 223K prior, while there’s no consensus for Continuing Claims at the time of writing although the prior release showed an increase to 1899K vs. 1853K prior.

Friday

The Tokyo Core CPI Y/Y is expected at 2.5% vs. 2.4% prior. The BoJ hiked interest rates by 25 bps the last week but didn’t offer anything in terms of forward guidance with Governor Ueda saying that they have any preconceived idea and that they will make a decision at each policy meeting by examining economic and price developments as well as risks. The market doesn’t expect another rate hike any time soon with the next one seen in October at the earliest.

The US PCE Y/Y is expected at 2.6% vs. 2.4% prior, while the M/M measure is seen at 0.3% vs. 0.1% prior. The Core PCE Y/Y is expected at 2.8% vs. 2.8% prior, while the M/M figure is seen at 0.2% vs. 0.1% prior.

Forecasters can reliably estimate the PCE once the CPI and PPI are out, so the market already knows what to expect. Therefore, unless we see a deviation from the expected numbers, it shouldn’t affect the current market’s pricing.

The US Q4 Employment Cost Index (ECI) is expected at 0.9% vs. 0.8% prior. This is the most comprehensive measure of labour costs, but unfortunately, it’s not as timely as the Average Hourly Earnings data. The Fed though watches this indicator closely.

Read More Details
Finally We wish PressBee provided you with enough information of ( Weekly Market Outlook (27-31 January) )

Also on site :

• Rodney Hinton Jr., whose 18-year-old son was shot dead by police, denied bond in killing of sheriff’s deputy
• 'Bachelorette' Star Hannah Brown Reveals Rare & Shocking Health Condition
• Kelsey Grammer Reveals Former Girlfriend Aborted Their Son When He Was in College