US
The most important event is the FOMC meeting. The expectation is for the Fed to keep the Fed funds rate target unchanged at 0.25-0.50%, which was already widely expected before this month’s financial turmoil. Instead, focus is on the accompanying statement, as there are no updated projections or press conferences in connection with this meeting.
A renewed decline in energy prices has weighed on consumer prices. That said, core CPI inflation has accelerated, indicating that core inflation may not be as weak as indicated by the Fed.
Housing was a bright spot in 2015 and this strength is expected to continue into 2016. Although housing starts stumbled in December, starts still rose a robust 10.8 percent in 2015.
EU
The ECB (European Central Bank) held a policy meeting this week and decided to keep its policy unchanged, which was largely expected. However, ECB President Draghi noted that downside risks to the growth outlook in the euro area “have increased again,” which have made inflation dynamics “weaker than expected.” With the overall rate of CPI inflation in the Eurozone hovering around zero percent at present, President Draghi said that it would “be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March.” This hint of further policy accommodation caused the euro to depreciate.
Euro area M3 money supply and bank lending figures are also due for release on Friday and the expectation is for continued progress particularly in the lending figures. Improved bank lending is one of the reasons the euro area activity is expected to reaccelerate in 2016, as a lack of lending is no longer a considerable headwind to stronger growth.
UK
In the UK, the Consumer Prices Index (CPI) rose by 0.2 percent in December 2015 compared with December 2014. Although this is the first month since January last year for which the rate has exceeded 0.1 per-cent, this continues the trend since early 2015 of the rate being very close to zero. Movements in transport costs, particularly air fares and to a lesser extent motor fuels, were the main contributors to the rise in the rate. Downward pressures from prices for alcohol and tobacco, along with food and non-alcoholic beverages, partially offset the rise.
UK Labour market statistics for September to November showed 31.39 million employed people, 588,000 more than a year earlier. The employment rate was 74.0 percent, the highest since comparable records began in 1971. The unemployment rate was 5.1 percent, lower than for a year earlier (at 5.8 percent). It has not been lower since August to October 2005.
China
Data on China’s fourth quarter real GDP growth figures released on Tuesday did not help soothe investors’ nerves. It painted a picture of a decelerating growth. GDP advanced by1.6% quarter-on-quarter (non-annualised) during the last quarter of 2015, slightly weaker than consensus expectations for 1.8% print. That took growth for the year as a whole to 6.9%, down from 7.3% in 2014 and the slowest pace since 1990.
Japan
The data calendar is packed with key data releases in the coming week. In particular, the market is expected to focus on the Bank of Japan’s monetary policy announcement on Friday after the ECB this week hinted that it might cut rates again in March.
Sources: Danske Bank, TD Economics, Handelsbanken, Wells Fargo Securities.