Main Points
- Fed Chair Powell’s testimony to Congress will focus heavily on the coronavirus, the “new risk” to the economic outlook. Congress will want further clarity on what the Fed is prepared to do and how will the coronavirus impact their current plans with the growing of the balance sheet.
- The coronavirus economic impact to Chinese growth is unknown and if the larger manufacturers decide to keep their workers at home even longer, markets will quickly have to price in further demand destruction.
- The US will publish inflation, retail sales and industrial output data in the coming week, while the Fed Chair Powell testimony and quarterly earnings reports from almost 500 companies will also attract attention.
- important data including GDP numbers for the UK and Germany, consumer and producer prices for China, and business confidence for Australia.
- Central banks in New Zealand will be deciding on monetary policy, while the European Commission will publish its Winter Economic Forecast.
US
The upcoming week has a busy calendar filled with US economic data releases, Fed speakers and Treasury auctions. The US economy is strong and if growth reaccelerates and inflation picks up, we could see rate hike calls return once coronavirus concerns ease. Powell’s testimony to Congress on Tuesday and Wednesday will be the main event while Traders also paying a close look at retail sales and consumer sentiment data on Friday.
The US consumer price inflation will probably accelerate to 2.5 percent in January, the highest since October 2018, while the core rate should ease to a six-month low. In addition, industrial output is seen falling for a second straight month, while retail sales are set to grow at a solid pace.
Euro Area
the European Commission will publish its Winter Economic Forecast on Thursday with fears of rescission status on Germany, while the Eurozone is releasing the second estimate of fourth-quarter GDP growth and several European countries
China
Phase-two trade talks should not start until China knows how big of a downturn the coronavirus will deliver to their economy. China may push for some leniency in delivering some of the phase-one purchase commitments until travel has returned to normal.
The recent decision by the Chinese to halving tariff on US goods was done mainly with the hope the US will play nice until they know the overall impact the virus will have on their economy.
consumer and producer prices release will be awaited, as forecasts pointing to a rise in consumer inflation to 4.9%, the highest level since 2011 amidst the coronavirus outbreak
UK
Brexit trade deal uncertainty has been dragging down the British pound. Expectations are mixed on whether Boris Johnson will be able to secure a trade deal before the end of the year. In the meantime, the focus will shift to the reshuffling of his cabinet, which is not expected to be massive and the economic health of the UK economy. On Tuesday the focus will be on UK preliminary estimate of fourth-quarter GDP growth, alongside business investment, trade balance, manufacturing and construction output.
New Zealand
The RBNZ is expected to hold rates at Wednesday’s meeting, though given the coronavirus outbreak, we may hear comments about the scope to easing policy.
Oil
After two fortnights of decline with oil prices, OPEC + is still trying to see if they can do anything to prevent prices from collapsing any further. We were supposed to see a commitment of an additional cut of 600K bpd, but the Russians needed more time to agree upon it. Oil will have trouble stabilizing unless we see positive news on the virus front or if we see a significant amount of supply removed.
Gold
Gold has been capped the $1,600 an ounce level dropping to $1560 levels, it seems many investors may have been too optimistic, the impact of the coronavirus on the global economy is unknown this could result on gold prices to rip higher. if we see severe weakness when Asia returns to the market, we could easily prices target the higher than $1600
