- Australian Central Bank minutes could hold further clues over timing of rate hikes
- UK Inflation and wage data set to underline cost of living crisis
- US Building Permits set to slow, but remain close to 10+ year highs
The week starts with the US Consumer Inflation Expectations survey for January. This number is set to remain elevated, but critically may plateau at the 6% level posted in December. This in turn has the potential to offer some solace to policymakers that sufficient has been done to crest the inflationary curve, although market impact is unlikely to be very pronounced until we see a sustained decline forming here.
In the early hours of Tuesday morning, the Reserve Bank of Australia will publish its latest meeting minutes. With policy rhetoric now strengthening, there’s mounting speculation that multiple rate hikes will be seen in 2022. It may be the latter part of the year when they arrive, but the tone of this note has the potential to increase volatility on the Aussie Dollar as a result.
Also on Tuesday, the latest UK Employment readings will be released. These cover a number of attributes from the last three months, including headline unemployment for December – forecast to hold steady just above the 4% mark – and average earnings, again for December. These are tipped to fall slightly from the 4.2% seen in December so expect to see them stood alongside inflation figures to serve as a stark reminder that real incomes are falling. A marked decline – say below 3.5% – would have the potential to inject a degree of panic as to how the UK economy will fare in the months ahead.
Keeping with inflation and US PPI numbers are due Tuesday. Again, as this feeds into the underlying price inflation presented to consumers, it will be closely watched, and policymakers will be hoping for month-on-month growth to be close to zero. Anything that looks too aggressive however will fuel concern that the Fed will have to take an even steeper path in terms of rate hikes over the year ahead, something that would boost the dollar and weigh on stocks globally as a result.
UK Inflation data for January is to be issued on Wednesday. Coming in the wake of December’s wage rise number, it’s inevitable that this is going to attract media attention and it’s likely to paint a fairly bleak picture. Even assessing this over the longer term or looking at the fact many saved significant sums of cash during lockdown, there’s no escaping the crippling impact of rising energy prices or the imminent tax hike in April. Markets are unlikely to find anything to cheer here – the question is more a case of just how bad it looks and whether that’s a catalyst for investors to dial back expectations.
Thursday sees the release of US Building Permit data for January. This is forecast to show a modest contraction and there’s probably a need not to try and read too much into the direction of travel here. Whilst borrowing cost are rising and that may be putting off some development projects, the number remains close to 15 year highs. With that in mind, a decline of less than 1% from the previous month’s 1.885 million shouldn’t warrant much of a response.
Rounding out the week we have UK Retail Sales data for January. Whilst this is widely expected to return to growth after the marked slump in January, inflationary pressures are also set to play a significant role here. Estimates suggest that growth of as much as 3% could be seen month-on-month, but over a two-month window that still shows contraction and to have that happen against the inflationary backdrop isn’t great. If markets need to take stock ahead of the weekend break, this could well be the trigger.
Article by Tony Cross
of Monk Communications