US exceptionalism set to shine
The broad sell-off on weak NFPs is likely to be faded by week’s end as US Q4 reporting season begins on Tuesday and December retail sales hits the wires. While we’re not that hopeful for retail sales to outperform given sales declines across major retailers, we think it’s a strong chance that the bulk of US reporting will show stronger corporate earnings growth. Furthermore, with US-China Phase One expected to be signed, we think USD and US equities are in good stead relative to G10 this week should results hold up
UK to reassess easing policy
GBPUSD edginess late last week has BoE Carney’s somewhat dovish comments to blame. Markets are now reassessing chances of a cut early this year. With Saunders due to speak, one of two unexpected doves at the MPC’s last meeting, this could make for some very interesting price action, especially if he further reaffirms a weak UK economy. Look to balance your view with releases in GDP and retail sales.
Canada in a good spot
The BoC Business Outlook survey has scope for volatility as it gets a fair look in from traders. But could be subdued with positioning unlikely to change, just yet, after BoC Gov. Poloz delivered some optimistic comments on the domestic economy. Housing and labour look good, while US-China trade has quietened right down. With little easing bias priced in and the survey likely to show improvement, we like USDCAD short bias this week.
NZ confidence looks poor
Short NZDUSD flows are the highest among G10 at the moment and for good reason. It doesn’t appear that NZ business confidence will turn around just yet from Q3’s print of -40, all-time lows. There’s little easing bias priced in for RBNZ’s Feb meeting, and so, plenty of room for downside risk to seep in on a poor print.
China GDP and activity data telling for PBOC
A primary window for markets to assess whether China’s economy is in for a soft landing. Importantly, a fall below 6% consensus expectations puts GDP outside China’s official target range of 6-6.5%. While it’s unlikely, if this does indeed take place, I think the case for supportive PBOC measures strengthens and ends up having a net positive impact on Asia equities.
What to look out for in the week ahead?