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Week Ahead – Fed to Stand Pat but BoE Could Cut; US and Eurozone Q4 GDP Eyed

There will be no shortfall of market-moving events in the coming week, with plenty of top-tier data and crucial central bank meetings shaping the agenda. The Federal Reserve will hold its first policy meeting of 2020 but Q4 GDP and PCE inflation numbers out of the United States are likely to be more helpful for investors in gauging the next move in interest rates. In comparison, the Bank of England’s meeting is expected to be the most exciting in quite some time. Elsewhere, inflation figures from Australia and flash GDP estimates from the Eurozone will set the tone for the aussie and the euro, respectively. Meanwhile, the world will be keeping an eye on the deadly coronavirus as any signs that the outbreak is worsening could further dampen risk sentiment.

Australian CPI data could ease rate cut dilemma for RBA

Expectations of a February rate cut in Australia continue to see-saw as de-escalating trade frictions, devastating bushfires and better-than-forecast data have seen investors flip flopping between a reduction and no change. The latest consensus is that the Reserve Bank of Australia will hold off from cutting rates at its February 4 meeting after December employment numbers pointed to limited impact so far to the economy from the bushfires that have been ravaging the country since October.

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If next week’s report on the consumer price index (CPI) for the fourth quarter is equally impressive, the odds for policy easing in February are likely to diminish further.

The CPI figures are due on Wednesday and will be followed by the producer price index (PPI) for the same period as well as private sector credit numbers for December on Friday. Ahead of those, the NAB business conditions survey for December might attract some attention on Tuesday, which may do a better job of revealing the scale of the damage from the bushfires on businesses.

The Australian dollar is in danger of being pulled lower again if the price indicators disappoint. The aussie will also be swayed by China’s official manufacturing PMI due on Friday, which will provide investors with the first glimpse on how the Chinese economy performed in the first month of the year. The Chinese market will be closed for the rest of the week as the country celebrates the Lunar New Year. But the nation will not be able to escape the headlines as authorities battle to contain the spread of the new virus.

Japanese data to be watched for signs of rebound

Industrial output, retail sales and unemployment figures due in Japan on Friday will be important amid fears the economy is struggling to find its footing following the October sales tax hike and the endless slump in exports. If the preliminary industrial output and retail sales readings for December fail to turn positive after the previous month’s negative prints, it would cast doubt on the Bank of Japan’s recent upward revisions to its growth forecasts. The BoJ, meanwhile, will shed more light on its last policy decision when it publishes a summary of the January meeting on Wednesday.

However, as far a