Tomorrow we have a host of important data coming out, primarily during the European session. And it could really rile up the markets!
Somewhat ironically, the most important data, the BOJ Interest Rate decision, might not be as market moving as the others, such as UK Claimant Count and German ZEW Economic Sentiment Indicator.
After a relatively calm weekend in regards to market-moving news, attention is on a very busy schedule.
The fourth-quarter earnings season is getting into full swing this week! Analysts continue to point to weak economic data from the UK, while others see the ECB having a more positive outlook following the leadership change.
What We Are Looking For
First up in the really early morning for European traders we have the Interest Rate decision by the BOJ. Expectations pretty much assure that the bank will leave rates where they are. Where we could get some action is right after the announcement, as we have Kuroda’s interminable press conference.
There is a growing consensus that negative rates have not boosted the economy or inflation. This is leading a majority of economists to predict that the BOJ will soon end its stimulus.
The question is what “soon” means. Speculation now is whether Kuroda will lift the BOJ’s growth outlook, which could provide some support for the JPY.
During early trading, longer-term bond yields rose in anticipation.
UK Might Reverse Trend
The next major event to look out for is UK employment data for December. Of course, there could be an impact from the General Election at the beginning of the month with the concurrent uncertainty. So, the market may not take a miss of expectations too badly.
Usually, the figure that moves the market is Claimant Count Change. Projections expect this to come in at 21.2K, an improvement from 28.8K in November.
Expectations are for yet another improvement with the unemployment rate to come in at 3.7% compared to 3.8% prior. In terms of inflation implications and BOE policy, total pay is expected to have increased by 3.4% compared to 3.2% in the prior report.
If expectations are met, we could see some more optimism for the pound, since it would justify the BOE keeping from cutting rates just a little bit longer.
Germany Not So Optimistic
Finally, we have the ZEW Economic Sentiment Indicator. We can expect this to dip back to 4.3.
A result like this would still be in expansion, but it would be a break from the rising trend that it’s been having since the middle of last year.
This might simply be a correction, of course, since the change isn’t all that big. The current situation is expected to improve but still remain in contraction, to -12.4 compared to -19.9 prior.