Events to Look Out For Next Week

Markets are preparing for a massive week full of key economic data and further tightening from the central banks. The FED, the SNB, the BOE and the ECB highlights on the policy fronts and rate increases are widely expected. A half point hike is expected from all three central banks excluding the SNB, as central banks move their focus from headline inflation rates to underlying inflation pressures and wage growth. The US CPI reading is also in the spotlight as it remains the key driver for the Treasury yields and US Dollar, as is the sharp moderation in y/y gains for all the inflation gauges into early-2023 that will trim pressure on the Fed to rapidly remove policy accommodation.

Have a look at the most important events of the coming days in our usual weekly publication.

Monday – 12 December 2022

Gross Domestic Product, Industrial & Manufacturing Production and Trade balance (GBP, GMT 07:00) – UK GDP growth for October is expected to contact at -0.1%. Industrial and Manufacturing Production for October are expected at -0.3% and -0.1% respectively, with headlines signalling ongoing contraction across the manufacturing and industrial sector.

Tuesday – 13 December 2022

Average Earnings (GBP, GMT 07:00) – Average Earnings including bonus for October are expected to increase 5.4% from 6.0% (3Mo/Yr). The ILO unemployment rate is expected to increase to 3.7%.
German ZEW (EUR, GMT 10:00) – The key topic for the Eurozone’s biggest and most important economy. Data is expected to show negative responses regarding the expectations for economic growth in Germany, with ZEW econoomic sentiment is seen contracting at -27.5 from -36.7.
Consumer Price Index (USD, GMT 13:30) – The US inflation expected to grow by 0.3% for the headline and 0.3% for the core in November, following respective October gains of 0.4% and 0.3%. CPI gasoline prices look poised to fall -2% in November. We expect dissipating upward pressure on core prices into 2023 as disruptions from global supply chain bottlenecks and the war in Ukraine subside. As-expected November CPI figures would result in a pullback in the y/y headline rise to 7.3% from 7.7% in October, versus a 40-year high of 9.1% in June.

Wednesday – 14 December 2022

Consumer Price Index and Core (GBP, GMT 07:00) – There is disagreement among policy makers largely reflecting the uncertainty surrounding the economic outlook as well as the outlook for inflation. UK inflation is expected to ease for November on a monthly basis to 1.7% m/m from 2% m/m, with headline pulling back to 10.7% y/y from 11.1% y/y. Meanwhile, the BoE faces the risk that inflation expectations become entrenched, and while BoE chief economist Pill expects inflation to fall next year, he flagged that the labour market remains very tight and is less flexible since Brexit.
Interest Rate Decision, Monetary Policy Statement and Press Conference (USD, GMT 19:00) – There should be no drama with next week’s rate decision where a step down to a 50 bp hike to 4.375 is widely expected. Hence the focus will be on Chair Powell’s press conference, SEP forecasts, and especially the dots. Chairman Powell could continue to stress the overriding risks of not bringing inflation under control, underscoring the likelihood of further hikes in 2023. Additionally, attention will be on the Fed funds forecasts for clues on the policy path. The Chair already warned to expect upward revisions to the September forecast, and we expect at least Bullard will mark-up his dot to a 5% level. The median Fed funds rates are expected at 4.6% in 2023 and 3.9% in 2024. A small upward revisions is anticipated for GDP growth and the PCE chain price gains in 2022, but downward bumps in the jobless rate estimates, which will likely be followed by small trimmings for the 2023 estimates for those variables. GDP is expected to be revised up by 0.1%-0.2% for all of the 2022 range and central tendency estimates. Headline and core chain price indexes should see 2022 increases of about 0.2%-0.3% for all but the high-end estimates.
Gross Domestic Product (NZD, GMT 21:45) – GDP for Q3 is expected to show further deterioration at -1.9% q/q from 1.7% q/q.

Thursday – 15 December 2022

SNB Rate Statement & Interest Rate Decision (CHF, GMT 08:30) – Inflation data for November showed the headline at 3.0% y/y and core inflation nudged higher, which will keep the SNB on course to tighten policy further this month.
Interest Rate Decision, Monetary Policy Statement and Press Conference (GBP, GMT 12:00) – The BoE seems increasingly spooked by the risk of second round effects, against the background of a labour market that is tighter than the central bank factored in. Another 50 basis point hike is widely expected and fully priced in. Investors will watch individual voting patterns and Bailey’s comments on the rate outlook very closely though. The last time around, Bailey managed to deliver a 75 basis point hike with a dovish spin, by suggesting markets were too pessimistic on the final rate. Judging by market pricing, this remains the case.
Retail Sales (USD, GMT 13:30) – November US retail sales is forecasted to grow by of 0.3% for the headline and 0.4% for the ex-auto measure, after October gains of 1.3% for both. Energy-led price declines have depressed nominal sales since Q2.
Interest Rate Decision, Monetary Policy Statement and Press Conference (EUR, GMT 13:15 & 13:45) – Markets are prepared for another half point hike from both the ECB and BoE, as central banks move their focus from headline inflation rates to underlying inflation pressures and wage growth. A 75 basis point hike from Lagarde cannot be ruled out, but the hawks will likely be placated with a commitment to end the re-investment of maturing assets next year. The start of QT may in fact be more of a problem for governments that are facing rising refinancing costs than the rise in official rates, and the ECB will have to keep a close eye on spreads next year. Generally, the hawks are likely to be happy with a 50 basis point move, as long as the ECB also confirms that QT will start next year. If the ECB phases out the re-investment of assets accumulated during the crisis, and leaves the door open to further rate hikes next year, it should be enough of a hawkish signal. A 75 basis point move remains a risk, though an overly hawkish signal on QT could push out spreads once again.

Friday – 16 December 2022

Markit PMIs (EUR, GMT 08:30 – 09:00) – The preliminary Eurozone Composite December PMI is expected to show a slight improvement, given a rise in Manufacturing sectors, leaving the composite at 48 from 47.8.
Markit PMIs (GBP, GMT 09:30) – The preliminary December Services PMIs is expected to remain below contraction but to grow to 49.2 from 48.8, while Manufacturing PMIs in the UK is expected unchanged.
Manufacturing PMI (USD, GMT 14:45) – The preliminary Manufacturing PMI for December is expected at neutral, improving from 47.7.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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