In our Investment Bank Outlook each week, we bring you a selection of perspectives from leading investment banks to outline the key issues and directional views for the week ahead. These excerpts, taken from research notes, will cover issues such as key market themes, economic releases, as well as any major trends and levels to watch. Please note, this material, which does not reflect the opinions of Tickmill, is provided for educational purposes only and should not be taken as an investment recommendation.

RBC Capital Markets

Week ahead: There are four central bank meetings in G10 this week: chronologically the BoJ, BoC, Norges Bank and ECB (see respective sections below). The World Economic Forum in Davos starts tomorrow and runs to Friday. On the data front, there is nothing first‐tier in the US, but Dec CPI and Nov retail sales are due in Canada (see CAD). In the UK, the Jan flash PMIs (Friday) are critical to the outcome of next week’s MPC meeting (GBP), but labour market data are pre‐election so of less interest. Flash PMIs are also due in the Eurozone. The Q4 earnings season continues in the US.

JPY: The BoJ is universally expected to leave rates (policy rates and the 10yr yield target) unchanged overnight tonight. The accompanying Outlook Report will have to take on board a run of disappointing activity data recently and downward revisions to growth projections are possible. If Q4 GDP (mid‐February) is as weak as the monthly activity data are suggest, expect speculation on further BoJ easing at the March meeting to grow.

GBP: The House of Lords in scheduled to vote on the Brexit bill on Tuesday, before sending it back to the Commons. The Commons will debate (and probably remove) any amendments added by the Lords and vote on the bill on Wednesday. Because it is the first major data point covering the post-election period we get for the UK, this month’s PMI survey, in particular, the services PMI, is the most important data point ahead of the MPC meeting on January 30th. Our economists expect the services index to rise to 51.3 (consensus 51.0). However, the 1% point upward revision to the December index between the flash and final estimates, largely reflecting the addition of post‐election data, suggests the risks are to the upside. Ahead of the PMIs, labour market data are due on Tuesday. The short GBP/USD trade we entered a week ago is close to the entry-level, even though rates markets have rallied. With 20bp of cuts priced in for January, the risks are to the upside for GBP heading into the PMI data.

CAD: Our economists are in line with the consensus for no change in BoC rates on Wednesday and OIS price only ~5% chance of a cut. Activity reports have been soft so far in Q4, prompting us to lower our Q4 GDP forecast to 0.7%, below our previous 1.4% expectation and the BoC’s 1.3% October projection. Yet, Governor Poloz suggested there were some transitory factors at play and was not overly concerned in an appearance earlier this month. RBC economists are in line with consensus for Wednesday’s Dec CPI (2.3% y/y) and slightly below for Friday’s retail sales (0.4% m/m vs 0.6% m/m).

EUR: Data released since the previous ECB meeting have been positive and consistent with the slightly more optimistic tone struck by Lagarde in December regarding the economic outlook. We expect no changes in policy or the tone of the press conference this month. The flash PMIs will be watched for evidence that the December improvement in services has been maintained.

NOK: Norges Bank announces rates on Thursday and the universal expectation is no change. This is a non‐MPR meeting so there will be little new information on the outlook.

Danske Bank

Broad dollar strength appears to be re-gaining traction versus the regions with the weakest fundamentals. In Europe, EUR/USD has come off its highs at 1.12 and is now hovering below 1.11. In the weaker parts of EM we have also seen a sell-off in recent week(s): the rally in ZAR seems over and the economy in South Africa continues to appear as stagnating. In Hungary, high inflation and low yields are again adding upward pressure on EUR/HUF and in Brazil, activity indicators have yet to live up to lofty consensus expectations, weighing on BRL. In the coming weeks we will be getting a new reading on PMIs and should these fail to impress, it is more than likely we will see continued pullback in these and similar crosses. Given the high dollar-beta in Scandies, some EM pullback could also add further upward pressure on EUR/SEK.

Following significant CHF strength in recent days and weeks, watch out for SNB sight-deposit figures today to gauge whether and to what extent the SNB sold francs last week. If the SNB has stepped aside for now it could lead the market to test new lows in notably EUR/CHF; if not, USD/CHF has good options of stabilising from here.

In the Scandies, the NOK has been range-trading over the last week. One likely reason for that is that domestic data has fallen short of expectations, which has triggered profit taking and leaving some accounts reluctant to add new longs. In that regard, this morning’s SSB industrial confidence release is important. If we are right in our call it should on balance contribute to a stronger NOK.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

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