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: Datawise, Q4 GDP is key in Canada (see CAD), Sweden, the US (second cut), and Turkey. Other releases include EZ flash inflation and AU Q4 capex (see EUR, AUD). The BoK decides on rates, with analyst estimates almost evenly split between no change and a 25bp rate cut. In South Africa, Finance Minister Mboweni presents the 2020 Budget, a key input for Moody’s decision in late March. Banxico publishes the Inflation Report and minutes. Both the UK & EU are expected to publish their negotiation mandates this week, with a weekend story in the Times suggesting the UK govt is already looking for ways to circumvent the NI protocol.

CAD: Friday’s Q4 GDP release is by far the most important one between the January and March BoC meetings after a dovish shift from the central bank in January. Our economists forecast GDP growth to only eke out a positive number in Q4 at +0.3% annualized, matching the BoC’s January projection. Transitory factors—pipeline shutdown, labour disruptions, bad weather—all impacted growth in the quarter, but the underlying impulse was still below the BoC’s 2.0% potential growth estimate. Details are particularly ugly, including a paltry 0.5pp add for consumption and a 0.1pp detraction from non-residential investment. Residential investment (+0.3pp) and govt (+0.5pp) will be the main growth drivers, while net trade should be close to flat on lower export and import volumes. For December GDP, our economists expect a surge in oil sands production to drive a 0.2% m/m increase. A soft Q4/Dec number would boost the case for an April cut (currently 50% priced).

EUR: A large part of last month’s increase in inflation was due to energy prices, which rose 1.8% y/y and compensated for a drop in services inflation. For this month (out on Fri), our economists expect the contribution from energy to be smaller (RBC headline: 1.3% y/y).

AUD: The pace of business investment remains disappointing with expenditure plans subdued. The partial data suggest a slightly better quarter, with gains in non-residential building work under way though yet to be completed and a lift in capital imports. Our economists expect a modest rise of 0.8% in Q4, with the plant & equipment component providing some guide to this component of business investment in the upcoming Q4 GDP. With this survey having been undertaken in the last 6– 8 weeks amid an escalation in the bushfires and onset of covid-19, there must be some risk that plans remains weak for the current FY. We will also get the first cut capex plans for 2020–21, but we caution that this is a very early estimate and will be subject to considerable revision.

Citi

  • CHF: Total Sight Deposits CHF release at 09:00 GMT. Intervention watch has become the topic of conversation for CHF/SNB watchers, and we wrote about limited options recently. EURCHF continues to sit at significant support around 1.06, and should we break lower, CitiFX Technicals see us visiting 1.0234-1.0264.
  • EUR: Two things to highlight:
  •    Germany IFO Business Climate at 09:00 GMT for February. Citi Economics forecasts this to deteriorate to 94.9 vs 95.9 prior. The team comments that respondents worry about lower Chinese demand and temporary supply chain disruptions. Employment intentions and inventories may help gauge the degree to which companies are looking through any short-term volatility due to the virus.
  • Outgoing CDU leader AKK will announce the selection process for her successor as party leader and probably also for CDU/CSU candidate for Chancellor.
  • USD: We have two regional Fed activity indices after Friday’s Markit services PMI shocker.
  • First up is the Chicago Fed Nat Activity Index at 13:30 GMT for January. We then have Dallas Fed Manufacturing Activity at 15:30 GMT for February. The market forecasts this to come in at 0.0 vs -0.2 prior. Watch for any downside misses here which could be indicative of coronavirus concerns starting to seep into the US manufacturing base.
  • To round off the day, Fed's Mester Speaks on Economy at NABE Conference at 20:00 GMT. She will discuss the economy and monetary policy – there will be a text and audience/media Q&A too.
  • GBP: BoE Chief Economist Haldane Speaks in London at 18:30 GMT on the “Wealth, Health and Happiness of Nations.” We don’t expect this to be market moving.

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