Back
25 Jan 2016
Big week ahead in the G10 sector - Nomura
FXStreet (Guatemala) - Analysts at Nomura explained the key events taking place for the week ahead in the G10 sector an FX space.
Key Quotes:
"All times in GMT: 1. US: New home sales (Wednesday 15:00), Durable goods orders (Thursday 13:30), Q4 GDP First estimate (Friday 13:30) 2. Europe: UK GDP (Thursday 09:30), Euro area Inflation (Thursday – Friday) 3. Japan: National CPI YoY (Thursday 23:30) 4. Central banks: Fed (Wednesday 19:00) , RBNZ (Wednesday 20:00), BOJ (Friday)."
G10 Data preview
"In the US, we expect that the Conference Board’s consumer confidence index ticked down modestly by 1pt to 95.5 in January, as positive factors related to lower gasoline prices, for example, were offset by the sharp drop in equity markets. On the home sales front, we expect sales to continue on an upward trend on the back of increased home sales in October and November, and based on data on the market for new homes such as homebuilder sentiment, single-family housing starts and permits (we forecast an increase by 3.3% in December). Lower energy prices, the strong USD, and slower global growth appeared to weigh materially on US growth, especially in the industrial and international trade sectors, resulting in a sharp slowing of economic activity in Q4 after growing above trend in Q2 and Q3. The main contributors to growth for most of 2015 (consumer and housing) slowed at the end of 2015, while businesses pared back inventory investment significantly in Q4. Overall, we expect slower gains in inventory investment to subtract a full percentage point from Q4 GDP growth, and we forecast a meager 0.2%. In the UK, we expect ONS’s first estimate of Q4 GDP growth to be driven up slightly by 0.5% q-o-q, owing to a smaller drag from the construction sector (due to warm weather). We expect Euro area flash January HICP inflation to increase to 0.4% y-o-y from 0.2% y-o-y in December, where a sharp decline in oil prices since the start of the year will largely mitigate the positive energy price base effect. In Japan, we forecast all-Japan core CPI inflation in December at 0.0% y-o-y, unchanged from November, where we expect any change in energy and core food inflation to be insufficient to have a measurable effect on core CPI inflation.
FOMC preview
We believe that the FOMC will wait until June before its next rate hike. We do not expect a change in policy language in its January statement, and it is unlikely that it will say anything about its plan for March. Risks to its outlook from tighter financial conditions, low oil prices, and developments will probably be acknowledged, and the meeting will feature new voting members for 2016.
BoJ preview
In terms of the BOJ, while our economists expect the BOJ to leave its policy unchanged next week, we judge the decision to be a close call. The BOJ’s NEER measure is now at its highest level since mid-Aug 2014, bringing back market expectations for BOJ action. In our view, deteriorating inflation and fewer concerns over JPY weakness by politicians point to a higher probability of the BOJ easing next week than any other meetings in 2015. Speculative positions have turned net JPY long, and BOJ easing decisions might be effective as an initial reaction, as JPY positions will be forced to be unwound.
RBNZ preview
At the last RBNZ meeting, while the Bank mentioned the need for monetary policy to help ensure that future average inflation settles near the middle of the target range, it also stressed that it expects this to be achieved at the current interest rate setting. We therefore believe that the RBNZ sees additional cuts to be unnecessary for now and that it will keep the policy rate unchanged at next week’s meeting. We expect the Bank to allow the effects of stimulus to feed into the domestic economy before making any further decisions.
ECB review
In light of the ECB’s dovish message at the last meeting, we now expect the Bank to ease again on 10 March via a further cut in the deposit rate of at least 10bp. We have a number of ECB speeches next week, which could give us further color on what the ECB is likely to be observing to guide its thinking on the inflation path."
Key Quotes:
"All times in GMT: 1. US: New home sales (Wednesday 15:00), Durable goods orders (Thursday 13:30), Q4 GDP First estimate (Friday 13:30) 2. Europe: UK GDP (Thursday 09:30), Euro area Inflation (Thursday – Friday) 3. Japan: National CPI YoY (Thursday 23:30) 4. Central banks: Fed (Wednesday 19:00) , RBNZ (Wednesday 20:00), BOJ (Friday)."
G10 Data preview
"In the US, we expect that the Conference Board’s consumer confidence index ticked down modestly by 1pt to 95.5 in January, as positive factors related to lower gasoline prices, for example, were offset by the sharp drop in equity markets. On the home sales front, we expect sales to continue on an upward trend on the back of increased home sales in October and November, and based on data on the market for new homes such as homebuilder sentiment, single-family housing starts and permits (we forecast an increase by 3.3% in December). Lower energy prices, the strong USD, and slower global growth appeared to weigh materially on US growth, especially in the industrial and international trade sectors, resulting in a sharp slowing of economic activity in Q4 after growing above trend in Q2 and Q3. The main contributors to growth for most of 2015 (consumer and housing) slowed at the end of 2015, while businesses pared back inventory investment significantly in Q4. Overall, we expect slower gains in inventory investment to subtract a full percentage point from Q4 GDP growth, and we forecast a meager 0.2%. In the UK, we expect ONS’s first estimate of Q4 GDP growth to be driven up slightly by 0.5% q-o-q, owing to a smaller drag from the construction sector (due to warm weather). We expect Euro area flash January HICP inflation to increase to 0.4% y-o-y from 0.2% y-o-y in December, where a sharp decline in oil prices since the start of the year will largely mitigate the positive energy price base effect. In Japan, we forecast all-Japan core CPI inflation in December at 0.0% y-o-y, unchanged from November, where we expect any change in energy and core food inflation to be insufficient to have a measurable effect on core CPI inflation.
FOMC preview
We believe that the FOMC will wait until June before its next rate hike. We do not expect a change in policy language in its January statement, and it is unlikely that it will say anything about its plan for March. Risks to its outlook from tighter financial conditions, low oil prices, and developments will probably be acknowledged, and the meeting will feature new voting members for 2016.
BoJ preview
In terms of the BOJ, while our economists expect the BOJ to leave its policy unchanged next week, we judge the decision to be a close call. The BOJ’s NEER measure is now at its highest level since mid-Aug 2014, bringing back market expectations for BOJ action. In our view, deteriorating inflation and fewer concerns over JPY weakness by politicians point to a higher probability of the BOJ easing next week than any other meetings in 2015. Speculative positions have turned net JPY long, and BOJ easing decisions might be effective as an initial reaction, as JPY positions will be forced to be unwound.
RBNZ preview
At the last RBNZ meeting, while the Bank mentioned the need for monetary policy to help ensure that future average inflation settles near the middle of the target range, it also stressed that it expects this to be achieved at the current interest rate setting. We therefore believe that the RBNZ sees additional cuts to be unnecessary for now and that it will keep the policy rate unchanged at next week’s meeting. We expect the Bank to allow the effects of stimulus to feed into the domestic economy before making any further decisions.
ECB review
In light of the ECB’s dovish message at the last meeting, we now expect the Bank to ease again on 10 March via a further cut in the deposit rate of at least 10bp. We have a number of ECB speeches next week, which could give us further color on what the ECB is likely to be observing to guide its thinking on the inflation path."