Here
are the links to the weekly roundups, reviews and also previews of the
beginning week. Last week’s post is here.
Previously
on MoreLiver’s:
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LAST WEEK
Bloodbathery
NEXT WEEK
Economic Calendar – Berenberg
Week
Ahead – ZH
Janet Yellen Testifies, China Closed
EU
Week Ahead – WSJ
Weighing the Week
Ahead
– Dash
of Insight
The
economic calendar is light and it is the start of the week-long Chinese New
Year. This means some media time and space that must be filled. Needing an
attention-getter, I expect the punditry to be asking: Is a recession looming?
EcoWeek: High
strung
– BNP
Paribas
US:
Expectations for additional Fed rate increases have evaporated. The drop-off in
bond yields is widespread and the latest victim to date is the dollar. Is the
US economy really in such bad shape? * EZ: The decline in oil prices becomes
problematic for price stability when it triggers second-round effects, i.e. a
lasting change in the expectations and behaviour of economic agents. * UK: Donald
Tusk unveiled his proposals for a deal between the UK and the EU. This basis
for additional negotiations was relatively well received, but negotiations
continue. If an agreement were to reached at the mid-February EU Summit, a date
for the referendum could be announced early in March. June 23rd is a
possibility but not a certainty. * Saudi Arabia: The drop in oil prices
highlights the crisis of the Saudi rent-economy. Only an acceleration in
reforms could limit risks.
Next
week sees Fed Chair Yellen give her semi-annual monetary policy testimony
before Congress (Wed, Thu). In the Euro Area, we expect a 0.3% q/q increase in
GDP for Q4 (Fri) and no signs of accelerating growth. As China celebrates its
New Year, the only data release will be FX reserves (Sun), which we expect to
show a record-high monthly drop. In Scandinavia, Riksbank is likely to cut
rates by 10 bp (Thu), while Denmark and Norway will release January inflation
figures (Wed).
Riksbank’s
time to ease, as we expect a repo rate cut by at least 10bp to -0.45% or more *
First time we hear Yellen since the initial rate hike in December * China
releases FX reserves figures on Sunday and we look for another decline of more
than USD100bn, reflecting substantial intervention. Pressure on the CNY picked
up significantly in January.
This
week has seen further declines in inflation expectations and interest rates * Concerns
about the US economy prompted a sharp fall in the dollar * The fall in
inflation expectations raises questions about the central banks’ ability to
fulfil their inflation mandates, especially with the policy
vacuum until March * Yellen’s testimony on Wednesday will be crucial in
providing guidance to market.
Eurozone:
GDP growth slowed by private consumption * Sweden: Riksbank to expand QE * Norway:
Core inflation continues to hover around 3.0 percent
Dollar
Beaten Back but Cynicism is Unwarranted
FX Positioning – Marc
Chandler
Big
Position Adjustment for Euro, Smaller for Yen
A
traumatic week and a roller coaster rid for USD * Sustainability of NFP boost
for USD and Yellen in focus next week * Big draw on Chinese reserves could
spark risk aversion anew * Will markets focus on US data or global macro
considerations?
Weekly Market
Summary
– The
Fat Pitch
NDX
undercut its January low this week, and Friday's sell off was extreme enough
that it is unlikely to mark the low. Negative investor sentiment seems to be
feeding on itself, with sell offs leading to historic fund outflows and further
sell offs. These extremes have reached a point where they most often reverse.
Even if US equities are in a bear market, a rally of 7-10% is likely close at
hand. Importantly, there has been no price action that yet suggests a reversal
in the short-term trend.