- Trump 2.0 still the focal point, but busier day for data, events and earnings: Korea GDP, Japan Trade & French Business Confidence to digest; UK CBI Industrial Trends, Mexico CPI, US jobless claims, Canada Retail Sales & Eurozone Consumer Confidence; Norway, Turkey rate decisions; SK Hynix tops earnings run, France to auction medium dated & I-L debt
- Norway: Norges Bank to hold, focus on outlook, and delicate balance between well contained CPI against weak NOK and high for longer elsewhere
- Turkey: further 250 bp cut expected from TCMB, signal of further cuts, focus on rollback of macroprudential tightening measures
- Japan: BoJ expected to hike 25 bps, likely to signal further gradual hikes, JPY comments perhaps key
EVENTS PREVIEW
While all eyes remain on the flow of policy directives
and statements from the new Trump administration, there is a busier flow of
data and other and events for markets to digest today. Statistically there are
the overnight South Korea Q4 GDP (very sluggish as politics weigh), Japan Trade
(continued export strength, despite weaker China shipments), Singapore CPI and
French Business Confidence, while ahead lie UK CBI Industrial Trends survey,
Mexico CPI, US weekly jobless claims, Canada Retail Sales and provisional
Eurozone Consumer Confidence. There are rate decisions in Norway and Turkey,
with Norges Bank expected to hold rates at 4.50%, but offer a strong hint that
a rate cut is imminent. This is an ‘interim’ meeting so there will not be an
update to its anticipated rate path, which in December anticipated 3 cuts in
2025, though a weak NOK and the prospect of high rates for longer elsewhere and
indeed rising energy prices may be cited as reducing the scope for cuts, though
inflation at 2.2% argues that policy should be less restrictive. Turkey’s TCMB
is expected to cut rates by a further 250 bps to 45.0%, and signal further
aggressive cuts throughout the year as inflation continues to fall. But having
introduced an array of macroprudential measures to keep policy tight as it
fought to get inflation under control, it now needs to reverse many of these to
ensure that the full benefit of these cuts is felt, and to ensure banking
sector liquidity loosens, especially given that local money markets were slow
to respond to the initial rate cut. Otherwise, there are further corporate
earnings to digest, with SK Hynix accompanied in the US by American Airlines,
Freeport McMoRan, General Electric, Texas Instruments and Union Pacific amongst
others. France will auction medium-dated OATs and a mix of I-L OATeis.
Attention the nturns to tonight;s Japan National CPI and a much-anticipated BoJ
policy meeting.
** Japan – Dec National CPI / BoJ rate decision **
– Ahead of the BoJ rate decision, National CPI is
expected to echo Tokyo readings with a bump higher in headline CPI to 3.4% and
ex-Food to 3.0%, primarily due to the expiration of fuel subsidies, while
ex-Food & Energy is seen steady at 2.4% y/y, though above the BoJ’s target.
While the consensus does look for a further 25 bps rate hike from the BoJ, both
Ueda and Himino were careful not to pre-commit in speeches last week, just
saying that there would be a rate hike discussion. Their caution was doubtless
predicated by the knowledge that the first week of the second Trump presidency
could prove to be a very choppy one for financial markets, which would lean
against a move at this meeting, above all given the opprobrium that was heaped
on the BoJ domestically following the July hike and the consequent market
volatility. Outside of the updated forecasts, which should add to the case for
a rate hike and indeed further policy ‘normalization’ going forward, it will be
interesting to note what is said about the JPY, with Ueda seemingly peddling
back on the risks of imported inflation back in December. This year’s wage
settlements will doubtless be cited as a key factor going forward, and as much
as the BoJ will likely not openly refer to it, the outlook for BoJ rates will
hinge to a non-negligible extent on PM Ishiba’s ability to garner support from
opposition parties to pass this year’s budget, with most opposed to further BoJ
rate hikes.
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