Macroeconomics: The Day Ahead for 23 January

  • 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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