In the data calendar the main event is US consumer prices for Decemberrket Commentary

Market movers today

• In the data calendar the main event is US consumer prices for December. We expect inflation to accelerate to 1.5% y/y from 1.2% y/y mainly on the back of higher food prices. US consumer prices have become a bit more interesting after the Fed in its qualitative forward guidance linked a future interest rate decision more explicitly to the development in inflation. The NAHB housing market index, the Philadelphia Fed business survey and initial unemployment claims should also get some attention.

• Bundesbank president Jens Weidmann is scheduled to speak at 11:00 CET in Berlin and here we will get the first opportunity to hear to what degree he shares Draghi’s dovish tone from last week. The European Parliament is scheduled to vote for Sabine Lautenschläger’s nomination in a non-binding vote.

• Fed chairman Ben Bernanke is scheduled to speak about ‘The Fed Yesterday, Today and Tomorrow’ at 17:10 CET. Although Bernanke will soon be former chairman, his views are still important as he will chair the 28-29 January meeting.

Selected market news

The Fed’s Beige Book released last night painted a fairly optimistic picture of the US economy suggesting that economic activity continued to expand across most regions and sectors from late November through the end of the year. The survey indicated that in nine of the 12 Federal Reserve districts the local economy was expanding at a moderate pace. Moreover, real estate markets generally continued to improve while retail activity had increased since the last Beige Book, the Fed said in the report.

All in all, global risk appetite continues to be well supported by the positive growth outlook as data this week, notably US retail sales, combined with the Fed’s Beige Book, have removed some of the uncertainty on the US economy that occurred following last week’s low payroll figures. Hence, it seems highly likely that the Fed will taper yet another USD10bn on its bond purchases later this month.

Despite the improved growth outlook, inflation remains very low in most developed countries and in a speech at the National Press Club in Washington last night, IMF chief Christine Lagarde warned that a growing risk of deflation threatens to derail the global recovery. She called on central banks of the advanced economies to ‘return to more conventional monetary policies only when robust growth is firmly rooted’. In general, the outlook for global economy is encouraging: ‘momentum strengthened in the latter half of 2013, and should strengthen further in 2014’, she said. In the US, she said, growth is picking up but ‘it will be critical to avoid premature withdrawal of monetary support and to return to an orderly budget process, including by promptly removing the debt ceiling threat’. In respect of the euro-zone Lagarde said that the economy ‘is turning the corner from recession to recovery’ but she also noted that the ECB could do more to help suggesting that ‘targeted lending, for example, could help reduce financial fragmentation.’