Forecasting the Coming Week: UK inflation and Chinese GDP steal the show

Inflation will remain at the centre of the debate in the following week as well, as market participants keep gauging the recently published US inflation tracked by the CPI and its potential implications for the Fed’s plans to reduce its interest rates. Looking at the broader picture, the 2024 World Economic Forum in Davos could also keep investors entertained.

Starting in the US, Retail Sales for the month of December will give markets an idea of how the High Street fared during the last month of 2023 ahead of the always-relevant flash Michigan Consumer Sentiment for the month of January (January 19). Against this backdrop, it remains to be seen whether USD Index (DXY) could break the current consolidation on either direction.

Still in the Americas, the Bank of Canada (BoC) will release its Business Outlook Survey (January 15), while the Inflation Rate for the month of December is also due (January 16).

In the old continent, Germany’s full-year GDP Growth is up on January 15, seconded by the final Inflation Rate for the month of December and the Economic Sentiment measured by the ZEW Institute on January 16. In the FX universe, EUR/USD continues to face strong resistance around the psychological 1.1000 barrier.

In the broader euro area, the ZEW’s Economic Sentiment is due (January 16), followed by the final Inflation Rate in December (January 17).

In the UK, the labour market report takes centre stage (January 16) prior to the Inflation Rate in the last month of the past year (January 17). GBP/USD has started the week on a strong foot, retargeting the key 1.2800 hurdle in the relatively short-term horizon.

In China, the publication of the GDP Growth Rate in the October–December period (January 17) should shed further details on the ongoing economic recovery (or lack thereof). Additionally, Industrial Production and Retail Sales are also scheduled.

The publication of the monthly jobs report will also be scrutinized in Australia (January 18), especially after lower-than-expected domestic inflation figures seem to have favoured a pause by the RBA at its next meeting in February. AUD/USD still appears underpinned by the 0.6650 region, although further weakness should not be ruled out in case of a below-expectations readings from the jobs data.

Around central banks, the Bank Indonesia (BI) meets on January 17 and is expected to keep its policy rate unchanged at 6.0%. The same view is also projected for the remainder of the year. In addition, the ECB will publish its Accounts on January 18, and consensus seems to favour a 10 bps rate cut by the PBoC to its 1-year LPR and 5-year LPR at its event on January 22.