Economic Week Ahead

Main Macro Events This Week

• United States: This weeks market highlight is going to be the FOMC meeting on Wednesday, U.S. Fed policymakers are widely expected to start moving interest rates higher with the first small rate hike seen this week, traders should understand that this would be the first rate hike since the the middle of 2006. The expected rate increase is for 25 bps, this would push the Feds’s target range to 0.25% to 0.50%. It should also be noted that the markets have been pricing in an expected rate increase for a few weeks already, so traders should expect the short term market reaction to create choppy trading conditions in the wake of this Wednesdays FOMC Statement and release of the U.S. Federal Funds Rate.

• Canada: On tap for Canada is the CPI (Friday) and is expected to accelerate to a 1.4% y/y pace in November from the 1.0% rate that prevailed in September and October. The Bank of Canada’s core CPI index is seen growing by analyst 2.2% y/y in November following the stable 2.1% growth in August, September and October. Core CPI is expected to fall 0.1% m/m in November after the 0.3% gain in October. Manufacturing shipments (Tuesday) are seen falling 0.5% in October after the 1.5% drop in September. But wholesale shipments (Friday) are seen rising 0.5% in October after the 0.1% dip in September. We will also see two more housing releases: the always interesting existing home sales report for November (Tuesday) and the November Teranet National Bank Housing Price Index (Monday). Also of interest will be the national balance sheet and financial flows accounts release from Statistics Canada (Monday), which will contains the debt to disposable income ratio. The ratio rose to a record high 164.5% in Q2 and a further expansion is expected. International transactions in securities for October is due on Wednesday. The Bank of Canada publishes the Financial System Review (Tuesday). The Review, which is published twice a year (June and December) will be followed by a press conference held by Governor Poloz and Senior Deputy Governor Wilkins.

• China: China released November industrial production and retail sales over the weekend and better than expected results could provide some offset to the sharp sell off in stock markets on Friday. Production posted a 6.1% y/y growth rate, with retail sales at 11.2% y/y.

• Japan: The BoJ meets (Thursday, Friday) and is not expected to make any changes. Recent data has improved a bit, the December Tankan index (Monday) is expected to fall to 10 from 12 for large manufacturers, and to 23 from 25 for large non−manufacturers. The October tertiary index (Monday) is seen improving to up 0.5% m/m from the prior −0.4% reading. Revised October industrial production (Monday) is seen unchanged at 1.4% y/y. The November trade report (Thursday), should show drop to a deficit of JPY 500 bln, versus a revised JPY 108.3 bln surplus. Exports, in particular, will be the focus.

• Australia: Focus will be on the minutes of the RBA’s December meeting (Tuesday). Assistant Governor (Financial Markets) Guy Debelle delivers a speech titled “Some Effects of the New Liquidity Regime” to The Australasian Finance and Banking Conference, (Wednesday). The date calendar is thin, but does have the Q3 home price index (Tuesday), which we expect will grow 2.0% (q/q) after the 4.7% gain in Q2.

• New Zealand: the NZD calendar has Q3 GDP (Thursday), expected to improve to a 0.5% growth pace (q/q, sa) following the 0.4% rate of expansion in Q2. The current account (Wednesday) is seen worsening to a −NZ$4.5 bln deficit in Q3 from the −NZ$1.2 bln shortfall in Q2. There is nothing from the RBNZ this week following the well−anticipated 25 basis point cut that left the official cash rate at 2.50% last week.

• Eurozone: Some ECB speak comes from ECB President Mario Draghi later today. On tab the data releases include December confidence data, but are unlikely to change the picture much. At least for now, the ECB seems to be done with further easing and it looks like nothing much is going to happen until March. The ECB’s economic bulletin on Thursday is likely to confirm this picture.

• Germany: The ZEW Investor confidence on (Tuesday) is seen rising slightly to 11.2 (med 17.3) from 10.4 in the previous month, although analyst view the risk is to the downside as the ongoing sell off in commodities has been weighing on stock markets and investor confidence. The German Ifo Business Climate reading meanwhile should benefit somewhat from the rebound in manufacturing orders and analyst are looking for a marginal rise to 109.1 (med 109.0) from 109.0 in the previous month. Eurozone Markit PMI − Manufacturing − Flash readings also expected to hold pretty steady with the manufacturing number seen steady at 52.8 (med 52.7) and the services reading steady at 54.2 (med 54.1), which should leave the composite unchanged at 54.2 (med 54.1).

• United Kingdom: November data for inflation (Tuesday), labor market (Wednesday), and retail sales (Thursday) highlight, while the December CBI industrial trends survey is also up (Thursday). The labor market data will be a key focus as the minutes to last week’s December BoE meeting showed the Monetary Policy Committee highlighting the recent decline in nominal pay growth, which was taken by markets as a dovish shift in thinking, in turn dampening expectations for a BoE rate hike.