Friday January 31, 2014 - 17:42:59 GMT
Share This Story
Lloyds TSB Financial Markets - www.lloydstsb.com/corporatemarkets
ECONOMIC DATA ANALYSIS - A KEY WEEK FOR GLOBAL SENTIMENT
ANALYSIS FRIDAY 31 JANUARY - 2013
KEY WEEK FOR GLOBAL SENTIMENT
• Emerging markets vulnerable to strong rise in US
• Weakness of euro area inflation shortens odds of
further ECB policy stimulus
• MPC meets, but no statement on forward guidance
expected before Inflation Report
It is a busy week ahead, with a potential ECB policy
easing vying for attention with a possible MPC statement on forward guidance,
key US data and a raft of global PMIs. All this, as well as the possibility of ongoing
emerging market turmoil on the back of rising concerns over Fed tapering and a
vindicate tapering decision... While the ECB
could steal the limelight, the focus for much of the week is likely to remain
on the Fed. Despite the surprise weakness of last month’s payrolls, the FOMC
announced a paring back of its asset purchases by a further $10bn (to $65bn a
month) at its latest meeting. Given the downside risks stemming from the cold
weather, a strong rebound in the coming week’s January employment report would
vindicate the Fed's decision and set the stage for a further $10bn ‘tapering’
at the next FOMC meeting on 19 March. We look for non-farm payrolls to rise by
197k (consensus 180k). The unemployment rate will also draw attention,
particularly if it falls further.
vulnerable to strong payroll... A strong
payrolls report would typically be unambiguously negative for global government
bond markets. But with the recent volatility in emerging markets and equities
inextricably linked to Fed policy, any ensuing rise in yields could be tempered
by a potential flight to quality.
US ISMs expected
to be stronger... Although the employment
report dominates, before that, the US ISM surveys will be watched for insights
into payrolls, as will the latest ADP survey. Our global team is looking for
above-consensus ISMs, with manufacturing and non-manufacturing forecast at 57.1
and 54.0, respectively. If realised, this would suggest ongoing momentum in Q1
PMI to heighten
concerns over China... Manufacturing and
services PMIs are also released in
China (Sat). Although China's growth rate
held above 7.5% in Q4, January's manufacturing
PMI is expected to drop back towards
the 50 level, pointing to the likelihood of
a weaker Q1. Concerns that slower growth in
China could undermine some of the developing economies
has been a contributory factor behind the recent volatility in emerging
markets. As such, the Chinese PMIs could again be a big market mover.
Barometer points to stronger PMIs... Similarly in the
UK, the PMIs will be watched for further
signs of recovery. Given the strong rise in
the LBCB Business Confidence Barometer and the improvement in the latest euro area ‘flash’ PMIs, both the manufacturing and
services PMI are forecast to show
improvements. Notably, our latest
Business Barometer posted a strong jump, to
+63 - equalling last October’s record high.
MPC meet, but no statement expected... The MPC holds its monthly meeting in the coming week. Although it is almost certain to keep policy unchanged, with the UK unemployment rate only just
above the 7% threshold, the market is
awaiting possible changes to forward
guidance. We doubt, however, the MPC
will communicate any decision on this before
following week’s Inflation Report.
ECB rate cut on
the cards... Lastly, but
possibly most importantly, the ECB Council also decides on policy on Thursday.
The meeting occurs amid rising concerns over the softness of euro area inflation.
In December, annual CPI rose by just 0.7% - its fourth consecutive month below
1% and much weaker than expected. Notably, it was a surprise fall in inflation
(to 0.7%) that prompted the ECB to cut the refi rate in November. Although the
ECB’s reaction function may not be that formulaic, the odds of a rate cut in
the coming week have shortened substantially. But, on balance, we expect the
ECB to wait for more data
This document, its
contents and any related communication (altogether, the 'Communication') does
not constitute or form part of any offer to sell or an invitation to subscribe
for, hold or purchase any securities or any other investment. This
Communication shall not form the basis of or be relied on in connection with
any contract or commitment whatsoever. This Communication is not intended to
form, and should not form, the basis of any investment decision. This Communication
is not and should not be treated as investment research, a research
recommendation, an opinion or advice. Recipients should conduct their own
independent enquiries and obtain their own professional legal, regulatory, tax
or accounting advice as appropriate. Any transaction which a recipient of this
Communication may subsequently enter into may only be on the basis of such
enquiries and advice, and that recipient’s own knowledge and experience. This
Communication has been prepared by, and is subject to the copyright of, Lloyds.
This Communication may not, in whole or in part, be reproduced, transmitted,
stored in a retrieval system or translated in any other language in any form,
by any means without the prior written consent of Lloyds. This Communication is
provided for information purposes only, and is confidential and may not be
referred to, disclosed, reproduced or redistributed, in whole or in part, to
any other person. This Communication is based on current public information.
Whilst Lloyds TSB ank plc (“Lloyds TSB”) and
Bank of Scotland plc ("Bank of Scotland") have exercised reasonable
care in preparing this material and any views or information expressed or
presented are based on sources it believes to be accurate and reliable, no
representation or warranty, express or implied, is made as to the accuracy,
reliability or completeness of the facts and data contained herein.
This material has
been prepared for information purposes only and Lloyds TSB, Bank of Scotland, their
directors, officers and employees are not responsible for any consequences
arising from any reliance upon such information. Under no circumstances should
this material be treated as an offer or solicitation to offer, to buy or sell
any product or enter into any transaction. If you receive information from us
which is inconsistent with other information which you have received from us,
you should refer this to your Lloyds TSB or Bank of Scotland Relationship
Manager for clarification.
Lloyds Bank Corporate
Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of
Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds
TSB Bank plc. Registered Office: 25
Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065.
Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH.
Registered in Scotland
no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no.
SC32700. Authorised and regulated by the Financial Services Authority under
registration numbers 119278, 191240 and 169628 respectively.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."