Week Ahead Preview 9th of January

Markets expect a relatively light economic calendar. Investors’ focus will be on the US inflation report for December as it will be the biggest risk event for this week.
 
The Eurozone headline inflation rate slipped from 10.1% in November to 9.2% in December (thanks to cheaper energy prices) and the core inflation rate rose from 5% to 5.2%. Based on these numbers, some ECB board members said that it was too early to know where inflation rates should peak and expected to see interest rates increase by the summer and hold after for a sustained period.  
 
The December Job report released on Friday showed that the US economy added 223K Jobs thanks to significant growth in the service sector, while the unemployment rate fell from 3.6% in November to 3.5% in December. On the other hand, the average hourly earnings YoY came at 4.6% while expectations were at 5% and the MoM rate came at 0.3% against the expected 0.4%. so, it looks like we have a downtrend momentum developing in the US job market.
 
Most US major indices closed the first week of 2023 in the green despite the strong job report as investors thought that demand may fall due to lower hourly earnings and as a result inflation rates could fall further leading the Fed to soften its policy or change it before the end of 2023. This improved the market’s risk appetite and led the US Dollar to weaken, and the gold to strengthen by 2.3%  
  
Economic data highlights 
 
 
Monday 9^th of January
 

• EUR- Unemployment Rate (NOV)
• JPY- Inflation Rates (DEC)

 
Tuesday 10^th of January  
 

• GBP- Retail Sales (DEC)
• BoC governor Macklem’s Speech
• BoJ governor Kuroda’s Speech
• Fed Chair Powell’s Speech

 
Wednesday 11^th of January   
 

• AUD- Inflation Rate Q4
• AUD- Retail Sales (NOV)

 
Thursday 12^th of January 
 

• CNH – Inflation Rates (DEC)
• CNH – Producers Price Index (DEC)
• USD – Inflation Rates (DEC)
• ECB Economic Bulletin

 
 
Friday 13^th of January   
 

• GBP- GDP (NOV)
• GBP- Industrial Production (NOV)
• EUR- Industrial Production (NOV)
• Fed Harker Speech
• USD- Michigan Consumer Sentiment Index (Jan)

US Inflation Report
 
Markets expect the headline inflation to fall from 7.1% in November to 6.5% in December thanks to cheaper energy prices (WTI fell in November by 7%) while the core inflation retreated from 6% to 5.7%.
 
A higher-than-expected data could affect the market’s risk appetite negatively, as it means that the Fed could maintain its high-interest rates for longer. In this scenario, risky assets (stocks, indices) could fall and safe havens such as the US Dollar could rally.  
 
A lower-than-expected date could affect the market’s risk appetite positively, as it means that the US central bank may reconsider its tight policy and cut rates before the end of 2023. In this scenario, risky assets (stocks, indices) could rally and safe havens such as the US Dollar could fall.