Week Ahead: FOMC, BOE, ECB, OPEC, NFP and big tech earnings

The FOMC is expected to hike 25bps, while both the BOE and the ECB are expected to hike 50bps.

Trader 1

There will be no shortage of potential market moving events this week!  After the Bank of Canada hiked rates by 25bps and signaled a pause in its rate hike cycle last week, the FOMC, BOE, and ECB, will each get their own shot at deciding what to do with monetary policy.  The FOMC is expected to hike 25bps, while both the BOE and the ECB are expected to hike 50bps.  In addition, OPEC meets this week to determine if it should raise, cut, or keep output unchanged.  This will also be a big week for economic data with EU CPI and US Non-Farm payroll data.  Will Average Hourly Earnings continue to fall?  And earnings from big tech firms such as Google, Amazon, and Apple all report this week.  Traders will be watching to see if company outlooks will deteriorate if recessionary fears pick up.

BOC

The Bank of Canada hiked rates by 25bps last week to bring the overnight rate to 4.50%.  In addition, the Governing Council said that expects to hold the policy rate at current levels while it assesses the input of the cumulative interest rate increase.  The BoC will also continue QT.  During the press conference which followed, BoC Governor Macklem said that the central bank raised rates rapidly, and now is the time to pause and assess whether Monetary Policy is sufficiently restrictive.  However, he added that if upside risks materialize, the central bank is prepared to raise rates further. 

FOMC

One of the busiest central bank weeks of the year arrives the 1st of February as the FOMC, BOE and the ECB all meet at their respective Interest Rate Decision meetings.  According to the CME FedWatch Tool, there is a 98% chance that the FOMC hikes rates by 25bps to bring the Fed Funds rate to 4.75%.  The real question lies in whether they deliver a dovish or a less hawkish hike.  Economic data has been weaker than expected since the December meeting, such as Retail Sales and manufacturing data.  In addition, inflation components have been weaker.  Average Hourly Earnings had a large drop, while the MoM CPI for December was negative for the first time since May 2020.  However, central bankers were out in force over the last month, with many suggesting a 25bps rate hike this week and possibly an additional 25bps hike in March.  Is there a chance the FOMC could signal a 25bps hike this week and a pause to assess cumulative rate hikes, ala the BOC? 

BOE

The Bank of England meets on Thursday this week and expectations are for a rate hike of 50bps to bring interest rates to 4.00%. But could the central bank be “one and done”? GDP for November hung in there for at 0.1% MoM, keeping the country out of an official recession.  However, inflation is still above 10%, with Decembers reading only falling to 10.5% YoY vs a previous reading of 10.7% YoY.  Core CPI remained unchanged at 6.3% YoY. As with the US, Retail Sales for December were soft at -1% MoM vs 0.5% MoM expected at -0.5% MoM last.  PMI data was also weak in January, as the Composite PMI fell to 47.8 from 49 in December.  This was the fastest rate of decline since January 2021. The most interesting part of the decision will be the breakdown by policymakers.  At the December meeting, the Committee voted 6-3 in favor of hiking 50bps, with two members voting to keep rates unchanged and one member voting for a 75bps hike.  Will sentiment converge on a 50bps this week?  And will a 50bps rate increase be enough to lower inflation, without sending the economy into a recession? 

ECB

The ECB also meets on Thursday to discuss interest rate policy.  Expectations are that the central bank will hike 50bps to bring the key interest rate to 3.00%.  ECB members have been out in force, most backing Christine Lagarde’s comments from the December meeting that the ECB will have a series of 50bps hikes.  Most recently, ECB member Knot said that the central bank will hike rates by 50bps in February and March, confirming what many have already been speculating.  The EU releases its first look at January CPI on Wednesday this week.  Expectations are for the headline rate to slip to 9.1% YoY vs 9.2% YoY in December.  The Core CPI is expected at 5.1% YoY vs 5.2% YoY in December.  Data as of late has shown that the Eurozone has managed to keep itself out of a recession, which should be confirmed this week.  The first look at Q4 GDP will be released on Tuesday.  Expectations are for a print of 1.8% vs a previous reading of 2.3%.  Although both data releases may give the ECB something to think about on Thursday, anything other than a 50bps hike and a signal for more will cause volatility in the markets. 

OPEC+

There should be little fanfare coming from the OPEC+ meeting on Wednesday this week.  The Organization of the Petroleum Exporting Countries indicated last week that it will leave the level of output unchanged at 2,000,000bpd as it waits to see the outcome of China’s reopening and the demand for additional oil because of it. In addition, the Committee is still watching to see how the EU’s ban on Russian seaborne crude and the price cap will work out. The European plan is set to take effect on February 5th

Earnings

Get ready for a busy week as big tech earnings culminate with Amazon, Apple, Alphabet, and Meta this week.  In addition, large cap firms such as AMGN, MCD, CAT, and XOM also report this week. Last week, INTC provided a disappointing report and outlook as the stock dropped nearly 8%.  Could we see the same from other companies this week?  Other important earnings to be released this week are as follows:  AMAT, AMD, AMGN, MCD, CAT, XOM, GM, PFE, SNAP, UPS, SPOT, META, BABA, GOOGL, AMZN, AAPL, BMY, X, F, SBUX, MRK, HON, X

Economic Data

As mentioned above, there will be an onslaught of economic data this week as it is both the end of January and the beginning of February.  Q4 GDP will be released this week from Germany and the EU. PMI data will be finalized for many countries, along with the NBS and Caixin PMIs from China and the ISM PMIs from the US. The EU will also release its first look at January’s CPI.  Germany’s Employment Change and the US Non-Farm Payroll are also due out this week.  Could Average Hourly Earnings fall again in the US?  Watch this economic data point.  It caused a large more in the US Dollar last month. Other economic data due out this week is as follows:

Monday

  • New Zealand: Trade Balance (DEC)
  • Switzerland: KoF Leading Indicators (JAN)
  • EU: Economic Sentiment (JAN)
  • US: Dallas Fed Manufacturing Index (JAN)

Tuesday

  • Japan Unemployment Rate (DEC)
  • Japan: Retail Sales (DEC)
  • Japan: Industrial Production Prel (DEC)
  • Australia: Retail Sales (DEC)
  • China: NBS Manufacturing PMI (JAN)
  • China: NBS Non-Manufacturing PMI (JAN)
  • Japan: Consumer Confidence (JAN)
  • Japan: Housing Starts (DEC)
  • Germany: Retail Sales (DEC)
  • Germany: Unemployment Change (JAN)
  • Germany: GDP Growth Rate Flash (Q4)
  • UK: BoE Consumer Credit (DEC)
  • UK: Mortgage Approvals: (DEC)
  • EU: GDP Growth Rate Flash (Q4)
  • Germany: Inflation Rate Prel (JAN)
  • Canada: GDP Prel (NOV)
  • US: Employment Cost Index (Q4)
  • US: S&P/Case- Shiller Home Price (NOV)
  • US: Chicago PMI (JAN)
  • US: Consumer Confidence (JAN)

Wednesday

  • OPEC+ meeting
  • Global: Manufacturing PMIs Final (JAN)
  • New Zealand: Employment Change (Q4)
  • New Zealand: Unemployment Rate (Q4)
  • China: Caixin Manufacturing PMI (JAN)
  • UK: Nationwide Housing Prices (JAN)
  • EU: CPI Flash (JAN)
  • EU: Unemployment Rate (DEC)
  • US: ADP Employment Change (JAN)
  • US: ISM Manufacturing PMI (JAN)
  • US: Fed Interest Rate Decision

Thursday

  • Australia: Building Permits (DEC)
  • UK: BoE Interest Rate Decision
  • EU: ECB Interest Rate Decision
  • US: Unit Labour Costs Prel (Q4)
  • US: Nonfarm Productivity Prel (Q4)
  • US: Factory Orders (DEC)

Friday

  • Global: Services PMI Finals (JAN)
  • New Zealand: ANZ Roy Morgan Consumer Confidence (JAN)
  • China: Caixin Services PMI (JAN)
  • EU: PPI (DEC)
  • US: Non-Farm Payrolls (JAN)
  • US: ISM Non-Manufacturing PMI (JAN)

Chart of the Week: NDQ - US 100 (240 minute)

240 Minute NASDAQ 100 chart

Source: Tradingview, Stone X

The NASDAQ 100 Index has been moving higher in an orderly channel since the beginning of 2023.  Not to jump to gun (as there are still two trading days left in the month), but so far, the NASDAQ 100 is up over 11% in January as fears of a recession slowly drift away and are replaced with the optimism of a China reopening and a more dovish Fed in 2023.  Last week, price recently broke through a downward sloping trendline dating to March 31st, 2022.  On Friday the index moved to its highest level since September 13th, 2022 and is banging up against the top trendline of the channel. If the NASDAQ 100 continues to move higher, the next resistance level at the highs from September 13th at 12420, then the gap fill from September 14th at 12681.62.  However, notice that the RSI is in overbought territory, an indication that price may be ready for a correction.  If the index does pull back, first support is at the lows of January 26th at 11853.37.  Below there, price can fall to the bottom trendline of the channel near 11700, then the lows of January 19th at 11252.

The FOMC, BOE, and ECB all meet this week to discuss interest rate policy.  Anything different from expectations could cause volatility in the markets.  In addition, economic data, including EU CPI and US NFP, could cause the markets to move.  Mange positions accordingly.

Have a great weekend!

More from week ahead

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