This week, we get inflation data from the US, Switzerland and China. The spotlight will fall on the US prints as investors try to figure out the number of Fed hikes throughout 2018. The ECB minutes will also attract attention for hints on how many policymakers prefer a clear QE end in September.
On Monday, during the European day, German factory orders for October are expected to have slowed, while Eurozone’s retail sales are forecast to rebounded to +1.4% mom from -1.1% the previous month.
In Switzerland, we get CPI data for December. Swiss consumer prices are expected to have risen 0.8% yoy, the same pace as in November. In our view, even if inflation accelerates, these data are unlikely to alter SNB officials’ thinking. At their latest meeting, they kept interest rate at the historic low level of -0.75%, and while they acknowledged that the franc has weakened this year, they noted that it remains “highly valued”. The Bank also repeated that it will remain active in the foreign exchange market as necessary. Although it raised its inflation forecasts for 2017 and 2018, the rate is expected to remain well below the Bank’s target. It is forecast to rise above 2% only in the third quarter of 2020. Also, officials noted that the forecasts are based on the assumption that the three-month Libor will remain at -0.75% over the entire forecast horizon, which makes it unlikely for the Bank to change its stance anytime soon. This was also confirmed by Chairman Jordan at the press conference following that meeting. He noted that the Bank is in “no rush at all” to start normalizing policy, even though the economy is performing well.
Read the full financial markets weekly outlook on JFD Research. - Monday