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(Reuters) – The central banks of Britain, the eurozone and Australia are queuing next week for the Federal Reserve to meet next week.
The Bank of England will raise rates for the second time in less than two months. And as investors try to guess how the Fed will attack inflation, Friday’s US job data will take center stage.
Here’s your week in the markets Ira Iosebashvili @IraIosebashvili New York, Kevin Buckland https://www.reuters.com/journalists/kevin-buckland Tokyo, John O’Donnell https://www.reuters.com/ journalists / john-odonnell Frankfurt, Tommy Wilkes https://www.reuters.com/journalists/tommy-wilkes and Dhara Ranasinghe @DharaRanasinghe London.
1 / HEATING
The Federal Reserve is clear to control inflation https://www.reuters.com/business/finance/inflation-fighting-fed-likely-flag-march-interest-rate-rate-hike-2022-01-26 and believes it is “historically tight” the labor market offers many opportunities to raise rates without harming job growth.
January job data released on Friday is likely to confirm that view. Economists surveyed by Reuters predict that the US economy will create 238,000 new jobs in December compared to 199,000 https://www.reuters.com/markets/us/us-job-growth-seen-accelerating-december-record-job-creation- anticipated- 2021-2022-01-07, when employment rose less than expected due to staff shortages.
Evidence of a tighter labor market and wage gains could boost further bets on how aggressive the Fed will be https://www.reuters.com/business/finance/nomura-forecasts-50-bp-fed-hike-march-2022- 01-27 – Markets now forecast a five-point rate hike by the end of the year.
The earnings season was reported by Google’s Parental Alphabet (NASDAQ 🙂 Inc. and Amazon.com (NASDAQ:) on February 1st and February 3rd. But as the rate hike catches up with Wall Street, earnings could weigh in second on job data, and the Fed is talking. GRAPH: FED AND STOCKS, https://fingfx.thomsonreuters.com/gfx/mkt/gkplgjmlxvb/Pasted%20image%201643209205234.png
2 / TAKE A WALK
At the Bank of England meeting on Thursday, interest rates are expected to rise from 0.25% to 0.5% https://www.reuters.com/world/uk/bank-england-track-second-rate-rise-under-two- months- 2022-01-24, to reduce inflation to its highest level in almost 30 years.
In December, it became the world’s first central bank to tighten its BoE policy, with markets forecasting a four-point 25-point rise by the end of 2022. Now investors are looking for guidance on how fast the bank expects to do.
The big question – many central banks are struggling – is whether a rate hike can now reduce inflation before price pressures can lead to higher wage demands, and they can generally feed higher price pressures https://www.reuters.com/world / uk / uk-manufacturers-plan-biggest-price-rise-1977-from-cbi-2022-01-25.
Be aware of Governor Andrew Bailey’s comments on the strength of the labor market, wage growth and how fast the inflationary pressures are affecting his opinion https://www.reuters.com/world/uk/boe-needs-lean-against -rising-price -pressures-mann-2022-01-21 beyond the supply chain disruption and rising energy prices.
GRAPH: UK Inflation, https://fingfx.thomsonreuters.com/gfx/mkt/zdvxoaooopx/uk%20inflation%20chart.PNG 3 / DISTRIBUTED
European Central Bank officials are sharing the same controversial issue – inflation.
Eurozone inflation is at a 5% high and January data released on Wednesday could give hawks new ammunition for a policy change.
ECB President Christine Lagarde’s comments suggest that inflation will fall below https://www.reuters.com/world/europe/ecbs-lagarde-inflation-drivers-will-ease-gradually-2022-2022-01-20 its 2%. this year’s goal is to alleviate the pressures of high energy prices and supply bottlenecks.
This year may see a reversal of market prices for rate hikes, which is in sync with ECB messaging. The rise in US rate hikes is a potential headache for officials who are reluctant to avoid an unwanted https://www.reuters.com/business/nimble-fed-narrows-normalisation-window-timid-ecb-2022-01-27. hardening of monetary conditions.
So Thursday’s meeting could be lively even if no immediate action is expected – the ECB has already set plans https://www.reuters.com/markets/rates-bonds/ecb-set-dial-back-stimulus-one-more -notch -2021-12-15 to complete its PEPP stimulus scheme. GRAPH: When will eurozone inflation peak ?, https://fingfx.thomsonreuters.com/gfx/mkt/myvmnjmkkpr/ECBFEB1.PNG
4 / DOVES, HIDE!
As rates rise in other major economies, rates are rising as they become an endangered species of central bank pigeons.
The Reserve Bank of Australia will meet on Tuesday in the wake of the hottest consumer inflation https://www.reuters.com/markets/rates-bonds/australian-inflation-surges-q4-market-bays-rate-hikes-2022-01 -25 2014 and the strongest labor market since 2008, putting pressure on RBA Governor Philip Lowe to take action.
Lowe points out that raising the 2022 rate is difficult, but economists are divided https://www.reuters.com/markets/rates-bonds/australia-cbank-scrap-qe-feb-1-wait-with-rate-hikes – Until 2022-01-26, whether the RBA will capitulate. Traders, however, have long bet that Lowe is behind the inflation curve, and the rate hike in May, and at least three more by the end of the year. GRAPH: Ready for a rate hike, https://fingfx.thomsonreuters.com/gfx/mkt/jnvwelgqjvw/Pasted%20image%201643274394329.png
5 / THEY ARE UGLY DUCKS
European banks, the ugly ducks of international finance, have long surpassed their successful U.S. rivals in surpassing them in profit and valuation.
Now they are trying to get https://www.reuters.com/markets/europe/now-or-never-european-banks-eye-comeback-against-wall-street-2022-01-27. In the coming days, more of these banks will put up their post with the results of 2021.
The wave of unpaid debt has long been largely exiled by European governments, who have borrowed more and more to rescue the economy and, indirectly, the banks.
Now, with the possibility of a gradual rise in interest rates, most European banks, with the exception of scandals Swiss credit (SEI :), https://www.reuters.com/business/finance/credit-suisse-flags-500-mln-swiss-franc-legal-hit-q4-2022-01-25 want to put their best foot forward. GRAPH: Dear European banks are going cheap, https://graphics.reuters.com/GLOBAL-MARKETS/jnpwelglbpw/chart.png
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