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The most important economic events expected this week 18 to 22 Jan 2021
In early 2021, the US dollar is showing signs of recovery, after suffering massive losses in the last two months of 2020. The Covid virus continues to spread in the United States and Europe, but there is optimism that the introduction of Covid vaccines will boost the economic recovery later in the year. Highlights this week include interest rate decisions from the European Central Bank and the Bank of Canada, and inflation reports from the Eurozone and the UK.
In the UK, the GDP for November contracted by 2.6%. This was better than expectations of -4.6%, but the Pound still snapped steep losses on Friday. Industrial numbers fell in November. The pound posted a gain of more than 1% early in the week, after Bank of England Governor Bailey dismissed reports that the Bank of England was studying the possibility of introducing negative interest rates.
Headline inflation in France, the second largest economy in the euro zone, posted a second consecutive gain of 0.2%.
In the US, headline inflation improved to 0.4%, up from 0.2%. This was the highest level in 4 months and could indicate that inflation is moving higher after a long period. Fed Chairman Powell reiterated the Fed's pessimistic stance, saying that now is not the time to discuss policy adjustment. Powell also pledged to give markets plenty of notifications before curtailing the massive quantitative easing program. The week ended with the dismal retail sales numbers for the month of December. The headline figure came in at -0.7%, which came after reading -1.1% the previous month. Core retail sales fell to -1.4%, down from -0.9% previously. This was the lowest level since April.
German Final Consumer Price Index: Tuesday. Inflation has suffered in the largest economy in the euro area, with a drop for most of the second half of 2020. However, the outlook for December stands at 0.5%, which will be the strongest gains since June.
UK Inflation Report: Wednesday. After rising to 0.7% in October, the CPI slowed to 0.3% in the November reading. The forecast for December is 0.5%. The core CPI improved to 1.1% in November and is expected to rise to 1.3% in December.
Eurozone Inflation Report: Wednesday. Headline inflation has caused four consecutive falls, and this trend is expected to continue into December, with an estimate of -0.3%. The core reading is expected to remain at 0.2%.
Inflation Report: Wednesday. The headline consumer price index fell to 0.1% in November, down from 0.4%. The cut-off CPI, which excludes the most volatile items, remained steady at 1.7% in November. We are now waiting for the inflation numbers for December.
Bank of Canada rate decision: Wednesday. The Bank of Canada interest rate remains as low as 0.25%. There was some talk of a sudden interest rate cut this week due to the worsening Covid situation. However, the likelihood of such a drastic step remains low.
European Central Bank interest rate decision: Thursday. Last week's ECB meeting minutes indicated concerns about low inflation and a rising exchange rate, and policymakers can reaffirm these concerns in the interest rate statement at the next meeting. No change is expected in the current monetary policy.
