- Sun: Japanese Prelim. GDP (Q4)
- Mon: US Holiday (Washington’s Birthday/Presidents
Day); Eurogroup Meeting; Swedish Unemployment (Jan), EZ Industrial
Production (Dec) - Tue: RBA Minutes (Feb); UK Unemployment/Wages
(Dec), German ZEW (Feb), US ADP Weekly, Canadian CPI (Jan), NY Fed
(Feb), Chinese Lunar New Year (Hong Kong markets closed from 17th-19th
Feb) - Wed: RBNZ Announcement, FOMC Minutes (Jan);
Japanese Trade Balance (Jan), Australian Wage Price Index (Q4), UK CPI
(Jan), US NY Fed (Feb), Industrial Production (Jan) - Thu: Japanese CPI (Jan), Australian Employment
(Jan), US Trade Balance (Dec), Weekly/Continuing Claims, Philadelphia
Fed (Feb), Pending Home Sales (Jan), EZ Flash Consumer Confidence (Feb),
New Zealand Trade Balance (Jan) - Fri: Hong Kong markets return from Lunar New Year;
ECB EZ Indicator of Negotiated Wages; UK Retail Sales (Jan), PSNB (Jan),
EZ/UK/US Flash PMIs (Feb), Canadian Retail Sales (Jan),US PCE/GDP
(Dec/Q4)
Japanese Prelim GDP (Sun):
Q4 Q/Q GDP is forecast to
have risen 0.4%, with Y/Y growth seen at 1.6%. ING expects a more
modest 0.3% Q/Q expansion, driven by a rebound in construction as the
impact of temporary safety regulations fades and firmer exports
supported by robust global semiconductor demand. January trade data
highlight continued strength in chip exports, with favourable calendar
effects and a low base likely to boost headline export growth. The
impact of supplementary budget spending is expected to become more
evident in Q1 2026 rather than Q4, while no material effect from
China-Japan disputes is anticipated in the Q4 data. Stable political
conditions and strong chip demand are also seen underpinning
manufacturing and services activity.
Canadian CPI (Tue):
The Canadian inflation report
will help shape expectations for BoC policy. The BoC is currently on
hold but is keeping its options open. Recent minutes said the policy
rate is on the stimulative side of the Bank’s estimated neutral range,
and policymakers agreed that holding rates at the current level was
conditional on the economy evolving in line with their outlook, warning
that heightened uncertainty has broadened the range of possible
outcomes. Members said it was difficult to predict the timing and
direction of the next policy move and would continue to monitor risks
closely, standing ready to respond if the outlook changes. On inflation,
the BoC noted that escalating tensions could disrupt global supply
chains and weigh on activity, posing both upside and downside risks to
prices. On the USMCA review, it said this posed downside risks to growth
and could pull inflation lower if the economy weakens, though higher
import costs, potential counter-tariffs and supply chain disruptions
could lift inflation. Amid the uncertainty, the BoC agreed to maintain
optionality in setting policy. In a speech, Governor Macklem stressed
the bank must be careful not to misdiagnose economic weakness, saying
policy should not attempt to offset lost supply, particularly as the
Canadian economy undergoes structural change. Money markets are pricing
no change in rates for the remainder of the year.
RBA Minutes (Tue):
The RBA will release minutes of
its meeting earlier this month, when it raised the Cash Rate for the
first time in more than two years by 25bps to 3.85%, as expected, with
the decision unanimous. The bank said inflation was likely to remain
above target for some time and that broad measures of wage growth
continued to be strong. It added that labour market conditions were
somewhat tight and capacity pressures greater than previously assessed
and noted uncertainty around the outlook for domestic economic activity
and inflation, and the extent to which monetary policy is restrictive.
The RBA also published its latest Quarterly Statement on Monetary
Policy, stating that underlying inflation was higher than expected and
that GDP growth had continued to pick up, with private demand
surprisingly strong. It raised its trimmed mean and CPI inflation
forecasts and lifted its December 2025 GDP projection but lowered its
year-end GDP forecasts for December 2026 and December 2027. The
forecasts assumed the Cash Rate at 4.2% in December 2026 and 4.3% in
December 2027. Governor Bullock said at the press conference that the
pulse of inflation was too strong and that high inflation hurt all
Australians, adding that the Board believed inflation would take longer
to return to target and could not allow it to get away.
UK Unemployment/Wages (Tue):
November’s
Unemployment rate came in above consensus at 5.1% (exp. 5.0%), with the
overall skew from the series a dovish one, as while the
hotter-than-expected wage figure was a hawkish impulse, it is a familiar
one. This week’s series is expected to feature a steady unemployment
rate and a decline in payrolls. As a reminder, the February BoE MPR saw
the peak unemployment forecast raised to 5.3% from the previous, and
current, rate of 5.1%; i.e. the MPC expects a further deterioration in
the jobs market. Note, given the remarks by BoE’s Bailey in the last
statement, wages are perhaps worth watching even closer than normal,
after he caveated his increased confidence on the path of wage inflation
by adding it is less clear when the inflation downside will feed into
wages; i.e., a marked drop in wages could tilt him to a March cut vs
current pricing for April. However, overall, the series will inform but
is unlikely to determine the timing of the next BoE cut, with the week’s
inflation series (see below) more pertinent in that deliberation.
RBNZ Announcement (Wed):
The RBNZ will hold its
first policy meeting of the year next week, where it is widely expected
to keep the Official Cash Rate unchanged at 2.25%, with money markets
pricing a 98% probability of no change. The meeting will be the first
under Governor Breman, who took office in December. At its previous
meeting in November, the RBNZ cut rates by 25bps, its third consecutive
reduction, bringing cumulative easing to 325bps since it began its
rate-cutting cycle in August 2024. The bank left the door open to
further moves, saying future changes to the OCR would depend on how the
outlook for medium-term inflation and the economy evolves, although its
projections implied a pause through 2026. The RBNZ noted that annual
consumer inflation rose to 3% in the September quarter but said spare
capacity in the economy should see inflation fall to around 2% by
mid-2026, with risks to the outlook balanced. Then-Governor Christian
Hawkesby said policymakers were well placed to mitigate risks and that
the central projection was for the Cash Rate to remain on hold through
2026, while retaining full optionality with every option on the table.
He later acknowledged the bank had lowered the cash rate significantly
and was more confident the OCR was now stimulatory, adding that the
hurdle for further cuts was high and that it could not keep the door
open to easing indefinitely. Governor Breman has also signalled openness
to further adjustments, but without urgency, saying the RBNZ had made
significant progress towards its mandated objectives and was closely
monitoring data, including inflation and GDP. She said there was no
preset course for monetary policy and that the bank would adjust if the
inflation outlook changed. Breman added that the economic outlook had
evolved broadly in line with expectations and that the forward path for
the OCR published in the November monetary policy statement pointed to a
slight probability of another cut in the near term, though if
conditions evolve as expected the OCR is likely to remain at 2.25% for
some time.
FOMC Minutes (Wed):
The Fed left rates unchanged at
3.50-3.75%, as expected, in a 10-2 vote, with Governors Miran and Waller
dissenting in favour of a 25bps reduction. Miran had previously voted
for a 50bps cut in December. The January statement upgraded its economic
assessment, replacing “economic activity has been expanding at a
moderate pace” with “expanding at a solid pace”, “job gains have slowed
this year” with “job gains have remained low”, and “the unemployment
rate has edged up” with it having “shown some signs of stabilisation”.
It also simplified “inflation has moved up since earlier in the year and
remains somewhat elevated” to “inflation remains somewhat elevated”. In
its risk characterisation, December’s addition that the Committee
“judges that downside risks to employment rose in recent months” was
removed, leaving only that it is attentive to risks on both sides of the
mandate. The statement’s tone was slightly more positive on the economy
and labour market and broadly unchanged on inflation. Ahead of the
decision, traders looked for signals on the future policy path, but the
statement offered no immediate clues and Chair Powell’s press conference
provided little by way of new information. Powell noted that decisions
will be made on a meeting-by-meeting basis, guided by the data and
balance of risks. He said policy is well positioned, reiterating it is
currently within a plausible neutral range, but towards the higher end.
If Fed sees goods pricing peaking over this year, that suggests the Fed
can loosen policy further. Powell highlighted that data since the
December meeting has improved the outlook. Inflation remains somewhat
elevated. Goods and tariff-related inflation expected to peak around
mid-2026, with many effects already passed through. He noted that the
labour market has weakened alongside solid growth, but recent data
suggests stabilisation following a period of cooling. Job gains remain
subdued, and while risks to employment have diminished, they have not
disappeared, making it difficult to judge whether the dual mandate is
fully in balance. Since the January meeting, Governor Waller (voter) has
argued policy remains too restrictive, the labour market “does not look
remotely healthy”, and tariff-driven inflation should be looked
through. Governor Miran (voter) has said underlying inflation is not
problematic and rates should be materially lower, warning policy may be
passively tightening, though he added that after this week’s jobs data
his concerns about the labour market have eased slightly. Governor Cook
(voter) stressed stalled disinflation and the need to maintain
credibility. Vice Chair Jefferson (voter) described policy as well
positioned, expects tariff effects to fade and inflation to ease in
2026. Logan and Hammack (both 2026 voters), characterised rates as
around neutral, signalling no urgency to cut unless labour conditions
deteriorate materially. Among non-voters, Musalem and Schmid cautioned
against further easing with inflation near 3%, while Daly, Barkin and
Bostic emphasised resilience but warned inflation remains above target.
Note, the minutes are an account of the January 28th meeting, so it will
not incorporate the January jobs report and CPI data.
UK CPI (Wed):
December’s print was
hotter-than-expected at the headline level, though subject to caveats
amid Budget-driven tobacco changes and elevated airfares due to the
timing of return flights over the Christmas period. Pertinently, the
core Y/Y figure was either in-line or cooler depending on the consensus
used; however, all services ticked higher, though by less than some
expected. An unwinding of the one-off impacts in December should see the
headline moderate in January, with Pantheon Macroeconomics forecasting a
3.0% Y/Y print, though that is above the BoE MPC’s 2.9% forecast. As a
reminder, the February MPR saw the inflation forecasts lowered across
the next three years, and the statement remarks that the “outlook for
inflation over the next six months is notably lower than expected in
November”, primarily due to energy prices, including the impact of
fiscal policy. The January series will be the main factor informing on
whether the BoE cuts in March (-19.5bps priced) or April (-26.9bps). The
language from the statement was balanced and kept the focus on the
medium term. As a reminder, February was a 5-4 split with Bailey the tie
break; on inflation, the Governor said he expects to see “quite a sharp
drop in inflation over coming months”. If CPI prints in-line with
Pantheon’s view, that is undoubtedly a sharp drop. However, the “coming
months” emphasis by Bailey skews the bias to April vs March. Overall,
CPI will have the main role to play in determining the timing of a cut,
and if we see the moderation desks are looking for in prices, along with
continued labour market pressures, a wage pullback and/or soft retail
metrics, then March may move towards being priced.
Australian Employment (Thu):
Westpac expects
employment to rise by 40k (prev. +65.2k), with the participation rate
edging up to 66.8% (prev. 66.7%) and the unemployment rate ticking up to
4.2% (prev. 4.1%). The labour market ended 2025 on a choppy note, the
bank says, with a weak November followed by a strong December, though
analysts caution that seasonal volatility – particularly around year-end
and January hiring patterns – complicates the signal. Westpac judges
the data reflect a solid finish to 2025 rather than a clear
re-tightening in conditions, with employment growth likely near its
trough as care-sector effects unwind and private demand stabilises.
January data will be closely scrutinised by the RBA amid renewed
inflation pressures, with attention on participation dynamics,
population re-benchmarking and “marginally attached” workers, which have
distorted recent January prints. Westpac expects a flatter employment
recovery through 2026 and a gradual drift higher in unemployment over
the year.
Japanese CPI (Thu):
Japan’s CPI is expected to slow
sharply, with headline inflation seen at 1.5% Y/Y (prev. 2.1%),
according to ING. The deceleration is largely attributed to government
energy subsidies and stabilisation in food prices. ING expects inflation
to moderate further in the coming months, reinforcing expectations that
price pressures may remain contained in the near term. From a BoJ
perspective, the central bank held rates steady in January to assess the
impact of previous hikes and await key data from the Shunto spring wage
negotiations.
UK Retail Sales (Fri):
Barclay’s consumer spending
report for January showed a modest increase in car spending during one
of the wettest months on record, with online and entertainment
expenditures bolstered as a result. However, the weather would
theoretically have had an impact on footfall to stores. Despite that,
Barclays’ report showed retail spending rebounded 1.7% Y/Y after a
relatively flat December, supported by January sales and online
activity. On the point of footfall, the BRC report showed in-store sales
having the “highest growth” in over six months, despite the poor
weather. Overall, the series should be robust and broadly in-fitting
with the December print of 0.4% Y/Y.
EZ Flash PMIs (Fri):
Expectations are for Services
to edge up from the prior reading, with some analysts seeing the
Manufacturing component return to expansionary territory. As such, the
Composite is expected to rise to 51.7 from 51.3. Taking a look at other
activity figures, EZ Retail Sales fell 0.5% in December from +0.1%
previously, while German Industrial Production missed forecasts by a
wide margin, underscoring the uneven nature of the country’s recovery.
This PMI report is unlikely to have a material impact on monetary
policy, with the ECB reiterating that the Bank remains in a “good
place”. February’s ECB statement said growth is resilient and recent
communication has largely reiterated a data-dependent approach. Recent
data has been broadly in line with staff projections, with increased
focus on the stronger EUR and trade and geopolitical developments. The
January report printed slightly below expectations, although the overall
trend has been sideways. In the prior reading, HCOB said the “growth
trajectory can be described as decent”, though not yet “comfortable”.
Regionally, Germany, Italy and Spain have continued to expand since
September, while France has been affected by the “difficult political
situation”. Since the last report, the political backdrop has stabilised
in the short-term after Prime Minister Lecornu forced an amended 2026
budget through.
UK Flash PMIs (Fri):
Investec forecasts the UK
Composite PMI at 53.6, marginally below the prior 53.7, with slight
downticks expected in both Manufacturing and Services, suggesting a
modest loss of momentum after the upward trend of recent months. Recent
activity data have included a subdued December GDP report, alongside
weak Manufacturing and Industrial Production figures. The report will be
closely watched by policymakers at the BoE, which kept rates unchanged
at 3.75% at its January meeting. The 5-4 vote split was more dovish than
the expected 7-2. Governor Bailey described activity as “subdued”,
while Lombardelli called it “weak”. Ramsden and Dhingra, who dissented
in February, also took a downbeat view of the activity environment. The
Bank cut its growth forecasts for Q1’26 and Q1’27. Money markets
currently assign a 76% chance of a cut in March and have fully priced in
a move by April. ING said that if recent weakness in growth and the
labour market persists alongside easing wage growth, a March cut is
“highly likely”.
UK PSNB (Fri):
December’s PSNB came in at GBP
11.6bln, around GBP 2.5bln below the consensus figure, however, still at
an elevated level and the 10th highest December print on record, with
the FY to December tally the 3rd highest on record. January’s data
captures capital gains and self-assessment payments ahead of the
end-January deadline, and as such the series can be volatile and subject
to significant and often one-off swings. As a reminder, the OBR expects
receipts from capital gains to increase substantially over the next few
years; a factor that may be seen in the January figure if participants
elected to sell-off assets ahead of the 2025 Autumn Budget. An increase
in such payments (potentially sparking a negative borrowing figure)
would be welcome by the Treasury and would, if only temporarily, provide
a welcome positive headline on the UK economy for the Labour government
at the moment.
US PCE (Fri):
PCE prices, the Fed’s preferred
inflation gauge, will be critical for policymakers and markets in
assessing the future path of interest rates. Consensus expects December
PCE to show firmer price pressures than recent CPI prints, with measures
such as food and producer prices pointing to upside risks. Analysts
note that the ‘wedge’ between CPI and PCE could produce a hotter PCE
reading, partly because PCE places greater weight on categories where
prices are rising more sharply. At his press conference following the
FOMC’s January meeting, Chair Powell said estimates based on CPI data
indicate headline PCE rose 2.9% Y/Y in December, up from 2.8%, while
core PCE, excluding food and energy, likely rose 3.0% Y/Y from 2.8%. He
said the elevated readings largely reflect goods inflation boosted by
tariffs. The Fed’s December projections pencilled in one additional cut
for 2026, though policymakers have recently indicated this depends on
further progress towards the inflation target, given the labour market
has outperformed expectations. Powell reiterated that decisions will be
taken on a meeting-by-meeting basis, guided by data and the balance of
risks. He said inflation has evolved broadly as expected but remains
somewhat elevated, with no progress on core PCE last year as the
overshoot was driven mainly by goods prices, tariffs and one-off factors
rather than demand. Goods and tariff-related inflation are expected to
peak around mid-year, with many effects already passed through. Powell
said that if tariff effects on goods prices peak this year, it would
signal scope to loosen policy. Short-term market-based inflation
expectations have fully retraced since “Liberation Day”, while
longer-term measures indicate confidence that inflation will return to
2%.
US GDP (Fri):
The preliminary Q4 GDP estimate is
expected to show US growth cooling from Q3’s 4.4% annualised pace. The
Atlanta Fed’s GDPNow tracker models growth at 3.7%, revised down after
softer core retail sales in December and downward revisions to November,
pointing to moderation in consumer spending from the prior quarter’s
3.5% pace. Activity nevertheless appears resilient. In its December SEP,
the Fed projected 2026 growth at 2.3%, upgraded from 1.8% in its
September forecasts; in January, the FOMC described the economy as
expanding at a “solid pace”, while Chair Powell said growth is on a firm
footing despite trade policy changes, cautioning that quarterly GDP can
be volatile. Vice Chair Jefferson has struck a cautiously optimistic
tone on 2026, expecting growth slightly above trend. He highlighted the
possibility that productivity gains, including from AI investment, could
allow faster expansion without reigniting inflation, though he stressed
it is too early to assess their durability. Some analysts say focus
will be on whether Q4 confirms a controlled slowdown rather than a
sharper loss of momentum, and the implications for policy. The Fed’s
rate path appears to hinge on further progress towards its 2% inflation
goal, with most policymakers seeking clearer evidence of disinflation
before backing lower rates.
This article originally appeared on Newsquawk.
