The Week Ahead – BOJ, BOC, and ECB to keep rates on hold as markets focus on global PMI readings and earnings

The debates on how much of an impact the Phase One trade deal will have on the global outlook will continue as market concerns fall on the Davos forum, central bank rate decisions and earnings season.  The upcoming week is shortened since US equity and bond markets will be closed on Monday for the observance of the Martin Luther King Jr. holiday.  A good amount of attention will fall on Davos, Switzerland as world leaders and the biggest business billionaires will be addressing a wide-range of topics.

  • Disappointing UK PMI data could cement expectations for the BOE to cut rates at the end of the month
  • Euro could stabilize if the Eurozone manufacturing PMI readings have better than expected rebounds
  • Wall Street may finally start fading the US-China trade deal euphoria as the focus shifts to tech earnings

A few big rate decisions will occur this week with no changes in policy expected from the BOJ, BOC, and ECB.  ECB Chief Lagarde will also begin to outline the beginning of a complete outline of the monetary strategic review.  We could see some broad strokes but don’t expect any major hints on changes to their current tools in place.  The overall mood for risk appetite will take some queues from the German ZEW Survey and the euro zone flash PMI readings.  With some clarity being delivered from the phase-one trade deal, expectations are high for improving sentiment with manufacturers in Europe.  This week, the fate of the dollar will likely be more reliant on macro story from Europe than from any US economic data points.



US stocks have been on a tear following a strong start to earnings season by the banks, the signing of the phase-one trade deal and de-escalation with the US-Iran conflict.  Despite the strong move with US equities, global currency volatility has fallen to a record low.  Right now, the Fed is widely expected to do nothing for the rest of the year regarding rates, but they will soon try to temper balance sheet growth expectations. The dollar remains overvalued but won’t break unless we start to see better than expected data globally.  With strong demand for US Treasuries the dollar could remain stubbornly strong in short-term.

The second week of earnings season will focus on tech as we will see results from Netflix, IBM and Intel.  Optimism is going for a better than expected earnings season as the banks have signaled the US consumer is strong and credit markets are healthy.

US Politics

While much of the mainstream media will focus on the impeachment trial of President Trump, Wall Street does not care.  Markets have shown almost no reaction to the entire impeachment process and remain heavily confident Trump will complete his first term.


The topic of conversation has very much changed this week from the election result and Brexit to the Bank of England and an imminent interest rate cut. A series of weak data points combined with some dovish commentary from policymakers Silvana Tenreyro and Gertjan Vlieghe have ramped up the odds of a cut later this month from around 5% to above 70%. The timing looks a little peculiar given the period the data covers but there has clearly been a shift within the MPC towards a rate cut. The meeting on 30 January is now very much live and therefore the jobs data on Tuesday and PMIs on Friday, not to mention commentary from various policy makers, will be very closely followed next week.


The ECB meeting next week is unlikely to create too many fireworks. The previous stimulus package was substantial and is unlikely to be added to in the near-term, barring a dramatic change in the data. Expect more warnings about downside risks and the need for more of a response on the fiscal side.


The Norwegian central bank has been on a tightening cycle since the summer of 2018, raising rates four times in that period from 0.5% to 1.5% where it stands today. The January meeting is an interim meeting, meaning no press conference or new rate path. As such, no rate hike is likely at this meeting, but the statement may hold clues about the path of travel under the new committee and if that’s changed from the last 18 months.


Vladimir Putin is planning the for the end of his term in 2024 by, it seems, reducing the power of the Presidency and replacing the Prime Minister. It’s unclear at this stage what his plan is but it’s suggested he’s effectively laying the groundwork to hold onto power in another way via constitutional change. It wouldn’t be the first time he’s got around term limits but it seems he’s being a little more creative on this occasion while masking it as a democratic shift, giving more power to Parliament.


The Mexican peso is rallying alongside all the Latin American currencies as the phase-one trade deal has triggered an emerging market rally.  Mexico is also benefitting from the Senate passing of the USMCA trade deal.  Mexico’s economy will see a strong bump with exports, but trader’s looking for further peso strength might be disappointed as outflows are possibly signaling hedge funds are cashing out of their trades.


The lira could see further pressure as the initial rally following their fifth consecutive rate cut was faded.  Turkey has been slashing rates since the summer, a total reduction by 1,275 basis points has brought the one-week repo rate to 11.25%.  Turkey reportedly is pressuring state-owned banks to support their currency, but that is a dangerous game if the macroeconomic indicators take a turn for the worse.

Hong Kong

Tight short-term funding rates have pushed the Hong Kong dollar higher at the start of the year, with USD/HKD dropping into the lower half of the permitted trading band. Better funding conditions will likely see the FX pair moving higher, with the threat of a return to violent protests exerting upward pressure.

On the protest front, talk is that an “anti-communist” rally will be held next week, with a “rehearsal” staged last Sunday. That event passed peacefully but the risk is always there.

Data-wise, unemployment on Monday and consumer prices on Tuesday are the highlights.


As always, there is the risk that protests escalate and turn violent again, which would be negative for the HK33 index and could push USD/HKD back to the upper half of the trading band.


Now that the Phase 1 trade deal has been signed and details have been released, it’s up to Beijing to keep on track to deliver on its promises on US purchases. US has already said there will be no adjustment to China tariffs before the US presidential election in November, which will probably be the first evaluation as to how well China is adhering to the T&Cs.

Next week is a shortened week, with China starting to focus on the Lunar New Year holidays from mid-week onwards, though the celebrations don’t start until Friday. There are no major data releases next week.


Markets will be constantly monitoring China’s compliance with its commitment to purchase US goods, with a greater risk of under-performance rather than excess. That would be negative for risk, hurt the CN50 index and probably boost USD/CNH.


India’s Supreme Court is due to hear pleas challenging the new citizenship law on January 22, with tensions likely to be high in the run-up and more protests likely. It’s a question of how violent they get. There is talk that diplomatic channels are working on a US President Trump visit to India by end-February.


Escalation from either side or political rhetoric would be negative for the INR and Indian equities.


Thursday’s release of December employment data will be the key event to set the tone for the rest of the month. Now that the wildfires raging in Queensland and New South Wales appear to be gradually being brought under control, the real economic damage will start to be assessed. Implications for the insurance sector have been said to be manageable, but it is the amount of additional fiscal spending to rebuild that could have a greater impact. Economic activity for Q4 and beyond will no doubt take a hit, but a massive unplanned fiscal budget could hurt local bond markets and currency.


Any downside misses on the employment data could reignite dovish RBA chatter, which would be negative for the AUD. An exaggerated fiscal deficit would also be detrimental. There is still some talk that the RBA may be forced into QE in the second half of 2020, which could keep the Aussie pegged back.

New Zealand

Very quiet on the data front next week, with no other issues facing the country.


The BOJ rate meeting on Tuesday is expected to be another lame duck, with no shift in policy rates or bond buying programs expected. However, a dovish outlook report could hurt equities. December’s trade data on Thursday could perform better than expected, given the uptick in Chinese and South Korean numbers for the same month.


Continuing deterioration in exports could hit the Japan225 index, as would a dismal Q4 outlook. The yen, as usual, will be swayed by the risk-on, risk-off gyrations.



Oil prices are stabilizing on improved demand outlooks since the phase-one trade deal will revive global manufacturing.  The oil rout may be over and we could start to see prices trade more rangebound.  If the global manufacturing rebound shows signs of improving next week, crude prices may remain supported.


US stocks are constantly making fresh record highs, currency volatility is at a record low, but something must give.  Gold prices are likely to see longer-term support as a plethora of geopolitical risks firmly remain in place.  Middle East tensions are likely flare up again, concerns are growing that the Fed will shortly address the tempering of balance sheet growth, and 2020 election uncertainty will keep long-term investors wanting to own gold.


Bitcoin seems to have a firm bottom in place and as hedge-fund demand improves we could see prices look to make a run at the $10,000 level.  Selling pressures from regulatory hurdles seem to have run their course and investors are growing optimistic the halving event in May will provide significant support over the newt few months.


Economic Releases and Events

Monday, January 20th

2:00 am EUR Dec Germany PPI M/M: 0.0%e v 0.0% prior

3:30 am HKD Dec Hong Kong Unemployment Rate: 3.3%e v 3.2% prior

8:30 am CAD Dec Canada Teranet House Price Index M/M: No est v 0.2% prior

Bank of Japan (BOJ) Rate Decision: Expected to keep policy unchanged

Tuesday, January 21st

Davos World Economic Forum (ends on Friday)

1:00 am SEK SEB releases Nordic Outlook

2:00 am SEK Swedbank release Economic Outlook

4:30 am GBP Dec UK Jobless Claims Change: No est v 28.8K prior

4:30 am GBP Nov UK Average Weekly Earnings 3M/Y: No est v 3.2% prior

4:30 am GBP Nov UK ILO Unemployment Rate 3Months: 3.8%e v 3.8% prior

5:00 am EUR Jan Germany ZEW Current Situation: -13.5e v -19.9 prior

5:00 am EUR Jan Germany ZEW Expectations Survey: 13.0e v 10.7 prior

5:00 am EUR Jan Eurozone Expectations Survey: No est v 11.2 prior

7:00 am MXN Dec Mexico Unemployment Rate(non-seasonally adj): No est v 3.4% prior

8:30 am CAD Nov Manufacturing Sales M/M: No est v -0.7% prior

6:30 pm AUD Jan Australia Westpac Consumer Confidence Index: No est v 95.1 prior


Wednesday, January 22nd

2:45 am EUR Jan France Manufacturing Confidence: 101e v 102 prior

3:00 am ZAR Dec South Africa CPI Y/Y: 4.1%e v 3.6% prior

8:30 am CAD Dec Canada CPI Y/Y: 2.2% prior

8:30 am USD Dec Chicago Fed National Activity Index: No est v 0.56 prior

10:00 am CAD Bank of Canada (BOC) Interest Rate Decision: Expected to keep rates steady at 1.75%

10:00 am USD Dec Existing Home Sales M/M: 1.4%e v -1.7% prior

11:15 am CAD BOC Gov Poloz Rate Decision Press Conf

6:50 pm JPY Dec Japan Trade (JPY): -161.0Be v -82.1B prior

7:30 pm AUD Dec Australia Employment Change: 15.0Ke v 39.9K prior


Thursday, January 23rd

00:00 am SGD Dec Singapore CPI Y/Y: 0.7%e v 0.6% prior

3:30 am SEK Dec Sweden Unemployment Rate: No est v 6.8% prior

4:00 am NOK Norges Rate Decision: Expected to key rates steady at 1.50%

7:45 am EUR ECB Rate Decision: Expected to keep rates unchanged

8:00 am RUB Dec Russia Industrial Production Y/Y: 1.9%e v 0.3% prior

8:30 am USD Weekly Jobless Claims

10:00 am USD Dec Leading Index -0.2%e v 0.0% prior

10:00 am EUR Jan Advance Consumer Confidence: -8.0e v -8.1 prior

4:45 pm NZD Q4 CPI Q/Q: 0.4%e v 0.7% prior; Y/Y: 1.8%e v 1.5% prior

6:30 pm JPY Dec Japan National CPI Y/Y: 0.7%e v 0.5% prior

7:50 pm JPY BOJ Minutes of December Meeting

9:00 pm NZD Dec New Zealand Credit Card Spending Y/Y: No est v 4.5% prior


Friday, January 24th

00:00 am SGD Dec Singapore Industrial Production Y/Y: -0.8%e v -9.3% prior

3:15 am EUR France Jan Prelim Manufacturing PMI: No est v 50.4 prior

3:30 am EUR Germany Jan Prelim Manufacturing PMI: 44.2e v 43.7 prior

4:00 am EUR Eurozone Jan Prelim Manufacturing PMI: 46.7e v 46.3 prior

4:00 am ECB Survey of Professional Forecasters

4:30 am GBP UK Jan Manufacturing PMI: 48.1e v 47.5 prior

7:00 am MXN Nov Mexico IGAE Y/Y: No est v -0.78% prior

8:30 am CAD Nov Retail Sales M/M: No est v -1.2% prior

9:00 am EUR Jan Belgium Business Confidence: No est v -3.4 prior

9:45 am USD Jan US Markit Manufacturing PMI: 52.8e v 52.4 prior


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya