Week Ahead – Volatility going nowhere

Markets wobble amid retail backlash

The last week in the markets has been extremely interesting and highly unusual, to say the least. We’ve long talked about the power of social media and recent events are a prime example of that. While the battle between retail investors and hedge funds may continue to dominate the headlines in the coming weeks, there is plenty more that investors should pay close attention to.

January jobs report eyed amid market wobble

Lira firms as CBRT commits to tight monetary policy

Chinese PMIs kick off the week



The two big data releases for the US will be the ISM manufacturing and the employment report.  The ISM manufacturing reading is expected to show a small decline in January.  The US nonfarm payroll report is supposed to show a rebound of 50,000 jobs in January, but it will be difficult as optimism is low for any signs of a rebound in leisure and hospitality jobs.   

US Politics

A busy week in DC will have investors following every incremental update on the COVID relief bill and whether Treasury Secretary Yellen will tweak the strategy with debt issuance.  On the stimulus front, lawmakers are early in negotiations so the divide should remain wide on what is an acceptable headline price tag of fiscal support.  


Vaccine delays and a public dispute between the European Commission and AstraZeneca dominated much of the past week and we may see more of this going forward, as politicians face a potentially angry electorate. A coordinated response arguably has numerous benefits but delays to regulatory approval and disputes like we’ve seen this week don’t do them any favours. Lockdowns may have to stay in place further into the spring and bring with them economic consequences. 

The data this last week was a little better on the growth front but it also covers a time before the more severe lockdowns we’re now seeing. And let’s face it, whether Germany avoids a double dip recession because of 0.1% growth in Q4, or is pushed into one after revisions, doesn’t matter. Next week is littered with low to medium impact data including final PMIs. 


Next week’s Bank of England meeting is unlikely to provide anything of note for the markets. The central bank added further asset purchases in November and while the country has gone back into lockdown since – and more severely so – it doesn’t change the outlook dramatically enough to warrant intervention from the central bank any time soon. 

Unemployment data for November was better than expected but given the state of the situation now, it’s old news. On a positive note, Covid cases are continuing to come down for a third week and are back at late October levels, when the country went into its second lockdown. There’s also signs of fatalities falling. A long road ahead still but the vaccine rollout is progressing well and lockdowns working. Schools won’t be opening until March and the rest of the country will gradually follow after. 


Monetary policy will remain tight until at least 2023, CBRT Governor Naci Agbal claimed this week, at which point inflation should be around its 5% target. The message was well received by the markets and should ensure investors remain on board, as long as he isn’t forced out in the interim, given his views conflict with those of President Erdogan. For now, investors are happy and the lira’s performance is reflective of this.


China official PMI’s are released on Sunday. A large divergence creates a binary volatility outcome on Monday morning, focused on AUD and NZD and Australia and China equities.

The PBOC continues to withdraw liquidity via the MLF’s while adding it via 7 and 14-day repos. That is pushing funing costs higher with Shibor continuing to squeeze. If Shibor ramps higher next week, China equities will feel the heat.


Huge week as India’s 2021 budget is announced on Monday with the RBI rate decision on Friday.

India’s fiscal deficit exploded to above 7% in 2020, but any fiscal tightening for 2021, or increased taxation, could see INR and Indian equities fall quite hard. With inflation back under 6.0%, the odds of rate cuts resuming have increased. Much will depend on the budget and the market’s response. Rut cuts would be local equity positive.

Australia & New Zealand

Heavy data week in Australia with PMI’s and RBA rate decision on Tuesday. Policy will remain unchanged but the market will be closely monitoring the statement and press conference for economic outlook and potential changes to dovish guidance. Highly unlikely, but a less dovish RBA would be negative for equities.

The AUD and NZD continue to hover just above medium-term supports. A squeeze higher globally by the US Dollar could see both stage potentially large downward corrections. The progress of US fiscal stimulus and the trajectory of vaccinations will be the main drivers with their high beta to the global recovery.


Jibun PMI’s and Household Spending will show a darkening domestic outlook as Covid-19 restrictions sap confidence. Potentially negative Japan equities in the short-term, although the Nikkei has been following the S&P 500 closely of late.

External factors aside, rumours are swirling that the Tokyo Olympics are going to be cancelled. That would be a strong short-term negative for Japanese markets and will see 2021 GDP growth revised lower.

USD/JPY has broken higher through a multi-month downward channel at 104.10 and through its 100-day moving average at 104.50, for the first time in 7 months. A rise in US yields next week, and/or a rise in the US Dollar could see USD/JPY rise to 107.00 quickly.

Key Economic Events

Sunday, January 31st

Economic Data

China Jan Manufacturing PMI: 51.5 estimate v 51.9 prior; Non-Manufacturing PMI: 55.0 estimate v 55.7 prior

Monday, February 1st

– Italian President could decide to give Conte another chance at forming a coalition or opt for a fresh start with someone new.

– Atlanta Fed President Bostic will speak with Boston Fed chief Rosengren at the “Uneven Outcomes in the Labor Market” conference.

– India presents budget

Economic Data

US Jan ISM manufacturing: 59.9 estimate v 60.7 prior, Markit manufacturing PMI, construction spending

Euro-area Markit manufacturing PMI, unemployment

UK Markit manufacturing PMI, mortgage approvals

Australia AiG performance of manufacturing index, ANZ job advertisements, Melbourne Institute inflation, commodity index

South Korea trade

India Manufacturing PMI

China Caixin manufacturing PMI

Manufacturing PMI: Russia, Poland, Hungary, Czech, South Africa, Canada

Turkey Markit/ISO manufacturing PMI

Japan vehicle sales, Manufacturing PMI

Tuesday, February 2nd

– RBA Interest Rate Decision: Expected to keep cash rate unchanged at 0.10%

– Another round of big earnings: Amazon, Alphabet, Alibaba, and Exxon report

– Riksbank Governor Ingves speaks at a Swedish parliament hearing on financial stability.

– French President Macron speaks at the EU Parliament in Strasbourg about transatlantic relations.

– Court hearing scheduled for Russian opposition leader Alexey Navalny

– Cleveland Federal Reserve Bank President  Mester makes remarks at the “Uneven Outcomes in the Labor Market” conference.

Economic Data

US Wards total vehicle sales

Euro-area GDP

Italy GDP

Portugal GDP

Czech GDP

Spain unemployment

Mexico Markit manufacturing PMI

UK Nationwide house prices

Hong Kong retail sales

Singapore purchasing managers index

Wednesday, February 3rd

– OPEC+ Joint Ministerial Monitoring Committee meets to review progress and compliance with agreed output cutbacks.

– St. Louis Fed President Bullard speaks at the CFA Society. Philadelphia Fed president Harker joins the “Uneven Outcomes in the Labor Market” conference. Chicago Fed President Evans takes part in a virtual discussion on the economy and monetary policy.

– Cleveland Fed President Mester speaks

– U.S. Treasury Secretary Yellen could address initial stances on her debt issuance strategy in the quarterly refunding announcement.

– EIA releases Annual Energy Outlook

Economic Data

US Jan ADP employment change: 50K estimate v -123K prior

EIA Crude Oil Inventory Report

Euro-area services PMI, CPI

Australia building approvals

New Zealand unemployment, ANZ commodity prices

Singapore PMI

India PMI

Spain PMI

U.K. Market/CIPS services PMI

Japan services/composite PMI

Russia Markit services/composite PMIs

Turkey CPI

China Caixan services/composite PMI

Thailand rate decision: Expected to keep Interest Rate unchanged at 0.50%

Thursday, February 4th

– San Francisco Fed President Daly speaks at a panel during a labor market conference hosted by the Atlanta Fed.

– NATO Secretary General Stoltenberg plans vision for the defense alliance at Chatham House, in London.

Economic Data

US initial jobless claims, factory orders, durable goods

BOE Interest Rate Decision: Expected to keep rates unchanged at 0.100% and asset purchases steady at GPB875 billion.

New Zealand building permits, ANZ business confidence

Australia trade, NAB business confidence

Russia gold and forex reserves

Czech central bank (CNB) interest rate decision: Expected to leave repurchase rate unchanged at 0.25%

Friday, February 5th

– The Biden administration is proposing to Russia a five-year extension of the New START treaty limiting the number of US and Russian strategic nuclear weapons.

– BOE’s Bailey and ECB Vice President de Guindos speak on a webinar about central banks and the post-Covid recovery.

– European Commission President Von der Leyen speaks at the University of Warwick virtual Economic Summit

– The first employment report of the year is expected to show a modest gain of 50,000 jobs.  Payrolls are still roughly 10 million less than just over a year ago. 

Economic Data

US unemployment report, Trade Balance, Consumer Credit

Canada unemployment, international merchandise trade

Australia RBA statement on monetary policy, foreign reserves, retail sales

German factory orders

India central bank (RBI) interest rate decision: Expected to keep Repurchase Rate unchanged at 4.00%.

Swiss foreign-currency reserves

Japan household spending, leading index

Singapore Retail Sales

Czech Retail Sales

Sovereign Rating Upgrades

– Russia (Fitch) 

– ESM (S&P)

– Czech Republic(Moody’s)

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.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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