Week Ahead – Stimulus battle continues

A lively start to the year

It’s been an surprisingly lively start to the year, with recent weeks being dominated by retail traders taking on hedge funds and showcasing the power of social media. While that looks to have gone quiet, a repeat performance may not be far away. With the data calendar a little light next week, focus will remain on US stimulus, the vaccine rollout and earnings.

US jobs report supports case for stimulus

Draghi to the rescue once more

Lira firms on CBRT commitment to tight monetary policy



The US economy continues to make progress in the fight against COVID as daily cases have declined for almost a month and vaccination efforts accelerate.  The nonfarm payroll report showed that the case for more stimulus remains elevated.  On Wednesday, the US consumer price index is expected to show price pressures are mild.  The reflation trade at one point will trigger a surge with prices, but that should not derail the Fed’s avoidance in tapering stimulus.    

US Politics

President Joe Biden is interviewed on CBS in his first network TV interview since his inauguration.  The focus in the US will remain on COVID vaccine rollouts.  

On Monday, the US Senate begins former President Donald Trump’s second impeachment trial. Last month Trump was impeached in a bipartisan vote in the House of Representatives on a charge of inciting the January 6th insurrection at the US Capitol.   


Next week is looking a little quiet on the data side, with the most notable release being the new economic forecasts on Thursday. The region is continuing to struggle on the vaccine rollout which could mean longer lockdowns and a slower recovery.

The political story continues to centre around Italy and whether Mario Draghi can form a government at a time of crisis for the country. The country is used to political uncertainty but now is not the time to be without a functioning government. Markets have responded positively to Draghi taking on the job but if he fails to form a government, Italian assets take a hit. 


No major surprises from the BoE at its February meeting. The first quarter will see less growth – as you’d expect during the country’s third and longest lockdown – but the recovery will pick up after with growth returning to pre-Covid levels in the first quarter of next year. Negative rates remain a possibility later this year but still an unlikely one with any further easing likely to come from asset purchases and the Term Funding Scheme.

We’ll hear from Governor Andrew Bailey next week, with the most notable data being the GDP reading for the fourth quarter, alongside other lower impact releases. 


The lira rebound continued this week as the CBRT stressed its commitment to retaining tighter monetary policy until inflation is back within target, something that will take at least two years. This continues to go against the views of President Erdogan. At this time, investors are at ease with this but there always remains the risk that Erdogan will lose patience over time as the economy suffers from higher rates.


China Inflation and Balance of Trade released Wednesday. Inflation will be closely watched after higher readings from other parts of Asia, Europe and the US. Higher print being equities negative. PBOC continues to subtly withdraw liquidity via the repo rollover supporting the Yuan.

PBOC is confining USD/CNY to a 6.4000/6.5000 range ahead of Lunar New Year. China on holiday for a week starting Thursday.


RBI surprises the market and leaves rates unchanged after the expansionary budget this week. India equities nearly 10% higher this week post-budget. Quiet week ahead with India Inflation and Industrial Production on Friday. 

With most of Asia on holiday, the market will remain fixated on the budget-driven equity rally. INR to remain steady on unchanged RBI.

Australia & New Zealand

Australian NAB Business Confidence and New Zealand Food Inflation unlikely to move markets. 

The technical picture suggests Australian and New Zealand Dollars at risk of a material downward correction next week due to rising US yields and US Dollar strength. Both have the potential to fall by between 200-300 points. 


Japan Current Account and Machine Tool Orders won’t be market-moving. PPI could show signs of imported energy inflations increasing pressure on the JGB’s.

Domestic consumption, constrained as the Covid-19 state of emergencies are extended and expanded. Tokyo Olympics to go ahead with restrictions, removing a key negative risk factor for the domestic economy.

USD/JPY has broken higher through its 100-day moving average at 104.50, for the first time in 7 months. A rise in US yields next week could see USD/JPY rise to 107.00 next week if US Employment data is strong this evening.

Key Economic Events

Sunday, February 7th

– Super Bowl 55 is played between the Tampa Bay Buccaneers and the Kansas City Chiefs. Robinhood has purchased its first-ever Super Bowl ad this year.

Economic Data

China Jan Foreign Reserves: $3.222 trillion estimate v $3.216 trillion prior

Monday, February 8th

– ECB President Lagarde discusses the ECB annual report at the European Parliament.

– Cleveland Fed President Mester speaks about the U.S. economy

Economic Data

German Dec Industrial production M/M: 0.0% estimate v 0.9% prior

Spain Industrial production

Japan BoP, bankruptcies

Singapore foreign reserves

Tuesday, February 9th

– ECB Chief Economist Lane participates in a panel discussion

Economic Data

US JOLTS job openings

Mexico CPI

New Zealand two-year inflation expectation

Australia NAB business conditions

Japan cash earnings, machine tool orders, money stock

Italy industrial production

China new yuan loans, money supply

Wednesday, February 10th

– Fed Chair Powell will speak on a webinar hosted by the Economic Club of New York.

– Bank of Canada Deputy Governor Lane speaks on payment modernization and digital currencies.

– ECB Executive Board member Panetta speaks about the potential effects of a digital euro.

– German Chancellor Merkel discusses with state premiers on the likely extension of coronavirus curbs.

– President Hassan Rouhani will lead tributes on Iran Revolution Anniversary

– EIA Crude Oil Inventory Report

Economic Data

US Jan CPI M/M: 0.4% estimate v 0.4% prior, wholesale inventories, monthly budget statement

UK GDP, industrial production

France industrial production

Sweden rate decision: Expected to leave interest rate unchanged at 0.00%

Denmark CPI

Norway CPI

Australia Westpac consumer confidence

China CPI and PPI

Japan PPI

New Zealand REINZ house sales

Turkey unemployment rate

Thursday, February 11th

– Lunar New Year public holidays are celebrated across Asia, with China breaking from February 11th to 17th.

– European Financial Forum 2021: Ireland’s Prime Minister Martin and McGuinness, the European commissioner for financial services speak

– ECB Governing Council member Villeroy speaks on climate and sustainable finance.

– South Africa President Ramaphosa delivers the annual state of the nation address.

– OPEC monthly Oil Market Report

– The European Commission provides new economic forecasts.

Economic Data

US initial jobless claims

Mexico industrial production

Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 25 basis points to 4.00%

South Africa manufacturing production

Malaysia GDP

Philippines rate decision

Friday, February 12th

Economic Data

US Feb Prelim University of Michigan sentiment: 80.5 estimate v 79.0 prior

Euro-area Dec industrial production M/M: 0.0% estimate v 2.5% prior

Colombia retail sales

Canada wholesale trade sales

Norway GDP

Poland GDP

Romania CPI  

Czech CPI

Hungary CPI

New Zealand Business NZ manufacturing PMI, food prices

Turkey current account balance, industrial production

India industrial production, CPI

Sovereign Rating Updates

          Hungary (Fitch/S&P)

          Norway (Fitch), 

          Sweden (S&P)

          Ireland (Moody’s)

          Belgium (DBRS)

          Luxembourg (DBRS)q

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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