• MON: German Ifo Survey (Jan); EZ Sentiment Survey (Jan); Chinese President Xi to speak.
• TUE: UK Employment data (Dec).
• WED: FOMC Policy Decision; Australian CPI (Q4); German GfK Survey; US Durable Goods (Dec); Japanese Retail Sales (Dec); New Zealand Trade Balance (Dec).
• THU: German Prelim CPI (Jan); US GDP (Q4) & PCE Prices (Dec); Japanese Unemployment Rate (Dec).
• FRI: BoJ Summary of Opinions (Jan); French and German Flash GDP (Q4); German Unemployment (Jan); US PCE (Dec); Canadian GDP (Q4).
• SUN: Chinese official PMIS

CHINESE PRESIDENT XI KEYNOTE SPEECH (MON): The keynote speech is slated for 12:00GMT/07:00EST in what would be the first appearance by the Chinese President on the global stage following the inauguration of US President Biden. Chinese analysts believe that Xi will likely emphasise China’s success in combating COVID-19 and call for more of a global effort in overcoming the health crisis, whilst “reiterating China's continued a commitment to an inclusive multilateral approach to address wide range of pressing global issues, from epidemic control to economic recovery”, according to China's Global Times newspaper. Xi is also likely to adopt a sanguine approach on trade with the West following the signing of the RCEP trade deal in the APAC region and the investment deal with the EU. No senior US officials have been listed as attendees to the event at the time of writing.

UK EMPLOYMENT (TUE): The headline unemployment rate for the three-months through November is expected to rise to 5.1% from 4.9% with November encompassing a bulk of the UK's second national lockdown. Ahead of the release, RBC notes that given the existence of the furlough scheme, the release only provides a limited view of the UK labour market. RBC highlights timelier ONS Business Impact of COVID survey, whose latest edition noted that the the number of furloughed workers rose by 2mln in November alone. Accordingly, recent remarks from BoE Governor Bailey have suggested that the true unemployment rate could be nearer to the 6.5% area.

FOMC PREVIEW (WED): The focus is on how Fed policy will be shaped by the Democrat ‘Blue Wave’ of Congress, and the fiscal plan proposed by US President Biden; it will be easy for Fed Chair Powell to restate the argument that while the outlook for the medium-term has improved by these factors (a greater fiscal impulse supporting the recovery), the short-term is still clouded by uncertainty as the pandemic continues to rage. Powell will also be quizzed on how a more constructive medium-term outlook will influence the central bank’s asset purchases, with some officials having already started this conversation about tapering: Bostic, Evans and Kaplan have suggested that scaling back could begin later this year, although the influential Governor Brainard and Vice Chair Clarida provided soothing commentary, arguing that the current rate of purchases would be appropriate for “some time”. Powell has also said that the Fed would telegraph any asset purchase tapering well in advance. Regarding rates, the Fed has already made clear that it will tolerate an inflation overshoot before it starts lifting the federal funds target; market-based gauges of inflation have been rising recently, but officials have already told us that the firmer price pressures likely to be seen in March/April/May will likely be temporary phenomenon influenced by pandemic base effects, implying that it is something that they would look through; realised inflation remains subdued, and this is something Powell will highlight again. Some have flagged up the risks of inflation coming back stronger than expected, but again, this is not something that the Fed will respond to before the middle of the year (at the earliest) given the aforementioned base effects from 2020; anyhow, Powell recently said that if there was an unwelcome move up in price pressures, the Fed has the tools to deal with it and will use them. Conversations on tools like extending the weighted average maturities of its asset purchases, and potentially targeting yields along the Treasury curve will likely get a mention, but given that there are no signs of tantrums with bond yields, it isn’t a primary focus for this meeting.

AUSTRALIAN CPI (WED): Q4 CPI Q/Q is expected to cool to 0.7% from the prior 1.6%, whilst the Y/Y figure is seen steady at 0.7%. The trimmed mean figures are forecast to remain at 0.4% and 1.2% for Q/Q and Y/Y respectively and the weighted median metrics are both seen easing to 0.4% Q/Q (prev. 0.3%) and 1.2% Y/Y (prev. 1.3%). Desks note that the CPI pullback is expected to emanate from Western Australia’s household electricity credit and reduced federal government homebuilder grants, with the former being a one-off and thus a reversal is expected in the Q1 2021 – the two factors are expected to results in a -0.32ppts impact on the CPI figure, according to analysts at Westpac. The bank’s expectations for headline CPI is in-line with the market’s view, but the Westpac sees the trimmed figures at 0.3% Q/Q and 1.1% Y/Y, a touch below the median view. “The six-month annualised pace of the trimmed mean is forecast to lift from 0.6%Y/Y to 1.4% still well below the bottom of the RBA’s inflation target band”, the bank said.

US Q4 GDP (THU): The consensus looks for +3.5% Q/Q annualised. Credit Suisse says that the growth slowdown should be broad-based across consumption and investment, although government spending is likely to turn positive after contracting in Q3. "Consumer spending declined sharply in the last two months of 2020 due to a resurgence in COVID cases and renewed lockdown measures. However, strong growth earlier in the quarter should make consumption growth positive," the bank writes. The data will likely highlight the differing fortunes of the manufacturing and industry versus spending on services. However, the outlook for the first half of the year will likely hinge on the success of Democrats’ in driving through President Biden’s USD 1.9trln fiscal plan, which will help to support consumer finances in the months ahead; whether this gets banked on savings or is injected back into consumption will likely be a function of how lockdowns are lifted, the rollout of the vaccines and the take-up by citizens; as the consumer becomes more confident to consume, savings rates will be drawn down and pumped into spending, which economists will see as a sign of confidence.

CANADA GDP (FRI): Canadian bank RBC projects the Canadian GDP will rise 0.2% M/M in November, which would be half of the 0.4% M/M estimate the StatsCan nowcast has suggested. RBC explains that a sharp pullback on the hospitality side — not specifically mentioned in the nowcast — is behind its lower estimate. "November sales reports for manufacturing and wholesale trade were both consistent with gains in those categories. Ahead, the bank reckons that StatsCan's nowcast for December will come in at -0.4% M/M, with the hospitality sector likely to bear the brunt. (It notes, however, that the estimate may be revised after flash estimates for retail, manufacturing, and wholesale sales in the lead-up to the GDP release." Ahead, for Q4 as a whole, the BoC's latest MPR projected growth of +4.8%, but sees growth contracting in Q1 as the pandemic resurged.

CHINESE OFFICIAL PMI (SUN): Chinese Official PMI data is scheduled for 31st January where participants will be eyeing if China sustains the momentum from last year that helped it become the only major economy in the world to register growth for 2020 amid the onslaught from the COVID-19 pandemic. The previous headline Official Manufacturing PMI had eased in December to 51.9 vs exp. 52.0 (prev. 52.1) following the 38-month high printed in November, although was still a tenth consecutive month in expansion territory, and was supported by the Christmas rush and demand for PPE products amid lockdowns, while factory activity is likely to have remained elevated in January heading into the Lunar New Year holidays next month, and due to China’s status of being the world’s factory, as other nation’s remain constricted by pandemic and lockdown measures. The data will coincide with the release of Official Non-Manufacturing PMI which also eased in December from the month before but remained at a firm expansion at 55.7 (prev. 56.4) to suggest a continued pick up in the services sector and improved domestic demand, while the prior Composite PMI which measures both the manufacturing and services sectors printed 55.1 (prev. 55.7).

NOTE: This note originally published on 22nd January for Newsquawk clients; find out about our 7-day free trial here.