• SUN: Chinese Official PMIs (Jan)
• MON: Chinese Caixin Manufacturing PMI Final (Jan); EZ, UK and US Manufacturing PMI Final (Jan); US ISM Manufacturing PMI (Jan).
• TUE: RBA Policy Announcement; EZ Flash GDP (Q4); US ISM New York (Jan); New Zealand Labour Market Data (Q4).
• WED: Chinese Caixin Services PMI Final (Jan); EZ, UK and US Services/Composite PMI Final (Jan); EZ Flash CPI (Jan) US ISM Services PMI (Jan); ADP National Employment (Jan); OPEC+ JMMC Meeting.
• THU: BoE Policy Announcement; CNB Policy Announcement; EZ Retail Sales (Dec); US Durable Goods R (Dec).
• FRI: US and Canadian Labour Market Reports (Dec).

CHINESE OFFICIAL PMIs (SUN): Participants will be eyeing if China has sustained the momentum from last year that helped it become the only major economy in the world to register growth for 2020 amid the onslaught of the pandemic. December’s headline eased to 51.9 (exp. 52.0, prev. 52.1) following the 38-month high printed in November, although was still a tenth consecutive month in expansionary 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).

US ISM MANUFACTURING AND SERVICES PMI (MON/WED): Analysts project that the January ISM headline will pare back a touch to 60.0 from 60.5. Markit's Purchasing Managers Index for January saw its operating conditions within the manufacturing gauge rise at the quickest pace since September 2014, with the survey stating that manufacturers reported a strong end to 2020, with production and order books continuing to grow, albeit with the rates of expansion slowing as a result of rising virus case numbers and related restrictions. With that said, the survey also highlighted how manufacturers were now not only facing weaker demand conditions due to the pandemic, but are also seeing COVID disrupt supply chains further, causing shipping delays, and these delays were limiting production capabilities as well as driving producers’ input prices sharply higher. Even so, firms remained highly positive about the outlook for the year ahead, anticipating that vaccine roll-outs will help drive a further recovery in 2021. The Services ISM, meanwhile, is seen paring to 57.0 from 57.2; Markit's services gauge saw business activity growth rise at the slowest rate for three months amid rise in virus cases; business activity, order books and employment all grew at much reduced rates, the report said. Markit said the services data implied that the near-term outlook had deteriorated, with business expectations for the coming year falling considerably, as some post-election exuberance waned and companies grew more anxious about the ongoing impact of the pandemic. But again, businesses remained confident about the outlook, reflecting greater optimism for prospects of life returning to normal in the second half of 2021, Markit said.

RBA POLICY ANNOUNCEMENT (TUE): The RBA is expected to keep policy settings unchanged, with the Cash Rate Target held at the record low of 0.10%, and its current QE programme maintained. The consensus for the central bank to refrain from any policy adjustments follows its actions late last year, where it lowered the Cash Rate Target, 3-year yield target and rate on term funding facility by 15bps in November, as well as announcing an AUD 100bln bond purchase programme within the 5yr-10yr maturities, for a period of 6-months. The RBA is therefore likely to prefer a wait-and-see approach to gauge the effect of these past measures, although it did state at the December meeting that the board was prepared to do more if required, with policy focused on bond buying and that it will review the size of its programme at future meetings. It also stated that substantial support will be needed for a considerable period, and it does not expect to raise the cash rate for at least three years, and not until inflation is sustainably within the 2-3% target band. Nonetheless, recent data releases have been mostly encouraging, which suggests a lack of urgency for policy adjustments; Q3 GDP topped estimates, and the December’s unemployment rate declined, while inflation data was also firmer – the RBA’s preferred trimmed mean CPI gauge still remains below target though, and therefore suggests the central bank won’t be in any hurry to begin normalising rates; Capital Economics anticipates the RBA could halt QE in April citing the rapid recovery in the labour market.

EZ CPI (WED): The Eurozone inflation is seen printing 0.3% Y/Y in January, rebounding from the prior -0.3%, with the ex-food and energy metric forecast to be unchanged at 0.4%. After residing in negative territory for a bulk of H2 2020, headline inflation is expected to return to positive territory as the base effects from last year’s oil declines and the expiry of the German VAT reduction provides support. Ahead of the release, RBC notes that ECB forecasts look for a Q1 outturn of 0.3% Y/Y before picking up to 0.9% in Q2, however, there is upside risks to the upcoming release prompted by the German CPI report, which saw HICP climb to 1.6% from -0.7%, a move which RBC suggests which contribute 0.5ppts to HICP alone.

JMMC MEETING (WED): The February JMMC meeting will see a review of secondary source data, alongside current market fundamentals, before proposing policy recommendations to the main OPEC+ body. No further policy steps are expected to be taken this month, and the confab will not be followed by a monthly OPEC+ meeting. The findings of this meeting are likely to be overlooked as producers decided on the February and March production levels in January. To recap, Russia and Kazakhstan were permitted to modestly increase crude output (not exports) for February and March (due to domestic demand) whilst Saudi opted for a voluntary cut of 1mln BPD production in said months. Analysts have remarked that Saudi’s extra cut of such magnitude outside of the already agreed deal suggests the Kingdom’s outlook for the crude market comprises of a very realistic downside risk arising from COVID variants. Nonetheless, the producers are likely to remain in wait-and-see mode regarding February and March production levels (barring any material changes to the environment) before convening a JMMC on March 3rd followed by the decision-making meeting on the 4th.

BOE POLICY ANNOUNCEMENT (THU): The MPC is expected to unanimously maintain current policy settings, keeping the Base Rate at 0.1% and APF at GBP 895bln. Since the prior meeting, the UK was able to secure a Brexit deal with the EU and thus eliminated one of the potential headwinds facing the economy. However, an escalation in the spread of COVID-19 prompted the government to impose another nationwide lockdown at the start of January, which was not incorporated into the MPC’s assumptions at the December meeting. Recent survey data from IHS Markit has seen the services sector dip further into contractionary territory, whilst manufacturing remains in expansionary territory with the sector largely still able to operate under current restrictions. As such, the downturn in the economy will be less severe than seen in spring last year. However, at the accompanying MPR, policymakers will likely lower their 2021 growth outlook from its currently level of 7.25%, according to UBS. The Swiss Bank touts a potential upgraded to the 2022 growth outlook, however, whilst inflation projections are set to be broadly unchanged. From a policy perspective, questions continue to surround the MPC and its approach towards NIRP with some desks touting the possibility of an update on the Bank’s engagement efforts with lenders on the feasibility of negative interest rates. Clearly, any statement will need to be carefully crafted as to not signal the imminent likelihood of a move below 0% and instead reflect that NIRP is a viable tool should the BoE require it. Such a statement would come in the context of commentary from the likes of external members Saunders and Tenreyro who have tended to take a more favourable view of the efficacy of negative interest rates. That said, Governor Bailey has certainly been cooler on the issue. More broadly, commentary from the MPC has done nothing to suggest that any further easing via rates or the balance sheet is on the cards for the upcoming meeting.

US LABOUR MARKET REPORT (FRI): Analysts look for 85k nonfarm payrolls to be added to the US economy in January (at present, the range of forecasts is between -100k on the low and +400k on the high, but this will change as more forecast are collated into next week’s release), rebounding from December’s -140k. The unemployment rate is seen steady at 6.7%. The read from the weekly initial jobless claims data is mixed: in the week that corresponds to the BLS survey period, claims printed 914k vs 892k going into the December jobs report; continuing claims, however, have eased to 4.99mln from 5.53mln going into the December report. In the January survey window, Pandemic Unemployment Assistance claims decreased in the week by 20k, taking it to 427k -- while an encouraging development, it is still higher than the 398k in the December survey window. Additionally, the ‘labour market differential’ in the recent consumer confidence data suggests that Americans were less optimistic about their employment prospects in January. Credit Suisse notes that COVID cases were accelerating in mid-January, while many states and local governments were implementing further restrictions, and the data is likely to reflect that, leaving risks of a second consecutive negative reading. On the other hand, the bank cites some business surveys which have suggested that the labour market remains positive, while seasonal adjustments in January also tend to be positive, arguing that if some of the layoffs in December were simply pulled forward from the usual seasonal slowdown, then headline employment will receive a boost in this report. The bank also notes that the USD 900bln fiscal stimulus injected in December will likely support the economy, and by extension the labour market, from ongoing downside risks - household payments have already stoked income and spending, and enhancements to the Paycheck Protection Programme may result in businesses re-hiring workers, CS thinks. But even so, the timing of the survey window for the January jobs report might be too soon for the positive effects to show.

CANADIAN LABOUR MARKET REPORT (FRI): Following the 62,600 jobs shed from the Canadian economy in December (revised to a decline of 52.7k), RBC looks for another decline in January (of -40k) given the increased pandemic restrictions implemented in the month across some parts of the country. The job losses should be concentrated in the hardest-hit sectors like food and accommodation, but says that seasonality in areas like retail and construction should limit the downside.