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During the upcoming trading week, the release of central bank meeting minutes from the FOMC, Reserve Bank of Australia, and European Central Bank headline the economic docket. Market participants will be combing through the respective central bank minutes for clues about future central bank policy.
PMI manufacturing data from the eurozone, United Kingdom, and United States will also be another big focus for traders and investors. The global manufacturing sector has been a bright spot over recent months, particularly in America. Any signs of global PMI activity slowing could cause stock markets to turn lower.
Other highlights on the economic calendar include eurozone fourth-quarter GDP, ZEW data from Germany, and EU employment figures. The world’s second-largest economy, China, also releases important import and export data.
Central Bank Minutes
The FOMC meeting minutes this week is expected to relay to investors the central bank’s commitment to providing the US economy with adequate support during the ongoing COVID-19 pandemic.
Traders and investors are not expecting the FOMC to steer away from the dovish play book, especially given recent weak US jobs and inflation data. Overall, those seeking any hawkish commentary are bound to be disappointed.
The RBA meeting minutes is expected to be supportive for the Australian dollar currency as the central bank reiterates their overall commitment to getting the economy started again. The RBA recently upped their QE purchases, so commentary around the stepping of QE will be closely watched.
And finally, the ECB policy accounts is not expected to be a big market mover, especially after the previous ECB policy meeting failed to mention the euro currency.
EU Manufacturing PMI
The growth prospects of the eurozone largely depend on EU PMI on service and manufacturing activity, making this week’s releases even more important. Traditionally, the German PMI release is the big mover meaning that EU equity markets and the euro can stage big reactions around this data point.
Most economies are expecting that German PMI manufacturing activity improved to 57.5. Preliminary data can change towards the months end, but overall, a positive number is expected by most economists.
US PMI manufacturing data is expected to turn to 56.00, which is a drop of around 2 points. Financial markets could probably live with this number, although they will be mindful that the monthly trend is to the downside.
US Weekly Jobs
US existing and continuing jobless claims ticked higher this week, meaning that the upcoming weeks release will be very important. Should we see more elevated weekly jobs data from the US it could provide a worrying sign that the US job situation is worsening.
Traders should look to sell the US dollar if the trend remains to the upside, as they start to price in the prospect for lower interest for longer, and more QE from the United States central bank.
UK Services PMI
Last month UK services PMI activity crashed to 39.5, putting the FTSE100 and sterling immediately under pressure. A minor recovery is expected this month, however, the ongoing lockdown is likely to keep services activity well-below 50.
The United Kingdom economy is highly dependent on the services, in fact, nearly eighty percent of the UK GDP is made up of services activity. The ongoing rally in sterling could start to pause if the UK services PMI takes another turn lower. All indications suggests that services activity in the United Kingdom economy continues to stagnate.
