Weekly Economic outlook, 30 Jan - 3 Feb.

Central banks and nothing else!

We can expect volatile global markets in the week that Fed, ECB, and BoE have policy meetings and interest rate decisions while earnings season continues. The labor market seems fine in the US, UK, and even the Eurozone, but central banks will have difficulty avoiding recession while inflation is still high. Besides the central banks meeting, we have to watch the NFP, OPEC+ meeting, and Earnings reports.

Consumer Confidence - Tuesday

CB Consumer confidence is one of the best indexes to measure the state of the labor market and how employees spend money. In December, the Confidence was at 108.3, well above its 10-year average of 102. However, it has been losing momentum over the past year. In January, we expect Consumer confidence to rise to 109.0, but recession fears can still slow it down, so missing estimates should not be surprising.

Fed Meeting - Wednesday

FOMC will finish its two days Interest Rate Decision and Monetary policy meeting on Wednesday. The statement will be watched closely after the meeting and Press Conference 30 minutes later. Since a 25 bps rate hike is widely expected, investors are mainly interested to know when tightening policies will end and what Mr. Powell will say about how long to keep interest rates high. However, considering recently published labor data and acceptable consumer confidence and spending, we can expect a tighter stance in the statement and press conference. Expected decisions can be positive for the US dollar and hold overall pressures on the Stock markets.

Bank of England - Thursday

The success of Europeans in controlling energy prices made us more optimistic in our predictions, but still, we expect a recession for the UK economy in the coming year. The consensus expectation is a 50 bps rate hike by the BoE monetary policy committee, but they will go by 25 bps to avoid a severe recession. Similar to the Fed meeting, investors will be interested in the press conference after the meeting to learn when BoE possibly ends the tightening cycle. Expected policies will harm the Sterling and support the UK stock markets.

European Central Bank - Thursday

ECB was one of the major central banks that started the contractionary policy cycle later than others. Therefore, we expect that they will slow down tightening policies also later. This week, we see a 50 bps rate hike in our estimates, with president Lagarde mentioning that future decisions will be data-dependent. These expected policies will hold pressure on the EU stock markets but will help the Euro to gain against its crosses.

NFP - Friday

Before Friday's none farm payroll numbers, we expect to see the Job openings still rolling over, with 10.2 Million unfilled vacancies by the end of December. Also, quits and layoff announcements are on the rise. These data from the labor market do not match with other sectors. However, the number of jobs added has decreased each month since August, and we expect 185K new jobs for December. Estimates are so low, so beating seems possible, and if so, it will help the USD gain and hold its strength.

Earnings of the week.

Fourth quarter earnings season is in its entire run, and according to Refinitiv, 65% of the SP500 list has beaten estimates, just a hair below the 66% long-term average. On Tuesday, Exxon Mobil, UPS, Pfizer, McDonald's, Caterpillar, and AMD will report. Wednesday's focus will be on Meta Platforms and Alibaba. Thursday will be the busiest day for earnings this week, with Apple, Alphabet, Amazon, Eli Lilly, Shell, Qualcomm, Honeywell, Starbucks, and Sony reports.