Four central bank meetings in G10 this week BoJ BoC Norges Bank and ECB

Week ahead: There are four central bank meetings in G10 this week: chronologically the BoJ, BoC, Norges Bank and ECB. The World Economic Forum in Davos starts tomorrow and runs to Friday. On the data front, there is nothing first‐tier in the US, but Dec CPI and Nov retail sales are due in Canada. In the UK, the Jan flash PMIs (Friday) are critical to the outcome of next week’s MPC meeting (GBP), but labour market data are pre-election so of less interest. The CME's BoE Watch tool now shows a 72% probability of a 25bps rate cut, up over 50% in less than 10 days following a series of weak economic data and dovish speak from the MPC. Flash PMIs are also due in the Eurozone. The Q4 earnings season continues in the US - 58 S&P 500 companies (including six Dow 30 components) are scheduled to report results for fourth quarter. Highlight will be Netflix, who is the first of the FAANGs to report this season. Also IBM Corp. (IBM), Johnson & Johnson (JNJ), Procter & Gamble (PG), Intel (INTC), and American Express (AXP).

The BoJ is universally expected to leave rates (policy rates and the 10yr yield target) unchanged overnight tonight. The accompanying Outlook Report will have to take on board a run of disappointing activity data recently and downward revisions to growth projections are possible. If Q4 GDP (mid‐February) is as weak as the monthly activity data are suggest, expect speculation on further BoJ easing at the March meeting to grow.

The economists are in line with the consensus for no change in BoC rates on Wednesday and OIS price only ~5% chance of a cut. Activity reports have been soft so far in Q4, prompting to lower Q4 GDP forecast to 0.7%, below previous 1.4% expectation and the BoC’s 1.3% October projection. Yet, Governor Poloz suggested there were some transitory factors at play and was not overly concerned in an appearance earlier this month.

Norges Bank announces rates on Thursday and the universal expectation is no change. This is a non‐MPR meeting so there will be little new information on the outlook.

Data released since the previous ECB meeting have been positive and consistent with the slightly more optimistic tone struck by Lagarde in December regarding the economic outlook. The expectation is that there will be no changes in policy or the tone of the press conference this month. The flash PMIs will be watched for evidence that the December improvement in services has been maintained.

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