Week Ahead 29 January 2024

The Federal Reserve is expected to maintain current interest rates this week. Market observers will closely monitor the post-meeting commentary for any indications of a potential shift towards easing monetary policy in March. Currently, the market is assigning a 50% probability of a rate cut in March, influenced by the latest core PCE data that was in line with the Fed’s inflation expectations at 2.0% in Q4. We expect the Fed to remain on hold until Q2 before starting to ease monetary policy, particularly given the still strong labour market; January non-farm payrolls data will be the key data release this week on that front.

In the Eurozone, attention will be on CPI data this week. Forecasts suggest a decrease in inflation to 2.6% y/y in January from 2.9% y/y in December. The market is currently pricing in an almost 90% probability of a rate cut by April although policy makers have indicated they would prefer to wait until the summer. In the United Kingdom, The Bank of England is expected to hold current interest rates during it's meeting this week.  

China is scheduled to release PMI data on Wednesday. The primary focus is on manufacturing PMI, which exhibited its weakest performance in six months in December at 49.0. The consensus anticipates an increase in manufacturing PMI to 49.2 in January, preceding the Chinese Lunar New Year holiday.