Markets are expected to remain volatile after the FOMC minutes last week lit a spark under rates markets. US bond yields have enjoyed a rip-roaring start to the year as bonds have plummeted and the Fed finally starts to tackle persistent price pressures, a tight labour market and robust economic outlook.

Hot inflation will no doubt grab the headlines this week with Wednesday’s release of the US CPI data for December. Numerous analysts forecast a headline print above 7% and the core moving towards 5.4%, with the usual suspects (shelter costs, wage inflation, vehicle prices) continuing to drive prices higher.

With the labour market pretty much in line with the Fed’s maximum-employment goal, even allowing for Friday’s NFP headline disappointment, any surprises in the data could reinforce or reverse some of the year’s market momentum, depending on their direction. A first Fed rate hike in March is now 90% priced in, though the consensus long dollar trade is yet to ignite. The rotation out of growth stocks into value sectors should continue.

Major risk events of the week

10 January 2022, Monday:

-Eurozone Sentix Confidence Survey: Investor morale fell in December to its lowest level since April, while a current conditions index dropped for a third month. Renewed restrictions to contain the Omicron variant are set to cloud the growth outlook further.

12 January 2022, Wednesday:

-US CPI: The must-watch figure of the week may see the headline rate above 7% – near a 40-year high – and the core rising well above 5%. Although it is not the Fed’s preferred measure of inflation, the data is expected to reinforce the Fed’s more hawkish narrative and could push the DXY out of its current range.

14 January 2022, Friday:

-UK November GDP: Economists see slightly faster growth, mainly due to better activity in the services sector. Although momentum may slow in the next few months due to Omicron, hopes are high for a Spring rebound. GBP rose to two-month highs last week on short-covering and as markets ramped up BoE hike bets.

-US Retail Sales: Sales rose for a fourth straight month in November, after surging 1.8% in October. This was a likely payback from consumers starting their holiday shopping early to avoid empty shelves. A rotation in spending from goods to services may drag on the data.