We get a smorgasbord of G-10 central bank meetings this week . The Fed, ECB, Bank of England, Bank of Japan and the Swiss National Bank will all deliberate on policy measures, amid the continued uncertainty over the Omicron variant. The market is currently taking a glass half-full view to Covid news flow, with the Vix back down to its long-term average around 20.

The Fed has already telegraphed the chance of faster tapering, with consensus expecting bond buying to finish in March. The new “dot plot” and forecasts are set to include at least a two-hike view for 2022 and the updated terminal rate will be particularly important.

Omicron is likely to make it more difficult for the ECB and BoE. The former is still expected to wind down its emergency bond buying program in March. But the new staff inflation projections may be lowered in tune with “team transitory”. Meanwhile, policymakers at the Bank of England have become slightly more cautious, even though the new variant could potentially exacerbate the supply chain recovery. There’s around a 40% chance of a 15bp hike.

Risk events of the week

14 December 2021, Tuesday:

– UK Jobs: Consensus expects the unemployment rate to fall one-tenth to 4.2% in October. Economists highlight the abundance of vacancies, with three straight months of more than one million jobs available. Wage growth may increase with the lifting of the furlough scheme.

15 December 2021, Wednesday:

– UK CPI: Inflation remains a concern for the BoE, with the forecast 4.8% headline print making for uncomfortable reading. Higher petrol, food and clothing prices all came together in November to keep the pressure on the MPC.

– US Retail Sales: A rise of 0.8% is forecast with consumers continuing to start their holiday shopping early. High inflation is not dampening spending, even as consumer sentiment falls.

16 December 2021, Thursday

– Australia Jobs: Analysts forecast a gain of 200k jobs, after the 46k fall in October. Rising participation should lift unemployment to 5% from the 5.2% prior print.

– Eurozone PMIs: With a fourth wave hitting the region, surging infections will weigh on the composite, which is predicted to fall to 54.0 from 55.4. Performance may vary widely across the continent due to more severe restrictions.

17 December 2021, Friday

– Bank of Japan Meeting: The BoJ is set to keep ultra-easy policy. But there may be a debate about whether to end its emergency pandemic-relief programmes beyond the current March 2022 deadline.

– UK Retail Sales: Analysts estimate a reading of +0.3% following a surge in sales in October, after five months of declining volumes. Black Friday activity was robust, while base effects may flatter the annual comparison.

– IFO Business Survey: The all-important German confidence index is due to fall for a sixth month running. New restrictions and rising Covid cases should weigh on morale as rising energy prices and supply bottlenecks persist.