The potential for monetary policy tightening is dominating the market’s thinking at present. The strong US CPI report released last week added more pressure on the US Federal Reserve to start lifting rates earlier than once thought, potentially as soon as March. We’ve had numerous FOMC members recently marking a more hawkish bias to the committee’s views, including notably, the fabled dove Brainard in her Fed chair nomination appearance before the Senate.

It’s worth remembering that the blackout period has started before the next Fed meeting on 26 January so there won’t be any more Committee members to listen out for on the wires. It is a US holiday on Monday, so their markets are closed.

Company earnings continue with more top tier US banks like Goldman Sachs and Morgan Stanley releasing their fourth quarter results, plus Netflix after the market closes on Thursday. US stocks notched their second straight weekly decline, helped lower by disappointing earnings from financial industry bellwether JP Morgan Chase which fell over 6%. Increasing wage pressure, price inflation and a tight labour market will affect forecasts.

Major risk events of the week

17 January 2022, Monday:

–China data: We kick off the week with Chinese fourth quarter GDP, as well as industrial production and retail sales. The data should confirm that the final quarter was weak but the real test for the domestic economy will come in the first quarter of this year, due to current regional lockdowns on top of the ongoing woes in the property sector.

18 January 2022, Tuesday:

–Bank of Japan meeting: This normally quiet central bank meeting is getting some airtime after “sources” said it is thinking of a rate hike at some point beyond this year and debating how to manage the messaging. Inflation is picking up and possibly risks to prices may now be described as “balanced” but hitting the 2% inflation target is still a very long way off.

– UK Jobs: Consensus expects the unemployment rate to remain unchanged at 4.2%. The labour market remains tight and prior data distortions are set to fade leaving earnings roughly where they were pre-pandemic. The end of the furlough scheme did not hurt as many forecast and this adds to the hawkish picture for the Bank of England.

19 January 2022, Wednesday:

–UK CPI: Another strong print is expected with headline inflation above 5% after the decade high in November. The key issue is how high prices will rise due to the increase in the household energy price cap in April. Analysts forecast a CPI top possibly around 6.5%, more than three times the BoE’s target.

20 January 2022, Thursday:

–People’s Bank of China policy announcement: After the PBoC surprisingly cut the one-year Loan Prime Rate last month, current opinion is divided as to whether policymakers will pull the trigger again. A rate cut may not be a signal on near-term policy unless the bank adds to forward guidance. China’s current zero-Covid policy is under pressure with the energy shock and defaults in the real estate sector likely to influence the decision.