Volatility looks set to stay elevated this week with a cocktail of Russia-Ukraine tensions, various central bank meetings and the monthly US non-farm payrolls data. A more hawkish Fed underlay a busy week with Wall Street’s fear gauge, the VIX volatility index well above its long-term average, having hit one-year highs last week.

With a minimum of four interest rate hikes now expected by markets this year, the US data during this week has a lot to live up to with some downside risks forecast for both the January ISM releases and Friday’s jobs data. Gains of under 200k for the latter are estimated, with the latest pandemic developments potentially set to slow the pace of hirings. But Fed officials see a very tight labour market and are expected to look through any temporary softness in job creation.

It’s a tale of two contrasting central bank meetings in Europe with “Super Thursday” seeing the ECB and BoE gather. The latter is widely expected to raise rates for a second consecutive time, but there is speculation that the MPC may water down its previous guidance. There will be no changes to ECB policy with EUR/USD remaining at the mercy of the re-priced Fed tightening cycle.

The late Nasdaq rally into the close on Friday, driven largely by Apple’s 7% gain after its results, avoided a fifth weekly loss for the tech-heavy index. All eyes are now on the rest of the megacap tech stocks with Alphabet reporting on Tuesday, Meta the following day and Amazon on Thursday. Investors should start to get a clearer picture on the path for online ads and if big spenders are felling any sort of pinch into the new year.

Major risk events of the week

31 January 2022, Monday:

-Eurozone GDP: Consensus sees fourth quarter growth slowing to 0.4% from the prior 2.2%. Following two very robust quarters of expansion, the spread of Omicron and resulting restrictions are expected to weigh on growth.

01 February 2022, Tuesday:

-RBA Meeting: The money markets expect rates to be held at 0.1% and the RBA to announce the end of QE in February. Inflation is back in the target band and unemployment is nearing full employment. Local banks forecast that the RBA will begin its tightening cycle in August.

–US ISM: Analysts forecast a reading of 58.0 from 58.7 in December. Manufacturing activity is set to remain relatively strong despite Omicron disruptions. Economists will be on the lookout for any signs of supply disruptions easing within the subcomponents and commentary.

02 February 2022, Wednesday:

–Eurozone CPI: Consensus sees the flash CPI estimate falling to 4.5% from 5.0% in December. The recent surge in inflationary pressures is seen by the ECB as temporary. But the continued rise in oil prices may add further pressure on policymakers going forward.

–OPEC Meeting: The cartel is expected to stick to its plan of gradual production increases, with a 400k barrel per day output rise set to start in March. Oil watchers forecast the market will be back into surplus later this year with strong supply growth from non-OPEC nations helping.

03 February 2022, Thursday:

–Bank of England Meeting: Markets expect the BoE to raise the bank rate by 25bp to 0.50% as inflation remains high and the labour market is tight. This should trigger the start of passive balance sheet reduction, or quantitative tightening, from March. The latest MPR will be published with an assessment of the inflation outlook.

–ECB Meeting: Consensus sees no change to policy measures and there are no new staff projections. Most analysts see the bank sticking to its “transitory” narrative, but some say the bank may emphasise that it is ready to act if inflation shows signs of becoming more entrenched.

04 February 2022, Friday:

-US Non-Farm Payrolls: The market median forecast for the headline print is 178k, lower than the disappointing 199K print in January. The spread of Omicron and bad weather may have reduced hiring intentions. Weak participation is expected to continue, and the unemployment rate is likely to track lower through the first quarter.

-Canada Jobs: Employment growth is expected to slow after the economy added twice as many jobs as expected in December and the unemployment rate hit a 22-month low. The spread of Omicron and fresh restrictions is forecast to slow the pace of hiring in some sectors.