Week of January 9

Markets are slowly getting back into the swing of things after the holidays with thin trading and few data releases over the last few days. The focus switches to Chinese high-frequency data expected to be released in the coming days.

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The week in review

News out of the US dominated the week, with indicators pointing to the Fed remaining more hawkish than the market would like. FOMC minutes affirmed the case for keeping rates high for a prolonged period, as they showed that no committee members expected a rate cut this year. Jobs numbers supported the view that the labour market in the US remains tight. Key US indices started the year on bad footing, with Nasdaq potentially heading towards 3-year lows below 10430 on the back of a rising dollar. DXY gained nearly 2% last week, with the next resistance at 106.00.

In Europe, the focus remained on the war in Ukraine as unseasonably warm weather helped reduce energy consumption. The first LNG tanker arrived from the US to Germany as part of the energy sourcing switch. Russia proposed a ceasefire for the Orthodox Christmas period. CPI figures from major EU countries came in well below expectations. EUR/USD slid below $1.05 from a high of $1.07 last week due to a stronger dollar, breaking a 3-week steak. Next down is $1.035, whereas up is resistance at $1.06. On the other hand, natural gas plummeted for the 4th consecutive week after nosediving yet another 15% to a local low of $3.50/cm.

TOP EVENTS IN The week ahead

The economic calendar remains relatively light, with potentially market-moving data expected primarily from China. 

China in the spotlight

The week opens with Chinese inflation figures, which are expected to show slow price growth and reduced production prices. China does not have a fixed date to report Q4 GDP, but it could be published as early as Friday, showing relatively modest growth, speeding up from the third quarter. Other data that could come from China but don't have a fixed date include industrial production and retail sales figures. The HK 50 could break past the 21k handle unless a retest sees a pullback down at 20200.

US inflation in focus

On Thursday, the US will release the latest CPI figures, with the expectation that headline inflation has come down faster than the core, although both are expected to triple the target rate. Over the last couple of data releases, economists have overshot their forecasts as price growth has slowed faster than anticipated. The next day, the University of Michigan is expected to report an increase in consumer sentiment. USD/JPY appears to be reversing (for now), with the next major ceiling at 138.00 and support at 132.60.

European data start to pick up

Early in the week, employment figures for the Eurozone will be released. But what could have a more significant impact on the markets is the release of GDP figures from Germany at the end of the week, which is expected to show a slowing of the annual growth rate. The monthly GDP from the UK also comes out, which is expected to show flat growth.EUR/GBP has stalled shy of the 0.89 resistance, with support at 0.88. Breaking past the peak could open the door to the 0.90 stronghold.

Other events and earnings

On Monday, Canada will publish its Ivey PMI. Tuesday will see CPI for Tokyo. On Wednesday, Australia will release its trade balance. Friday will close out with the UK's trade balance and the Eurozone's industrial production. Earnings include reports from Bed Bath & Beyond, Tesco, Sainsbury's, PageGroup, Infosys, Taiwan Semi and UnitedHealth.