Week Ahead: Q4 Earnings & China GDP

Hello and welcome to the SpreadEx preview of the big events for the week ahead in financial markets, including a review of the important market news and price moves of the past week.

Week in review: Hot inflation but meek Powell

Inflation was the central theme of the week for US Markets. Even though the official data showed another month of decades-high price increases, it was comments by Powel and nominee for Vice Chair Brainard that codified the market reaction. Investors understood the Fed will likely take an aggressive stance on inflation and raise rates as soon as they finish winding down QE but chose to sell the news that had already been priced in.

In Europe, inflation data continued to show increasing divergence between the central & northern countries versus the periphery. With inflation even in Germany expected to exceed the ECB's target, pressure is mounting for the bank to dial back its asset purchase program.

On the geopolitical front, extended talks between NATO, Russia and European representatives ended without any progress, leaving the Russian ruble exposed and adding to the upwards pressure on oil. Energy prices remain high as another wave of cold weather is projected for the coming week. Without easing tensions between Russia and the West, natural gas and electricity prices in Europe are expected to remain high.

5 big things to watch next week

Q4 Earnings

Friday saw the unofficial start of the fourth-quarter earnings season, with US banks JPM, WFC, BLK, C and FRC reporting. However, the juice of the season will be through next week when almost a quarter of global corporations report their earnings in a span of just four days. That is likely to set the tone for the markets through the rest of the season. 

Key SPX levels to watch lay at 4500 and 4800.

China GDP

The US will be away on holiday on Monday, but we will get an avalanche of critical data from China, including GDP, Industrial Production and Retail Sales. The expectations suggest a deceleration on all fronts, with most investors focusing on the GDP data. 

An above 3.7% print would add pressure towards 6.34 on USD/CNY, whereas a miss would have investors eye the 6.38 level.

Boris tensions & unemployment data

Later in the week, the UK reports its latest employment figures, and PM Johnson is expected to have another tense session in the Commons. The release of polling data through the week could get extra attention if it implies that Johnson continues to lose support and UK assets, including the pound and the FTSE 100 could feel the impact - finally. UK inflation is expected on Wednesday. 

An important week for GBP/USD, with $1.3790 and $1.3640 on traders' radar.

AUD/USD & ASX in focus

Around the world, also on Wednesday, Australia reports its latest consumer confidence figures, followed by unemployment. However, the data isn't expected to change the outlook for the RBA to keep rates steady. Regardless, it'll likely impact the Aussie dollar, depending on the result. 

Positive figures might prove bullish for AUD/USD up to $0.7350. On the flip side, the $0.72 would offer good support if the outcome is bearish.

Blowback from Canada’s covid restrictions?

Finally, we close out the week with Canadian Retail Sales and Employment figures, which are expected to be impacted by the most recent round of anti-covid measures in economically-significant cities like Toronto. 

A break of the recent low at 1.2450 USD/CAD could be detrimental for the short-term outlook of Loonie as the next level of decent support lies below 1.24. A positive surprise could offer a short-term relief rally towards 1.2569.

Happy trading!

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