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Macroeconomic & Geopolitical

Going Viral: The Coronavirus or a Central Bank Holding Pattern?

23 January 2020 - 3 min read

Wuhan goes on lockdown while the U.S. shifts trade truce considerations to Europe. Meanwhile, Central banks remain optimistic for strengthening global growth, and we’re vigilant for potential insurance cuts from the BoE next week.

Watch List

Arrows indicate consensus forecast compared to the previous period.
 

U.S.

  • The FOMC is set to remain on hold in January, while maintaining an easing bias. Incoming labor market, sentiment, and housing data have been upbeat and global uncertainty is waning, while wage pressures and inflation remain muted.
  • GDP is expected to see a modest uptick to 2.2% in Q4. Consumer spending will drive growth, but at a slower pace, and residential investment and trade will aid growth.

Europe

  • We expect the BoE to keep its policy rate steady, but the markets are pricing in a 59% chance of an insurance cut. The CBI Survey beat forecasts and showed improving capex plans and new orders—good forward indicators. The RICS and the Deloitte CFO survey also had solid readings, suggesting a post-election boost will aid the economy. If the January flash PMI is upbeat, the BoE will likely stay on hold.
  • The German IFO business climate index is expected to increase in January, as sentiment—particularly expectations—improves across the globe.

Asia Pacific

  • China’s official manufacturing PMI for January is expected to remain relatively unchanged in expansionary territory. The official PMI is more highly correlated with industrial production than the Caixin, so this will act as a good gauge for IP growth.
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