Week Ahead: FOMC’s symmetric minutes, German sentiment, UK inflation

FOMC Minutes

The last meeting of the Federal Reserve Committee saw policymakers reaffirming their commitment to letting inflation run hot in order to make up for years of lacklustre price growth. Jerome Powell told reporters after the meeting that “we wanted to underscore our commitment to 2% not being a ceiling, to inflation running symmetrically around 2% and we’re not satisfied with inflation running below 2%”. Expect more underscoring in the minutes, and perhaps more softening of the economic assessment – the post-meeting statement revised its view of consumer spending to “moderate” from “strong” in December.

Germany ZEW sentiment

Industrial production data last week raised further questions over the outlook for the Eurozone. Production fell 4.1% during 2019, and now there’s the added threat of disrupted supply chains thanks to the coronavirus outbreak. Last month’s ZEW sentiment index surged to 26.7 from 10.7 in December, but recent developments suggest that optimism may have been premature.

UK CPI

A soft inflation reading in December had seen markets divided over whether or not the Bank of England was finally about to cut interest rates, having been on hold so long due to Brexit uncertainty. In the end Governor Mark Carney left things unchanged before passing the baton to Andrew Bailey. Another round of soft inflation data this week might not be enough on its own to persuade the Monetary Policy Committee that a rate cut is necessary, but if Friday’s preliminary Markit PMIs also show weakness markets are likely to raise bets on easing soon.

Eyes on OPEC

Oil markets had been hoping that OPEC would ride to the rescue this month, bringing forward its March meeting as the coronavirus outbreak hammers global oil demand. It now seems that this is unlikely, but any rumours to the contrary will still have a strong impact on oil. A change in diagnostic methods last week saw the number of coronavirus cases and deaths race higher, but equities largely shrugged this off. It’s commodities that are bearing the brunt of the economic impact, so key risks remain for oil on virus and OPEC-related headlines.

Heads-Up On Earnings

The following companies are set to publish their quarterly earnings reports this week:

Watch the Week Ahead on XRay

Highlights on XRay this week: