Market movers ahead
We expect focus to continue to be on central banks next week, with the FOMC and Bank of Japan (BoJ) meetings. In our view, the Fed is likely to be reluctant to raise rates in the current environment, with a low oil price, low inflation expectations, risk-off sentiment in US equity markets and weak key economic figures.
We expect the BoJ to leave policy unchanged in January but we believe the probability of additional easing has increased substantially.
In the euro area, we look for inflation to increase in January despite the latest sharp decline in the oil price. Core inflation is also set to increase but inflation is still far from the ECB's 2% inflation target.
In both the UK and the US, the first estimate of GDP growth for Q4 15 is due to be released. In the US, we look for almost no growth, due partly to falling oil investments but also to a negative contribution from inventories. UK services should have lifted growth.
Following the latest sharp oil price decline, Norwegian economic figures are also set to be in focus in the coming week.
Global macro and market themes
We look for a turn in risk sentiment as central banks step in.
China sentiment has become too negative.
EUR/USD is range bound within 1.05-1.10 - set to turn higher later in 2016.
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