This week, the focus remains on inflation and how central banks may be forced to deal with it sooner, as FX traders fret over interest rate differentials. The persistent increase in inflation is fuelling global yields, which will impact all asset classes, even cryptocurrencies.
US Federal Reserve Chair Jerome Powell will speak Tuesday when he fronts a Senate panel for his nomination hearing, while on Thursday, Vice-Chair nominee Lael Brainard will do the same. Fed expectations have turned decidedly hawkish since the start of the year – so their comments may move markets, even if US nonfarm payrolls massively disappointed on Friday.
Meanwhile, earnings season gets underway this week with a focus on banks, as JP Morgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) report on Friday.
With heightened inflation expectations, the 10-year Treasury yield has risen to its highest in 2 years. It might get another boost this week with US CPI and PPI, while China's December trade data may offer clues as to how much yuan strength authorities will tolerate.
US December core CPI is expected to have risen 5.4% annually after climbing 4.9% in November. Other US economic data this week include retail sales, jobless claims and University of Michigan consumer sentiment. A relatively quiet week ahead for Europe with Eurozone industrial production and trade data the only notable releases.
The United Kingdom will also publish trade and industrial production numbers. On Friday, China's trade data will be scrutinized for the breakdown of imports and exports, amid worries that the yuan's 6-year high versus peers might impact international trade.
It will be a bit busier in Australia with building approvals, consumer sentiment, retail sales, and trade data due.