Friday, January 28, 2011

Weekly Focus: Big Central Bank Divergence Globally

*Market Movers ahead*

We expect data out of the US to be strong with a slight increase in
the manufacturing ISM and private payrolls growth of 180,000 in

In Euroland the focus will be on inflation, both at the ECB's press
conference Thursday and on Monday where we expect the Euroland HICP to
reach 2.3% y/y - a level that has historically been hiking territory
for the ECB.

In Asia the main event will be the release of the two Chinese PMIs.
Both fell in December and we expect both to be broadly flat in

*Global update*

The FOMC meeting this week sprang no big surprises as the statement
showed the same dovish language as in December. We believe it is very
unlikely that the Fed terminates its asset purchase programme before
time and look for the first Fed funds rate hike around mid-2012.

Despite strong macroeconomic data out of Norway, the new governor of
Norges Bank gave no indication that the central bank is considering
adjusting its rate path higher. However, we believe this will not be
too long in coming and we maintain our expectations of a first rate
hike in May.

In Euroland the battle between strong economic data, especially in
Germany, and the debt crisis continues. This week saw another increase
in Euroland PMIs at the same time as the discussion on the future of
the ESFS continued.

Fiscal challenges outside the euro area gained some attention this
week fuelled by the downgrade of Japan's credit rating. Discussion in
the US Congress on fiscal policy is also heating up ahead of the
needed increase of the federal debt ceiling.

*Full Report in PDF*

Source: ActionForex.Com

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