Markets will again zero in on the U.S. this week, and not just because of Donald Trump in Bloomberg's opinion. The Federal Reserve meeting and nonfarm payrolls may set a clear direction for dollar and yields for the next few months. U.S. GDP data on Friday showed the largest negative contribution from net exports since 2010. This will give the president ammunition for his Twitter feed because it confirms his view on the evils of globalization. So prepare. Beyond Trump’s rhetoric, it’s going to be a big week for orthodox economic developments in the United States.

No one expects a policy shift at the Fed meeting Wednesday. The FOMC has remained silent on whether they are considering hiking rates in March; the market prices around a one-third chance. This low probability reflects last year’s experience of perpetual rate hike delays. But if the Fed hints that a rate hike is a serious possibility for March, pricing should rise to between 50% and 75%. The dollar would obviously benefit. On the other hand, silence would likely lead yields and the dollar to fall. The dot plot in December showed a median expectation of three rate hikes this year. Nothing has happened since then to suggest this is too optimistic. Therefore, it seems likely the FOMC will acknowledge a March hike is a possibility...so there is also an upside risk for the dollar and yields. However, watch out for Friday’s payroll data as a possible sting in the tail. The Fed won’t have access to the data when they announce policy, and it wouldn’t be the first time the data threw a spanner into the Fed’s intentions.

Other US data in addition to the FOMC and payrolls, include ISM, ADP, housing data, personal income & spending, vehicle sales and core PCE.

That said, in the US, the focus on politics will likely remain paramount, with every Trump tweet closely scrutinized.

In addition to the busy US week, we also have policy decisions from the Bank of Japan and Bank of England, and a slew of important data releases from the Euro area including inflation data which is expected to pop higher, and in the UK parliamentary debate on Article 50 among other data and events.

Similar to the FOMC, consensus expects the BoJ to maintain the status quo, and with JGB purchases being reduced, focus turns to when it will remove the ¥80tn guideline for annual purchases. Likewise, the BoE will keep rates on hold and likely end QE, with risks that they sound more hawkish.

Summary of key global events:

A look at daily events for the coming week courtesy of DB's Jim Reid, who notes that we’re kicking the week off in Europe with various January confidence indicators for the Euro area before we then get the first estimate of CPI for Germany in January. It’s a busy start to the week in the US with the December personal income and spending reports along with the PCE core and deflator readings. As well as that, we’ll also get pending home sales and the Dallas Fed manufacturing survey.

Tuesday morning starts in Japan where we’ll get employment indicators, housing starts, construction orders and industrial production data as well as the BoJ policy meeting outcome. During the European session we’ll get CPI, PPI and Q4 GDP in France, unemployment in Germany, net consumer credit and mortgage approvals in the UK and Q4 GDP and January CPI for the Euro area. In the US on Tuesday we’ll get the S&P/Case-Shiller house price index along with the Chicago PMI and consumer confidence.

Turning to Wednesday, the early focus in Asia will be on China where the official manufacturing and non-manufacturing PMI’s in January are due. During the European session we’ll get the confirmation of the final manufacturing PMI’s for the Euro area, Germany and France as well as a first look at the data for the periphery and UK. In the US we’ll get the ADP employment change reading, ISM manufacturing, manufacturing PMI and construction spending. Later in the evening we’ll of course then get the FOMC rate decision.

The data docket is fairly quiet in Asia and Europe on Thursday, however the BoE rate decision and inflation report will be of keen interest. In the US on Thursday we’ll get initial jobless claims and Q4 nonfarm productivity and unit labour costs. We end the week in Asia on Friday with the Caixin manufacturing PMI in China. In Europe we’ll then get the remaining PMI’s (services and composite) as well as retail sales for the Euro area.

We then end with a bang in the US on Friday with the January employment report including the all important payrolls print. As well as that we’ll get the final PMI’s, ISM non-manufacturing and factory orders data.

Away from the data the only Fedspeak this week comes from Evans when he speaks on Friday afternoon. Over at the BoJ we’ll get the minutes from the December meeting on Thursday. Meanwhile at the BoE Carney will speak post the rate decision on Thursday. The other big focus this week is earnings with 106 S&P 500 companies scheduled to report accounting for 22% of the index market cap. Notable reporters include Apple, Facebook, Exxon Mobil, Pfizer, Merck and Amgen. In Europe well also get earnings reports from 58 Stoxx 600 companies including Royal Dutch Shell, Roche and Astra Zenaca. Another potentially interesting event this week is tomorrow’s House of Commons debate in the UK on the government’s draft law to trigger Article 50. The debate is set to last two days.

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Goldman concludes the weekly preview with a summary of key US event highlights together with consensus estimates.

Monday, January 30

8:30 AM Personal income, December (GS +0.5%, consensus +0.4%, last flat); Personal spending, December (GS +0.4%, consensus +0.5%, last +0.2%); PCE price index, December (GS +0.16%, consensus +0.20%, last flat); Core PCE price index, December (GS +0.12%, consensus +0.10, last flat); PCE price index (yoy), December (GS +1.6%, consensus +1.7%, last +1.4%); Core PCE price index (yoy), December (GS +1.7%, consensus +1.7%, last +1.6%): Personal income is likely to rise 0.5% and personal spending by 0.4% in December. Based on details in the PPI and CPI reports and the Q4 GDP report which showed the core PCE price index increased by 1.3%, we expect core PCE prices to increase by 0.12% in December, or 1.7% from a year ago. In the December report, core CPI increased by 0.23% month over month, or 2.2% from a year ago. Additionally, we expect that headline PCE prices rose +0.16% (mom).

Personal income is likely to rise 0.5% and personal spending by 0.4% in December. Based on details in the PPI and CPI reports and the Q4 GDP report which showed the core PCE price index increased by 1.3%, we expect core PCE prices to increase by 0.12% in December, or 1.7% from a year ago. In the December report, core CPI increased by 0.23% month over month, or 2.2% from a year ago. Additionally, we expect that headline PCE prices rose +0.16% (mom). 10:00 AM Pending home sales, December (GS flat, consensus +1.1%, last -2.5%): Regional housing data released so far suggest a second consecutive month of lackluster contract signings for existing homes in December, likely reflecting the recent rise in mortgage rates, which have also weighed on the new homes sales and existing homes sales reports. We expect an unchanged reading for the pending homes sales index following November’s 2.5% drop. We have found pending home sales to be a decent leading indicator of existing home sales with a one- to two-month lag.

Regional housing data released so far suggest a second consecutive month of lackluster contract signings for existing homes in December, likely reflecting the recent rise in mortgage rates, which have also weighed on the new homes sales and existing homes sales reports. We expect an unchanged reading for the pending homes sales index following November’s 2.5% drop. We have found pending home sales to be a decent leading indicator of existing home sales with a one- to two-month lag. 10:30 AM Dallas Fed manufacturing index, January (consensus +15.5, last +15.5)

Tuesday, January 31

08:30 AM Employment cost index, Q4 (GS +0.7%, consensus +0.6%, last +0.6%): We expect the ECI to accelerate modestly to +0.7% in Q4 to a year-over-year pace of 2.4% (compared to 2.3% in Q3), reflecting firming labor markets and an uptrend in our wage tracker— a weighted average of the ECI, average hourly earnings, non-farm compensation per hour, and the Atlanta Fed's wage growth tracker. Our wage tracker stands at 2.8% (yoy) in Q4, roughly unchanged from Q3.

We expect the ECI to accelerate modestly to +0.7% in Q4 to a year-over-year pace of 2.4% (compared to 2.3% in Q3), reflecting firming labor markets and an uptrend in our wage tracker— a weighted average of the ECI, average hourly earnings, non-farm compensation per hour, and the Atlanta Fed's wage growth tracker. Our wage tracker stands at 2.8% (yoy) in Q4, roughly unchanged from Q3. 09:00 AM S&P/Case-Shiller 20-city home price index, November (GS +0.8%, consensus +0.6%, last +0.6%): We expect the S&P/Case-Shiller 20-city home price index to rise 0.8% in the November report, following a 0.6% increase in October. The measure still appears to be influenced by seasonal adjustment challenges, and we place more weight on the year-over-year increase, which at 5.1% is in line with recent trends.

We expect the S&P/Case-Shiller 20-city home price index to rise 0.8% in the November report, following a 0.6% increase in October. The measure still appears to be influenced by seasonal adjustment challenges, and we place more weight on the year-over-year increase, which at 5.1% is in line with recent trends. 09:45 AM Chicago PMI, January (GS 56.0, consensus 55.0, last 53.9): We expect the Chicago PMI to climb to 56.0 after pulling back to 53.9 in the December report. Our slightly-above-consensus forecast reflects the general improvement in manufacturing surveys as well as encouraging commentary from industrial firms.

We expect the Chicago PMI to climb to 56.0 after pulling back to 53.9 in the December report. Our slightly-above-consensus forecast reflects the general improvement in manufacturing surveys as well as encouraging commentary from industrial firms. 10:00 AM Conference Board consumer confidence, January (GS 112.6, consensus 112.8, last 113.7): Consumer confidence is likely to pull back slightly to 112.6 after the index jumped to a 15-year high in the December report, driven by what the Conference Board called “a post-election surge in optimism.” Indicators of consumer sentiment remain strong in January; University of Michigan’s Consumer Sentiment report reached a new cycle high, and Bloomberg’s Consumer Comfort index held roughly steady.

Wednesday, February 1

08:15 AM ADP employment report, January (GS +160k, consensus +167k, last +153k): The ADP report introduced methodological changes with the October release and now offers more details by sector. We find that while the ADP employment report holds limited value for forecasting the BLS’s non-farm payrolls report, large ADP payroll deviations from consensus forecasts are directionally correlated with NFP surprises. We expect a 160k gain in ADP payroll employment in December, reflecting stable hiring trends and a reduction in initial jobless claims.

The ADP report introduced methodological changes with the October release and now offers more details by sector. We find that while the ADP employment report holds limited value for forecasting the BLS’s non-farm payrolls report, large ADP payroll deviations from consensus forecasts are directionally correlated with NFP surprises. We expect a 160k gain in ADP payroll employment in December, reflecting stable hiring trends and a reduction in initial jobless claims. 10:00 AM Construction spending, December (GS +0.8%, consensus +0.2%, last +0.9%): We expect construction spending to increase 0.8% in December, following a firm 0.9% gain in November.

We expect construction spending to increase 0.8% in December, following a firm 0.9% gain in November. 10:00 AM ISM manufacturing, January (GS 55.3, consensus 55.0, last 54.5): Manufacturing surveys continue to signal moderate expansion in business activity, and we expect ISM manufacturing to climb to 55.3 in the January report. The Philly Fed (+3.9pt to 23.6) and Richmond Fed (+4pt to +12) manufacturing sector surveys both strengthened further following encouraging December reports. The Empire State survey (-1.1pt to +6.5) edged down and the Kansas City Fed survey held steady (+9), but both remain firmly in expansionary territory. Our manufacturing survey tracker—which is scaled to the ISM index—rose to 56.6 in January from 55.6.

Manufacturing surveys continue to signal moderate expansion in business activity, and we expect ISM manufacturing to climb to 55.3 in the January report. The Philly Fed (+3.9pt to 23.6) and Richmond Fed (+4pt to +12) manufacturing sector surveys both strengthened further following encouraging December reports. The Empire State survey (-1.1pt to +6.5) edged down and the Kansas City Fed survey held steady (+9), but both remain firmly in expansionary territory. Our manufacturing survey tracker—which is scaled to the ISM index—rose to 56.6 in January from 55.6. 02:00 PM FOMC statement, January 31-February 1 meeting: As noted in our FOMC preview, the FOMC looks very likely to keep policy unchanged. We expect the post-meeting statement to remain relatively upbeat about US growth prospects in the second half, and anticipate few changes to the description of inflation-related data. The balance of risks statement and the characterization of current policy as “accommodative” are both likely to remain unchanged. Additionally, we do not expect any explicit mention of fiscal policy for the time being.

As noted in our FOMC preview, the FOMC looks very likely to keep policy unchanged. We expect the post-meeting statement to remain relatively upbeat about US growth prospects in the second half, and anticipate few changes to the description of inflation-related data. The balance of risks statement and the characterization of current policy as “accommodative” are both likely to remain unchanged. Additionally, we do not expect any explicit mention of fiscal policy for the time being. 4:00 PM Total vehicle sales, January (GS 17.3mn, consensus 17.6mn, last 18.3mn): Domestic vehicle sales, January (GS 13.5mn, consensus 14.0mn, last 14.2mn)

Thursday, February 2

08:30 AM Non-farm productivity, Q4 preliminary (GS +1.1%, consensus +0.9%, last +3.1%): Unit labor costs (qoq), Q4 preliminary (GS +1.5%, consensus +1.9%, last +0.7%); We expect non-farm productivity to increase at an annualized rate of 1.1% in Q4, nicely above the 0.75% trend achieved on average during this cycle. We expect unit labor costs – compensation per hour divided by output per hour – for Q4 to increase 1.5%.

We expect non-farm productivity to increase at an annualized rate of 1.1% in Q4, nicely above the 0.75% trend achieved on average during this cycle. We expect unit labor costs – compensation per hour divided by output per hour – for Q4 to increase 1.5%. 08:30 AM Initial jobless claims, week ended January 28 (GS 250k, consensus 250k, last 259k); Continuing jobless claims, week ended January 21 (last 2,100k): We expect initial jobless claims to fall to 250k following last week’s 22k rebound (to 259k). We believe the bulk of the seasonality-related volatility is now behind us, and we continue to expect claims to settle into a range roughly averaging 255-260k in February and early March. We expect a below trend reading for the week in question, however, reflecting seasonal factors that appear to anticipate a rise in layoffs, as well as some pullback in California, where claims jumped +13k last week, an outlier that seems is likely to normalize going forward.

Friday, February 3

8:30 AM Non-farm payroll employment, January (GS +200k, consensus +175k, last +156k); Private payroll employment, January (GS +190k, consensus +165k, last +144k); Average hourly earnings (mom), January (GS +0.3%, consensus +0.3%, last +0.4%); Average hourly earnings (yoy), January (GS +2.8%, consensus +2.8%, last +2.9%); Unemployment rate, January (GS 4.6%, consensus 4.7%, last 4.7%): We expect January non-farm payrolls to rise 200k following a 156k increase in December, with reacceleration reflecting a combination of lower-than-usual year-end layoffs, favorable weather effects, and a further improvement in employment surveys. The four-week average of initial jobless claimed fell to a 40-year low, and while we believe seasonality-related volatility drove much of the decline, our analysis suggests part of the drop reflects a reduction in year-end retail industry layoffs (and some improvement in the underlying pace of job losses). We also believe unseasonably high snowfall played a role in the softer-than-expected December payrolls report, with as many as 20-40k employees likely to return to work in the January survey period. On the negative side, we expect a below-trend payroll growth in the transportation and warehousing industry, following elevated temporary hiring related to strong online holiday shipments. We expect the unemployment rate to fall one-tenth to 4.6% - which would mark a return to the cycle low – in part driven by reduced year-end retail layoffs. We expect average hourly earnings to rise 0.3% month over month and 2.8% year over year reflecting firming wage growth and state-level minimum wage hikes. The report will also be accompanied by the annual benchmark revision to the establishment survey as well as the annual introduction of new population controls in the household survey.

We expect January non-farm payrolls to rise 200k following a 156k increase in December, with reacceleration reflecting a combination of lower-than-usual year-end layoffs, favorable weather effects, and a further improvement in employment surveys. The four-week average of initial jobless claimed fell to a 40-year low, and while we believe seasonality-related volatility drove much of the decline, our analysis suggests part of the drop reflects a reduction in year-end retail industry layoffs (and some improvement in the underlying pace of job losses). We also believe unseasonably high snowfall played a role in the softer-than-expected December payrolls report, with as many as 20-40k employees likely to return to work in the January survey period. On the negative side, we expect a below-trend payroll growth in the transportation and warehousing industry, following elevated temporary hiring related to strong online holiday shipments. We expect the unemployment rate to fall one-tenth to 4.6% - which would mark a return to the cycle low – in part driven by reduced year-end retail layoffs. We expect average hourly earnings to rise 0.3% month over month and 2.8% year over year reflecting firming wage growth and state-level minimum wage hikes. The report will also be accompanied by the annual benchmark revision to the establishment survey as well as the annual introduction of new population controls in the household survey. 09:15 AM Chicago Fed President Evans (FOMC voter) speaks : Chicago Fed President Charles Evans will give a speech on current economic conditions at the Prairie State College Economic Breakfast in Olympia Fields, Illinois. Audience and media Q&A is expected.

: Chicago Fed President Charles Evans will give a speech on current economic conditions at the Prairie State College Economic Breakfast in Olympia Fields, Illinois. Audience and media Q&A is expected. 09:45 AM Markit services PMI, January final (preliminary 55.1)

10:00 AM ISM non-manufacturing, January (GS 56.6, consensus 57.0, last 56.6): We expect the ISM non-manufacturing index to hold steady at 56.6 in January. In the December report, the ISM non-manufacturing index remained flat at 57.2, and following the ISM’s annual adjustments to its seasonal factors, the index decreased to 56.6 for the month. Overall, non-manufacturing surveys were stronger in January, as the Richmond Fed (+11pt to +15), Philly Fed (+7.2pt to +33.3), and the New York Fed (+8.0pt to +7.4, not seasonally adjusted) service sector surveys all strengthened at the headline level. The Markit Services PMI also expanded at the fastest pace in the last year. Our non-manufacturing tracker stands at 55.9 for January, up from 54.8 in December.

We expect the ISM non-manufacturing index to hold steady at 56.6 in January. In the December report, the ISM non-manufacturing index remained flat at 57.2, and following the ISM’s annual adjustments to its seasonal factors, the index decreased to 56.6 for the month. Overall, non-manufacturing surveys were stronger in January, as the Richmond Fed (+11pt to +15), Philly Fed (+7.2pt to +33.3), and the New York Fed (+8.0pt to +7.4, not seasonally adjusted) service sector surveys all strengthened at the headline level. The Markit Services PMI also expanded at the fastest pace in the last year. Our non-manufacturing tracker stands at 55.9 for January, up from 54.8 in December. 10:00 AM Factory orders, December (GS +0.8%, consensus +1.1%, last -2.4%); Durable goods orders, December final (last -0.4%); Durable goods orders ex-transportation, December final (last +0.5%); Core capital goods orders, December final (last +0.8%); Core capital goods shipments, December final (last +1.0%): We expect factory orders to rebound 0.8% following a 2.4% decline in the November report. Last week’s durable goods report showed new durable goods orders softened 0.4% while core orders were firm.



Source: BofA, Goldman, DB