*Please note; The author is working from UTC +13 when determining the timeline of data releases.
Japan’s Tankan Large Manufacturing Index covering Quarter 4 of 2021 is due Monday, just before 1:00 pm. The Index is expected to show an improvement of one to two points in the business sentiment of Japan’s large manufacturers, capping off six straight quarters of improving sentiment. A bullish index reading could help the Japanese Yen retain some ground it lost against major trading partners last week, as market participants opted for a risk-on bias.
Data emanating from the UK will take up Tuesday, Wednesday, and Friday headlines, with three important events set to influence the direction of the Great British Pound.
On Tuesday night, the UK’s Unemployment Rate YoY to October is expected to decrease to 4.2% from 4.3% in September. The Bank of England (BoE) will consider the Unemployment Rate for its Interest Rate decision, released on December 17. Complicating the matter is the recent covid-19 restrictions (aka. “Plan B”) in the country.
However, the BoE, among other commentators, has recently noted the resilience of the UK job market. Accordingly, Plan B, and any of its negative side-effects, may only end up a footnote in the BoE’s final decision.
Forecasts suggest a significant lift in the UK Inflation Rate could be reported Wednesday night. TradingEconomics is forecasting a lift to 5.0% from 4.2% for the UK’s November YoY figure.
However, a higher than expected inflation rate may not lead to any market turmoil in the GBP. Case in point, leading up to the last BoE Interest Rate Decision, the BoE’s Monetary Policy Committee (MPC) were already predicting that inflation would exceed 5% in 2022. Yet, the MPC voted to delay raising its benchmark rate. This kind of hesitation, on behalf of the BoE, hints that the headline value is a secondary consideration for its Interest Rate Decision.
The US Interest Rate Decision on Thursday morning is wedged in between the UK data releases. The interest rate decision is accompanied by the Federal Open Market Committee (FOMC) Economic Projections. Investors will be watching for notes concerning the Fed’s plan for an accelerated taper and consequently, whether the USD can generate more upside in response.
To cap off all the UK data is the BoE’s Interest Rate decision, released at 1:00 am New Zealand time, so bear in mind your own local time for this major event.
As it stands, investors are giving an interest rate hike a 50/50 chance, down from a 70/30 chance in favour of a hike at the beginning of the month.