Key events in developed markets next week

US business surveys may well be showing ongoing strength the “hard” activity data for January has been disappointing with both retail sales and manufacturing production missing market expectations. Nonetheless, the employment, wage and confidence figures all look very good and so we believe there are some weather effects hurting the official data and these will quickly reverse. Inflation pressures continue to build and even if we get soft housing numbers next week we are going to need to see something big (a major equity market correction, for example) for the Federal Reserve to choose not to hike interest rates at the March FOMC meeting.

In the Eurozone, next week will tell whether market turmoil has affected confidence among businesses and consumers. While the increased volatility does not seem to come from a downturn in economic fundamentals, it could affect the mood among consumers and expectations for businesses in the months ahead.

The ECB minutes should give additional insights into how the ECB assesses the strength of the euro and whether there has been any discussion on the future path of QE.

As markets try to gauge whether a data-dependent Bank of England will hike rates again in May, next week’s UK jobs report will be closely watched. We expect wage growth to remain unchanged, although the risks are clearly biased to the upside. A positive surprise would add further weight to the Bank’s argument that labour market tightness is forcing firms to increase pay to retain and attract staff. We’d still caution that it is early days, and the year-on-year numbers will creep up over coming months purely on base effects (last winter was very poor for wages). Nonetheless, we think policymakers will be sufficiently satisfied with recent progress on wage growth to prompt a rate hike at the May meeting, although of course this still hinges on further Brexit progress over the next couple of months.

The Ifo index will give the first impression of how German businesses are assessing ongoing political dramas and the new coalition agreement in Germany.