Key Events In Developed Markets Next Week - Saturday, January 16

Biden's inauguration will be the dominating event next week. However, keep an eye on the US housing market numbers, central bank decisions from the eurozone, Canada, Japan, and Norway, and PMI data releases.

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US: Biden inauguration will dominate but keep an eye on housing numbers

The inauguration of Joe Biden as the 46th President will dominate headlines around the world, with security having been stepped up following events in Washington DC earlier in the month. Joe Biden has already made the case for another substantial fiscal package given the calamitous impact the pandemic has had on the economy, but this will still require working with Republicans to get the legislation passed swiftly.

In terms of the data, it will be housing numbers that lead the agenda. Record low mortgage rates have supported activity and that will continue to be the case. The housing market is more insulated from the pain felt in the leisure and hospitality sector given the bulk of the workers who lost their jobs are relatively young and the median age for a home buyer in the United States is 47, according to the National Association of Realtors. The strength in housing has positive knock-on effects for retail sales tied to home furnishings and building supplies while also boosting employment in the construction sector.

None of this will alter the outlook for stable monetary policy from the Federal Reserve on 27 January. The recent increase in longer-dated yields and the consequent steepening of the yield curve has caused some concern at the Fed given the speed and scale of the move. Talk of asset purchase tapering (the Fed is currently spending $80bn a month on Treasuries and $40bn per month on mortgage-backed securities) has been knocked on the head based on recent Fed comments and we expect them to retain a dovish bias given the ongoing pandemic.

Eurozone: ECB stance to stay constant

This week, the eurozone focus will be on the European Central Bank, but after December’s big splash there is not much to be expected this time around. ECB President Christine Lagarde will be happy to sit this one out and wait for more information about the second wave impact on the economy and vaccination programmes to come in. In terms of data, the PMIs will be worth watching on Friday. December data was rather upbeat but came in before the harsh German and Dutch lockdowns were announced. Since then, more countries have tightened restrictions, so don’t get your hopes up for a strong reading here.

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