Investing.com - Global financial markets will focus on this week's European Central Bank meeting for further details on when the central bank plans to end its massive economic stimulus program.
Staying on the central bank front, traders will pay close attention to a monetary policy decision from the Bank of Japan after a small tweak in its bond purchases earlier this month triggered talk that it would cut back on QE.
Mounting chatter that the world's leading central banks will start tightening monetary policy has sparked a global bond market selloff this month, with yields in the U.S., Europe and Asia all spiking higher.
Meanwhile, investors will keep an eye on a preliminary reading of fourth-quarter U.S. growth to gauge if the world's largest economy is strong enough to withstand multiple rate hikes in 2018.
In the UK, market players will focus on the first estimate of British fourth-quarter GDP for further hints on the health of the economy and the likelihood of the Bank of England raising interest rates this year.
Inflation data out of Canada will also garner some attention after the Bank of Canada raised interest rates for the third time in seven months last week.
Another headliner this week will be the World Economic Forum in Davos, Switzerland, taking place Tuesday-to-Friday, where U.S. President Donald Trump, German Chancellor Angela Merkel, French President Emmanuel Macron and British Prime Minister Theresa May are all expected to be in attendance.
Global trade will also be in the spotlight in the week ahead, as U.S., Canadian and Mexican negotiators convene in Montreal from Tuesday in talks to update the North American Free Trade Agreement.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. European Central Bank Policy Meeting
The European Central Bank is widely expected to keep interest rates at their current record low levels when it holds its first policy meeting of the year at 1245GMT (7:45AM ET) on Thursday. President Mario Draghi will hold what will be a closely-watched press conference 45 minutes after the rate announcement.
The main focus will be whether the ECB thinks the euro zone recovery is now so strong that it can end its €2.5 trillion stimulus program in one fell swoop in September, as some in its ranks have been suggesting recently.
The euro and German Bund yields surged this month after minutes from the ECB's December meeting signaled a revisit to its communication stance in "early" 2018 and specifically a pledge to continue its €2.5 trillion bond-purchasing program.
However, three sources close to the matter said last week any change to guidance was likely to come later than this week's meeting, with the March meeting, when policymakers get updated economic forecasts, seen as a more realistic option.
The ECB cut its monthly bond purchases from €60 billion to €30 billion back in October, but extended the program until the end of September 2018, citing muted price pressures.
Besides the ECB, market players will eye flash survey data on January euro zone business activity due on Wednesday to gauge the strength of the region's economy.
In addition to the PMI data, there are also a pair of surveys on German business morale from both the IFO and ZEW institutes.
2. BOJ Policy Announcement
The Bank of Japan is also seen keeping policy on hold at the conclusion of its two-day rate review on Tuesday, including a pledge to keep short-term interest rates at minus 0.1%, while painting a slightly better picture of the economy. BoJ Governor Haruhiko Kuroda will hold a press conference afterward to discuss the decision.
There have been some indications recently that the central bank is setting the ground to begin discussions on winding back its quantitative easing program. A small reduction in the purchase of long-dated Japanese Government Bonds (JGB) by the BoJ earlier this month triggered speculation it will follow the Federal Reserve and ECB and start normalizing policy sooner than expected.
Data this week also includes export figures for December on Wednesday, which was seen growing for a 13th straight month, thanks to overseas demand for semiconductor manufacturing equipment, steel and cars.
Meanwhile, Thursday's inflation report is expected to show consumer prices posting a 12th straight month of gains in December, although remaining well off the BoJ's 2%-target.
3. U.S. Advanced 4th quarter GDP
The U.S. is to release preliminary figures on fourth-quarter economic growth at 8:30AM ET (1330GMT) Friday. The report is expected to show growth slowing to an annual rate of 3.0% from 3.2%. If GDP comes in as forecast, it would be the third consecutive quarter of 3%-growth, a solid and consistent pattern that hasn't been seen since 2005.
Besides the GDP report, this week's calendar also features data on durable goods orders, new home sales and weekly jobless claims.
The Federal Reserve meets on Jan. 30, but no action is expected to be taken at Fed Chair Janet Yellen's final meeting before she hands the gavel to Jerome Powell. The majority of economists believe that the Fed will hike rates in March, followed by another hike in June, with a third move higher arriving in December.
Meanwhile, for the stock market, investors will digest a heavy week of earnings, which features big-name manufacturers and basic industries companies such as, Caterpillar (NYSE:CAT), General Electric (NYSE:GE), Ford (NYSE:F), Procter & Gamble (NYSE:PG) and Johnson & Johnson (NYSE:JNJ), as well as tech names Netflix (NASDAQ:NFLX) and Intel (NASDAQ:INTC).
Investors are also likely to continue to monitor the latest headlines coming out of Washington in regard to the government shutdown. Lawmakers have been trying to reach a deal on immigration, which is viewed as crucial to breaking the deadlock.
On the trade front, the coming week may also see more signals about Trump's "America First" stance, as NAFTA talks get underway again in Canada.
The week will close with the president himself delivering a highly anticipated speech on last day of the World Economic Forum at Davos in the Swiss Alps.
4. UK Preliminary Q4 GDP
The Office for National Statistics is to produce preliminary data on U.K. economic growth for the fourth-quarter at 0930GMT (4:30AM ET) on Friday.
The report is forecast to reveal the economy grew 0.4% in the last three months of 2017, after expanding at the same rate in the previous three-month period. On an annualized rate, the British economy is expected to grow 1.4% in the Sept.-Dec. quarter, slowing from growth of 1.7% in the preceding quarter.
Ahead of the GDP report, monthly unemployment data will be eyed on Wednesday for further indications on the continued effect that the Brexit decision is having on the economy.
Politics is also likely to be in focus, as market participants keep an ear out for any news regarding the ongoing Brexit negotiations.
The BoE raised interest rates for the first time in more than ten years in November, but said it sees only gradual rises ahead as Britain prepares to leave the European Union.
5. Canada Inflation Data
Canada is to release December consumer price inflation data at 8:30AM ET (1330GMT) Friday. The report is expected to show that inflation decreased 0.3% last month. On a yearly base, CPI is projected to climb 1.9%.
In addition to the inflation report, this week's calendar also features December retail sales data on Thursday.
The Bank of Canada raised interest rates as expected last week, but said that while more rate hikes are probably warranted, some continued monetary policy accommodation will likely be needed to maintain optimal growth and inflation, citing uncertainty over the future of NAFTA trade pact.
Stay up-to-date on all of this week's economic events by visiting: http://www.investing.com/economic-calendar/
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