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Wednesday’s key focus will be flash inflation readings for both Italy and the Eurozone, ahead of tomorrow’s ECB meeting. US mortgage applications and ADP employment change are on the schedule for this afternoon.
Italy Flash Inflation to Dampen (1000 GMT)
Italy’s headline inflation is seen moderating to +3.8% y/y in January from +3.9% y/y in December. Slight growth is expected on the monthly comparison, seen stepping up to +0.5% m/m from +0.4% m/m. In the December print, food and durable goods prices continued to climb, whilst energy saw promisingly weaker growth rates than the month prior.
Italian harmonised inflation growth is projected to weaken for the first time in six months to +4.0% y/y from +4.2% y/y in December, however analysts are looking for a substantial monthly slowdown to -0.7% m/m, down 1.2 points from +0.5% m/m.
Eurozone Flash Inflation Forecasts Look (too) Optimistic (1000 GMT)
The ECB will be closely eyeing today’s preliminary CPI numbers for proof of inflation having peaked ahead of their Thursday meeting. The consensus is anticipating Eurozone inflation to moderate to +4.4% y/y in the January estimate, down 0.6 points from December’s record high of +5.0% y/y. This would be the first softening of HICP growth in six months. A one-point contraction of -0.4% m/m from +0.4% m/m is expected.
Core inflation is seen moderating to below the ECB’s target interest rate at +1.9% y/y from +2.6% y/y in December.
These substantial improvements in the region’s aggregate inflation prints are due to the assumption of inflation having peaked, underpinned by the fade-away of base-effects such as the German VAT cuts. Upside risks are very likely, following French, German, Italian and Spanish prints all outpacing forecasts in the prelim readings this week.
US MBA Mortgage Applications Likely to Fall Further (1200 GMT)
US mortgage applications are due today for last week, following a fall of -7.1% in the week prior. The MBA highlighted that incentive to refinance is particularly low with increasing rates seen at present.
US ADP Employment Change To Weaken (1315 GMT)
The ADP employment change is predicted to be significantly lower than December, with +184k employees hired in the private sector for the month of January. December saw a significantly higher reading as it did not yet encompass the effects of the Omicron variant, which began to surge towards the end of the month and appears to have peaked mid-January. The ADP notes that private sector remain almost 4 million payrolls behind the pre-pandemic level.
The key policymaker appearances on the schedule today are both from the BOC; Deputy Gravelle and Governor Macklem. Links to events are in the calendar below.
| Date | GMT/Local | Impact | Flag | Country | Event |
| 02/02/2022 | 1000/1100 | *** |  | IT | HICP (p) |
| 02/02/2022 | 1000/1100 | *** |  | EU | HICP (p) |
| 02/02/2022 | 1200/0700 | ** |  | US | MBA Weekly Applications Index |
| 02/02/2022 | 1315/0815 | *** | | US | ADP Employment Report |
| 02/02/2022 | 1330/0830 | * |  | CA | Building Permits |
| 02/02/2022 | 1500/1000 | ** | | US | Housing Vacancies |
| 02/02/2022 | 1500/1000 | | CA | BOC Deputy Gravelle speaks on swaps panel | |
| 02/02/2022 | 1530/1030 | ** | | US | DOE weekly crude oil stocks |
| 02/02/2022 | 2000/1500 | | CA | BOC Gov Macklem testifies at parliamentary committee | |
| 03/02/2022 | 2200/0900 | * |  | AU | IHS Markit Final Australia Services PMI |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.