This week started with USD strength, which is common around the start of the year from a seasonal perspective but focus quickly shifted to incoming US Data. The US ISM Manufacturing print showed a mixed picture for the US as orders slow, employment remains strong, and prices show inflation falling. Ultimately, this week’s data sets the stage for some key US inflation data next week. At the time of writing, US NFP data is still to be released and a strong beat in the headline jobs number above 350k could be a final boost for the USD into the end of the week.

Other key events from the past week

• EUR: German inflation relief, Jan 03: Germany’s Harmonised Inflation Rate came in at 8.6% vs 9.1% expected. This was a welcome relief in some ways, but with inflation still up over +8% STIR markets did not alter the expected path for the ECB rates. However, if Euro inflation can fall fast then the ECB may slow down its rate hiking cycle. Inflation remains a key focus in Europe too.
• USD: US ISM manufacturing, Jan 04: The print was mixed. Prices were lower, below the market’s minimum expectations, at 39.4 which provides some further assurance that inflation is dropping in the US. However, with new orders falling to 45.2 vs 47 expected the concern is that a harder landing may be ahead for the US.
• Avatar hit: Disney, Jan 04: Disney’s ‘Avatar’ sequel grossed $1.48 billion on Wednesday this week and is now expected to exceed Top Gun’s total sales. Are deeper dips in Disney shares worth holding for the long term?

Key events for the coming week

• USD: Inflation data, January 12: Core inflation is expected to fall to 5.9% next week, so expect any surprises to the upside to give the USD some strength on expectations the Fed needs to hike more aggressively. US inflation is a major market focus as the Fed directs monetary policy to control high inflation.
• Adidas January seasonals: Adidas has a great seasonal run to look at.
• USD: Consumer sentiment, Jan 13: With many Wall Street firms expecting a US recession for 2023 how is the US consumer holding up? Expectations are for consumer sentiment to pick up for January to 60.5 from 59.7 in December.

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