The main attention this week is expected to be on the first eurogroup meeting this year as euro area finance ministers continue their efforts to resolve the debt crisis, while U.K.’s data will grab attention due to their high relevance.
Euro area finance ministers will convene on Monday in Brussels to tackle many important issues after the decisions reached last year, where they will try to boost confidence further after Mario Draghi’s upbeat comments on Jan. 10.
At the end of last year, European officials reached an agreement with the IMF to unlock Greeces next aid tranche on four installments starting from December and ending in March 2013. Another critical outcome of the latest EU finance ministers gathering was making the ECB as chief supervisor of euro zone banks which is deemed a step of a paramount importance as it paves the way for a strong European banking union.
Hence, the Jan. 21 meeting will probably show approval on rescue loans worth 12 billion for Greece as well as direct bank recapitalizations and single banking supervision.
The eurogroup will consider help for Cyprus during the meeting in addition to discussing Spain’s budget.
It is also important to highlight this meeting will witness an important event which is naming the new head of the eurogroup as Luxembourg’s Jean-Claude Junker has reiterated his intention to step down before the end of this month.
Germany’s DPA news agency said last week Dutch Finance Minister Jeroen Dijsselbloem will take the lead of the eurogroup at this week’s meeting.
Regarding fundamentals, the main attention is predicted to be on Germany’s investor and business confidence reports for Jan., amid expectations of seeing improvement in both indicators, and euro area’s PMI manufacturing and services advanced readings for this month.
In the U.K., eyes will track the release of fundamentals which include growth and labor market data, plus the BOE’s minutes.
Third quarter GDP which recorded a rebound of 0.9%, to make the U.K. economy leave recession, is expected to be sharply revised down to 0.2% contraction.
The revised seem to be very strong that if it happened it would affect the market significantly as it will raise suspicions of global growth, following last week’s upbeat Chinese fourth quarter GDP figures.
Probably the expected revision is a result of the deterioration in some of the fourth quarter’s data and announcements by the BOE and other analysts that the rebound in the three months through Sep. is temporary, due to the Olympic Games hosted by London during this period, and the economy would soon come back to recession.
Unemployment data due this week will show a rise in the rate to 7.9% in the quarter ended Nov. from a prior of 7.8%, while claimant count change is set to record a rise of 0.8 thousands in Dec. from 3.0 thousands drop in November.
BOE minutes for January’s monetary decision, on the other hand, is predicted to grab attention as it will detect how was the voting during the meeting which showed a hold in monetary stance at 0.50% interest rate and 375 billion pounds of asset purchases.
Last month, the voting came unanimous in favor of leaving borrowing cost unchanged while David Miles resumed his call for an extra 25 billion of QE as he sees that "it would be possible to achieve higher output growth without causing any material inflationary pressure."