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Covid-19 continues to weigh on the major economies, with the vaccine rollouts slowly gathering steam. The financial markets are monitoring the US stimulus plans as it winds its way through Congress. This week’s highlights include Eurozone GDP and UK inflation reports.

Inflation was a bright spot in the eurozone, as German CPI rose from 0.3% to 0.8% in January. Germany’s Whole Price Index (WPI) jumped to 2.1%, up sharply from 0.6%.

British GDP reports were stronger than expected. The economy grew by 1.0% in Q4, better than the estimate of 0.5%. The monthly GDP rose 1.2%, beating the estimate of 1.0%. Still, the economy contracted by 9.9% in 2020, the sharpest annual contraction on record.

In the US, inflation numbers were a bit lower than expected, and the US dollar’s response was muted. Headline inflation dipped from 0.4% to 0.3%, while Core CPI fell from 0.2% to 0.0%. Unemployment claims rose for the first time in four weeks, rising from 779 thousand to 793 thousand. The week wrapped up on a down note, as UoM Consumer Sentiment for January dropped from 79.2 to 76.2 points. It was the lowest level since July 2020.
  1. Eurozone GDP:  Tuesday, 10:00. The Covid pandemic has resulted in huge swings in the economy, with GDP readings of -12.1% and +12.6% in Q2 and Q3 of 2021, respectively. The economy is expected to level off in Q4, with an estimate of -0.7%.
  2. UK Inflation Report: Wednesday, 7:00. Headline inflation improved from 0.3% to 0.6% in December and another solid gain is expected in January, with a forecast of 0.5%. Core CPI rose from 1.1% to 1.4% in December. The estimate for January stands at 1.2%.
  3. US Retail Sales: Wednesday, 13:30. Headline retail sales is expected to rebound after two declines. The January estimate stands at 1.1%. Similarly, core retail sales is projected to climb 0.9%, after a weak reading of -1.4% beforehand.
  4. Canada Inflation Report: Wednesday, 13:30. Headlines inflation disappointed with a reading of -0.2% in December, missing the forecast of 1.0%. Trimmed CPI, which excludes the most volatile items in the headline CPI, ticked lower to 1.6%, down from 1.7%.
  5. Canada ADP Non-Farm Employment Change: Thursday, 13:30. This employment indicator has resumed its losing ways, with a decline of 28.8 thousand in January. Will we see an improvement in February?
  6. French Final CPI: Friday, 7:45. Inflation in the eurozone’s second-largest economy remains weak. The index has gained 0.2% in the past two months, and the estimate for January stands at 0.2%.
  7. US Manufacturing PMI: Friday, 14:45. Manufacturing PMI continues to indicate strong expansion. The PMI rose to 59.1 in January and the upcoming reading stands at 58.8.

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