The thirty-third day of the year arrives. They say that the pronunciation of the mysterious 33 allows doctors to listen through the stethoscope if the vibrations inside the patient sound likely or, on the contrary, something is wrong. Between Wednesday, February 1 and Thursday, February 2, the financial stars will align in a confluence that is difficult for investors to digest due to the magnitude of the appointments on the agenda.
Federal (Fed), European Central Bank (ECB) and Bank of England are listed alongside the annual accounts of giants such as Amazon, Apple, Alphabet and Meta on Wall Street and, bridging the gap, those of BBVA and Santander on the Ibex 35. If they shake it, anything can come out, a balm or an explosive?
Of all the benchmarks, the Fed and the ECB rank above all else. The doctors of the two most powerful central banks in the world review the state of their patients: the economies of the dollar area and the euro zone. If the vibrations they hear continue to be inflationary, they will apply new doses of interest rates to reduce the inflammation in prices. Conversely, if they hear an improvement there and some worrisome noise elsewhere (jobs, recession) they may change the pattern.
The financial maelstrom will begin at 8:00 p.m. on Wednesday when the Fed publishes its decision -a rate increase of 25 basis points is expected- and will accelerate from 9:15 p.m. when Jerome Powell finishes giving the bases and clues about, attention, what are you going to do with the balance. Will the pace of bond sales increase? Will it be linked to an announcement of a pause in rate increases? From what he says, the degree of tension and volatility in the main financial stock and bond indices began.
After the Wall Street close, the bullish or bearish wave in January prices will travel through Asia throughout the night until reaching Europe at dawn shortly before the latest inflation data in the euro zone is released. The forecast is that the harmonized CPI will continue to grow above 9%. With that report under her arm, Christine Lagarde and the rest of the ECB governors will have a heated discussion after the division in the council on December 15. It is taken for granted that rates will rise to 3%, 50 basis points more, but we will have to listen to the details and the tone.
At the beginning of her term in December 2019, Lagarde assured that she did not identify with the hawkish (hawkish) probably of greater monetary restrictions, nor with the dovish (doves) that promote more lax policies. “I hope to be an owl that associates with some wisdom. I’ll have my own style. Don’t overinterpret, don’t guess or cross-reference. I’m going to be myself and therefore probably different,” he said.
After his speech a month and a half ago, the markets have once again questioned the credibility of what the French banks say. The mismatch between the ECB’s guidance and the price of government bond yields will have to be adjusted from Thursday. If Lagarde does not limit the message of “several increases” of 50 basis points, some seams may come apart. Otherwise, if he points to March as the last increase of this type, he will once again agree with those who do not trust his words. In any case, the political pressure from European leaders so that the ECB continues to be the big buyer in its public debt auctions will be the true ‘litmus test’ for 2023.
