USA Q4 GDP should show a growth to 2.5% with a 2.6% clip for real final sales and a tiny $2 bln inventory addition

As you surely know, there's a lot of macroeconomic and stock news to talk about, so we asked HF Markets Head Market Analyst about the Australian inflation print, RBA decision, British pound amid PMIs, the US GDP and, to some, the most tempting events of the near future - McDonald's and Apple Earnings.

This week Australian CPI goes public what do you expect from the print and the RBA decision on February 7th?

Australian inflation, as determined by the CPI print today, is expected to move higher to 7.6% from 7.3% on an annual basis, however the quarterly figure is expected to fall to 1.6% from 1.8%, the lowest level since January 2022, as the low Q4 2021 figure drops out of the calculation. The RBA decision on February 7 remains "in flux" as far as the current market expectations are concerned. 14bp appears to be priced in as AUDUSD breaches the key psychological 0.7000 level this week. However, Hawks are calling for 25bp and Doves will be pitching a "No Change" policy.

Do you expect GBP may be somehow boosted by PMIs on Tuesday?

UK PMIs were disappointing, with the important Services sector slumping to a 2-year low. Data showed a 48.0 reading against expectations of 49.7 with the sector remaining in contraction, along with the manufacturing sector which reported a slight uptick to 46.7 from 45.3. Adding to woes for the UK was news that government borrowing in December hit £27.4bn, a 30-year high, and that ONS productivity data was revised significantly lower, with the UK going from the fastest growing G7 nation to the second slowest.

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USA GDP is the big one this week, what asset could benefit the most from the lower/higher-than-expected print? Are you of the opinion GDP will be seriously taken into consideration by FED?

USA Q4 GDP should show a growth to 2.5% with a 2.6% clip for real final sales and a tiny $2 bln inventory addition that leaves a restrained $40 bln inventory accumulation rate. The Q4 sales climb should be led by a solid 3.4% pace for consumption, alongside an estimated 5.5% growth pace for nonresidential investment. The housing sector should continue to weigh on the economy, with an estimated -12.0% Q4 contraction rate for residential investment. The solid close for GDP growth into the end of 2022 bodes well for a soft-landing path in 2023, though expectations are for a -0.4% contraction rate for GDP in Q1, and the risks for growth in 2023 lie to the downside. All this said, the FED will be more interested in Friday's Core PCE Price Index and its possible m/m increase to 0.3% from 0.2%.

Earnings season is underway: what do you expect from McDonald's and Apple next week?

Next week is a huge week for Q4 Earnings, with the tech giants reporting, topped by APPLE, who report after the market closes on Thursday February 2. Apple shares are up 13% from January lows with the market expecting quarterly revenues of a colossal $122 bln and EPS (Earnings Per Share) to be around $1.93-1.96. The outlook for the key markets of the US and China will be key to how the shares perform from here. Earlier in the week (January 31 before the market opens) iconic restaurant chain McDonald's reports Q4 Earnings. Consensus EPS are in the range of $2.45-$2.51, with revenues expected to show a lift to $5.60 bln.


Stuart Cowell

With over 25 years experience working for a host of globally recognized organisations in the City of London, Stuart Cowell is a passionate advocate of keeping things simple, doing what is probable and understanding how the news, charts and sentiment work together to provide trading opportunities across all asset classes and all time frames.

Stuart has been trading the global markets since 1997 and has also run his own consultancy. He believes that knowing yourself and employing effective risk management are the keys to successful trading.