SCOREBOARD: Fact vs fear

The Aussie data flow this week is stacked pretty heavy. The RBA's meeting on Tuesday is obviously pretty important and in addition we have the Bank's quarterly statement on monetary policy on Friday (11.30am), to explain in more detail whatever action they take.

Another 25bps rise is pretty much a fait accompli – or rather it should be. Despite fears and forecasts to the contrary, the actual data is showing strength. China's economy is robust, America grew at the fastest pace in six years, Australian jobs growth is phenomenal and core inflation is currently above the band. All the while, monetary policy is still stimulatory and will continue to be even if the RBA hikes. Nevertheless we can't dismiss the human factor and the RBA board may indeed end up relying more on fears and forecasts than hard facts. As it is, futures are pricing in a 62 per cent chance of a hike. So traders still expect a hike, but lack the conviction of analysts, all of whom (of those surveyed) expect a 25bps move.

Moves beyond that will of course depend on continuing growth and inflation numbers (and I expect the RBA will time future hikes to the inflation data – so no March move). The actions of commercial banks will be no less important, but I'd be stunned if they hiked above and beyond the RBA this time round – news reports are that NAB has already said it won't.

Think about the global environment. It isn't exactly conducive to hiking above the RBA, when our friends and allies abroad are talking levies and taxes on their own banks. In a world where net interest margins have been rising – hiking above the RBA would be akin to marching to Canberra with a placard reading "please tax us too!”

Other data flow is pretty decent as well. Retail sales for December (Thursday 11.30am) will be closely watched, and coming after a very strong rise of 1.4 per cent in November, some weakness is expected. The median forecast is for a rise of 0.2 per cent but there is a wide range. I'm taking a gutless flat position. For the quarter however, most expect reasonable growth of around 0.6 per cent, although I'm slightly stronger at 0.8 per cent. Either way, retailing should make a reasonable contribution to GDP for growth for the quarter. Otherwise watch out for building approvals (Thursday 11.30am) and the NAB business survey (Tuesday 11.30am). Today we have ANZ jobs ads and the TD inflation gauge.

Data globally includes a run of other central bank meetings – ECB (no change expected, will review its exit strategy in March), BoE (no change expected) Norges Bank (hiked by 25bps in December), but the main event will be US payrolls on Friday (January data). A rise of 20k is forecast but remember there may be some seasonal distortions due to bad weather and we also have the annual benchmark revisions. The unemployment rate is forecast to remain at 10 per cent. Prior to that we have the ISM manufacturing survey tonight (modest fall expected), alongside spending, income and core inflation.

Just a quick word on the Kiwi front for those who are watchers. Apparently RBNZ governor Alan Bollard said on Friday (not reported) or implied that there could be some heavy lifting to do with rates once they start mid-year (or April as I expect) and that people should remember that rates didn't come down in 25bps steps.

That's about the lot – note we have a Chinese PMI today at noon in addition to the Aussie data already mentioned (ANZ job ads, TD inflation gauge). There is a chance of wage agreement data for Australia as well at 2pm – not normally market moving.