In terms of short-term market direction, the next few days are likely to hinge on the latest inflation prints from the UK and the US.

Today (11 January) sees the release by the US Bureau of Labour Statistics of December’s consumer price index.

After readings of 3.2% in October and 3.1% in November, investors will be hoping inflation continues to fall towards the Federal Reserve’s 2% target so a December print starting with a two would be a good start.

So far, food prices and what is referred to as ‘shelter’ (housing costs) have been the main sticking points while energy costs have been trending negatively thanks to lower gasoline prices.

In the UK, the ONS (Office for National Statistics) releases the December consumer price index on 17 January, and again hopes and expectations are for a continued fall towards more ‘normal’ levels.

November marked a sharp slowdown in the annual rate of inflation to 3.9% against 4.6% in October, and for now the consensus is only expecting a small fall in December.

However, grocery market data published last week by marketing and analytics group Kantar showed food prices rose by just 6.7% in the four weeks to 24 December against a 9.6% increase in November.

That represents the sharpest one-month decrease since the firm began collecting till-roll data and suggests December’s overall price index could surprise positively thanks to lower food and drink inflation.

Finally, market-watchers will be keeping an eye on the raft of US economic data due at the end of next week including retail sales, industrial production and housebuilding, before moving on to the first central bank meetings of the year. 

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