"A new year kicks off with continued focus on central banks and inflation, as well as on signals of how long and deep a recession are we heading into," Danske Bank analysts note.

Focus on US manufacturing data and FOMC minutes

"For inflation pressures to cool off, further tightening of financial conditions and weaker economic activity is still needed."

"The week starts with December manufacturing PMIs being released from the euro area and from Scandinavia. Indices are widely expected to remain below the 50 threshold implying a recessionary environment albeit it seems that activity has continued to recover from October lows. Overnight, we will also get manufacturing PMI data from China."

"Later in the week, on Tuesday, December flash inflation print from Germany is due, while on Wednesday the focus will be on the US manufacturing data and FOMC minutes."

"Friday will be even more interesting as we will get the December flash inflation print from euro area ahead of US nonfarm payrolls in the afternoon."