Tag: Japan

  • Dollar Struggles Continue Despite Strong ADP, Caution Prevails

    Dollar Struggles Continue Despite Strong ADP, Caution Prevails


    Dollar remains on the backfoot in early US session, despite the strong ADP private employment report. The data highlights continued resilience in the labor market, with services-driven job growth and sustained wage pressures. While this should theoretically reinforce the case for Fed to maintain its pause in easing for longer, traders appear reluctant to react decisively ahead of Friday’s Non-Farm Payroll report, which will provide a more comprehensive labor market picture.

    Beyond economic data, uncertainty surrounding US-China trade relations is another key factor keeping traders from placing larger bets on the greenback. The additional 10% duties on Chinese goods remain firmly in place. Traders are monitoring the anticipated phone call between US President Donald Trump and Chinese President Xi Jinping, but no official timeline has been set. The lack of diplomatic engagement has kept market caution elevated.

    Adding to the confusion, the US Postal Service reversed its earlier suspension of inbound packages from China and Hong Kong. Instead, it will now work closely with US Customs and Border Protection to enforce the new tariff collection measures more effectively. This aligns with Trump’s decision to close the “de minimis” trade loophole, which previously allowed Chinese e-commerce giants like Temu and Shein to ship goods into the US duty-free in high volumes.

    Overall in the forex markets, Canadian Dollar continues to lead gains this week, supported by the avoidance of US tariffs. Japanese Yen follows closely, buoyed by strong wage growth data, which is raising expectations for further rate hikes from BoC. Australian Dollar has also shown some resilience too. Dollar remains the weakest performer, followed by Euro and New Zealand Dollar. Sterling and Swiss Franc are positioned in the middle of the pack.

    Technically, USD/CAD is now pressing an important cluster support level at 1.4260, with 38.2% retracement of 1.3418 to 1.4791 at 1.4267, and 55 D EMA at 1.4267. Strong support is expected there to complete the pull back from 1.4791 and bring rebound. However, decisive break of 1.4260 will be a sign of broad-based weakness in Dollar for the near term. USD/CAD could dive further to 618% retracement at 1.3942, along with extended selloff in Dollar elsewhere.

    In Europe, at the time of writing, FTSE is up 0.37%. DAX is up 0.15%. CAC is down -0.21%. UK 10-year yield is down -0.061 at 4.464. Germany 10-year yield is down -0.0391 at 2.364. Earlier in Asia,Nikkei rose 0.09%. Hong Kong HSI fell -0.93%. China Shanghai SSE fell -0.65%. Singapore Strait Times fell -0.20%. Japan 10-year JGB yield rose 0.0076 to 1.284.

    US ADP jobs beats expectations with 183k gain, led by services

    US ADP private employment report showed a stronger-than-expected job gain of 183K in January, surpassing market forecasts of 149K.

    Service sector was the clear driver of employment, adding 190K jobs, while goods-producing industries shed -6K positions. By company size, small businesses contributed 39K jobs, medium-sized firms led with 92K, and large corporations added 69K.

    Wage growth remained elevated, with annual pay increases for job-stayers at 4.7% yoy, while job-changers saw an even stronger 6.8% yoy rise.

    According to Nela Richardson, Chief Economist at ADP, the report reveals a “dichotomy” in the labor market, with consumer-facing industries leading the way, while business services and production lag behind.

    Eurozone PPI rises 0.4% in Dec, flat annually

    Eurozone PPI increased by 0.4% mom in December, slightly below market expectations of 0.5% MoM. On a year-over-year basis, PPI was unchanged, above expectations of a -0.1% yoy decline.

    Breaking down the monthly price changes in Eurozone, energy prices saw the biggest increase at 1.4%, followed by durable consumer goods (+0.2%). Capital goods, intermediate goods, and non-durable consumer goods all edged up by 0.1%.

    At the EU level, PPI rose 0.4% mom and 0.1% yoy. The biggest price gains were seen in Bulgaria (+5.1%), Croatia (+2.4%), and Slovakia (+1.5%). On the other hand, Ireland (-1.5%), Romania (-1.3%), and the Netherlands (-0.4%) saw the largest declines.

    Eurozone PMI services finalized at 51.3, no major growth leap expected

    Eurozone Composite PMI was finalized at 50.2 in January, up from 49.6 in December, marking the first month of economic expansion since August. However, PMI Services Index was finalized at 51.3, down from prior month’s1.6, suggesting that while the services sector remains in growth territory, momentum is fading.

    Among individual countries, Spain led the expansion with a Composite PMI of 54.0. Germany’s index climbed to 50.5, hitting an eight-month high, signaling tentative stabilization. Italy remained in contraction at 49.7, while France improved slightly to 47.6.

    According to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, the services sector has been instrumental in preventing a broader economic contraction in the Eurozone. Modest but accelerating new orders and employment offer some optimism that the sector could gain momentum in Q1 2025. However, rising costs in services, particularly due to wage pressures, remain a concern for the ECB.

    The services outlook is “modest”, with business expectations declining slightly and staying below historical averages since mid-2024. Political uncertainties in the Eurozone, including Germany’s upcoming elections and France’s fragile government, continue to weigh on sentiment.

    “No major growth leaps are expected in this sector for now,” de la Rubia added.

    UK PMI services finalized at 15-month low, stagflation concerns rise

    UK PMI Services was finalized at 50.8 in January, slipping from December’s 51.1, marking its joint-lowest level in 15 months. PMI Composite edged up slightly to 50.6, indicating that overall economic activity remains stagnant, with minimal expansion.

    According to Tim Moore, Economics Director at S&P Global Market Intelligence, “stagflation conditions appeared to take a firmer hold”, with weak output growth coupled with persistent cost pressures. Input cost inflation accelerated for the fifth consecutive month, reaching its highest level since April 2024.

    Renewed decline in new business volumes adds to signs that the UK’s economic outlook remains weak, as firms report softening demand conditions. Business confidence has also taken a hit, with expectations for future activity dropping to their lowest level since December 2022.

    The most concerning development is the sharp deterioration in employment trends, as service providers cut jobs at the fastest pace in four years. The “twin perils” of shrinking workloads and rising payroll costs has forced many firms to halt recruitment.

    Japan’s nominal wage growth surges 4.8% yoy in Dec, real wages rise for second month

    Japan’s labor market showed strong wage growth in December, with labor cash earnings surging 4.8% yoy, significantly above expectations of 3.8% yoy and accelerating from 3.9% yoy in the prior month. This marks the 36th consecutive month of annual wage increases.

    Regular pay, which includes base salaries, rose 2.7% yoy, while special cash earnings—mainly reflecting winter bonuses—jumped 6.8% yoy, providing an additional boost to workers’ disposable income.

    Real wages, which adjust for inflation, climbed 0.6% yoy, marking the second straight month of positive growth. This improvement comes despite a notable acceleration in consumer inflation, with the price index used to calculate real wages—excluding rent but including fresh food—rising 4.2% yoy, up from 3.4% yoy in November and reaching the highest level since January 2023.

    China’s Caixin PMI services PMI drops to 51.0

    China’s Caixin Services PMI slipped to 51.0 in January, down from 52.2 and below expectations of 52.3. PMI Composite also edged lower from 51.4 to 51.1, marking a four-month low, as both manufacturing and services sectors struggled to gain momentum.

    According to Caixin Insight Group, while supply and demand conditions showed improvement, services growth lagged behind, pointing to weaker consumer activity.

    Wang Zhe, Senior Economist added, “Employment in both sectors fell significantly, and overall price levels remained subdued, particularly factory-gate prices in manufacturing.”

    New Zealand’s unemployment rate rises to 5.1%

    New Zealand’s labor market softened further in Q4, with unemployment rate climbing from 4.8% to 5.1%, in line with expectations and marking the highest level since 2016, excluding the brief spike following the 2020 Covid lockdown.

    Employment fell by -0.1% in the quarter, slightly better than the expected -0.2% decline, but still reflecting ongoing weakness in job creation. Meanwhile, wage growth continued to moderate, with the labor cost index rising 0.6% qoq, bringing the annual rate down to 3.3% from 3.8%.

    The latest data supports the case for further monetary easing by RBNZ, which remains committed to swiftly bringing the OCR down from the current 4.25% toward neutral level. A 50bps rate cut is still widely anticipated at the upcoming policy meeting this month.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0305; (P) 1.0346; (R1) 1.0421; More…

    While EUR/USD’s recovery from 1.0210 continues today, upside is still limited below 1.0531 resistance. Intraday bias remains neutral and further decline is expected. On the downside, break of 1.0176 will resume whole fall from 1.1213. However, sustained break of 1.0531 will rise the chance of bullish reversal and turn bias back to the upside for stronger rally.

    In the bigger picture, immediate focus is back on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, strong support from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Employment Change Q4 -0.10% -0.20% -0.50% -0.60%
    21:45 NZD Unemployment Rate Q4 5.10% 5.10% 4.80%
    21:45 NZD Labour Cost Index Q/Q Q4 0.60% 0.60% 0.60%
    23:30 JPY Labor Cash Earnings Y/Y Dec 4.80% 3.80% 3.00% 3.90%
    00:30 JPY Services PMI Jan F 53 52.7 52.7
    01:45 CNY Caixin Services PMI Jan 51 52.3 52.2
    07:45 EUR France Industrial Output M/M Dec -0.40% -0.10% 0.20% 0.10%
    08:50 EUR France Services PMI Jan F 48.2 48.9 48.9
    08:55 EUR Germany Services PMI Jan F 52.5 52.5 52.5
    09:00 EUR Eurozone Services PMI Jan F 51.3 51.4 51.4
    09:30 GBP Services PMI Jan F 50.8 51.2 51.2
    10:00 EUR Eurozone PPI M/M Dec 0.40% 0.50% 1.60% 1.70%
    10:00 EUR Eurozone PPI Y/Y Dec 0.00% -0.10% -1.20%
    13:15 USD ADP Employment Change Jan 183K 149K 122K 176K
    13:30 USD Trade Balance (USD) Dec -98.4B -97.1B -78.2B -78.9B
    13:30 CAD Trade Balance (CAD) Dec 0.7B 0.4B -0.3B -1.0B
    14:45 USD Services PMI Jan F 52.8 52.8
    15:00 USD ISM Services PMI Jan 54.2 54.1
    15:30 USD Crude Oil Inventories 2.4M 3.5M

     



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  • Yen Rises on Strong Wage Data, Gold Continues March to 3000

    Yen Rises on Strong Wage Data, Gold Continues March to 3000


    Japanese Yen gained significant ground in the Asian session, supported by stronger-than-expected nominal wage growth, which bolstered the likelihood of further BoJ rate hikes. Additionally, continued rise in real wages for the second consecutive month, despite being largely driven by seasonal bonuses, adds to the argument that wage pressures could help sustain inflation near the 2% target.

    Supporting this outlook, BoJ monetary affairs director Kazuhiro Masaki told parliament that the central bank is prepared to continue adjusting monetary support and raising rates if underlying inflation progresses toward its 2% target. These remarks reaffirm the expectation that Japan’s interest rate normalization will proceed gradually but steadily this year.

    While Yen leads gains in the forex market, overall sentiment is mixed, with trade war concerns temporarily fading into the background. Canadian Dollar is currently the strongest performer this week, followed by Yen and Swiss Franc. Dollar lags behind as the weakest, joined by Euro and New Zealand Dollar. Sterling and Australian Dollar are treading a middle ground .

    With trade-related uncertainty easing, attention is now shifting back toward key economic events. US ISM Services PMI is due later today. Tomorrow, BoE is expected to announce a 25bps rate cut, but the MPC voting split and economic projections will be crucial in setting future rate expectations. To close the week, US Non-Farm Payrolls and Canada’s employment report will be in focus on Friday.

    Technically, Gold’s record run continues with strong momentum and remains on track to 3000 psychological level, which is close to 38.2% projection of 1810.26 to 2789.92 from 2584.24 at 3074.07. Attention is on whether Gold would lose momentum on overbought condition as it approaches this level. But in any case, outlook will stay bullish as long as 2772.04 support holds.

    In Asia, at the time of writing, Nikkei is down -0.10%. Hong Kong HSI is down -0.69%. China Shanghai SSE is down -0.36%. Singapore Strait Times is down -0.14%. Japan 10-year JGB yield is up 0.0191 at 1.295. Overnight, DOW rose 0.30%. S&P 500 rose 0.72%. NASDAQ rose 1.35%. 10-year yield fell -0.030 to 4.513.

    Fed’s Jefferson and Daly signal no urgency for rate cuts

    Fed Vice Chair Philip Jefferson reaffirmed the cautious approach to policy easing, stating that while a “gradual reduction” in monetary policy restraint towards neutral remains the most likely scenario, there is no urgency to change the current stance.

    “I do not think we need to be in a hurry to change our stance,” he said in a speech overnght.

    He emphasized that policy decisions will continue to be guided by incoming data and the evolving economic outlook, noting that monetary policy is “not on a preset course.”

    Jefferson outlined a “range of scenarios” for future policy moves. If economic activity remains robust and inflation fails to sustainably decline toward 2% target, Fed could maintain its restrictive stance for longer. Conversely, if the labor market weakens unexpectedly or inflation cools faster than expected, the central bank may need to ease policy at a quicker pace.

    Meanwhile, San Francisco Fed President Mary Daly echoed similar sentiments, describing the US economy as “in a very good place.” She emphasized that the central bank is in a strong position to “wait and see” before making any policy moves.

    Japan’s nominal wage growth surges 4.8% yoy in Dec, real wages rise for second month

    Japan’s labor market showed strong wage growth in December, with labor cash earnings surging 4.8% yoy, significantly above expectations of 3.8% yoy and accelerating from 3.9% yoy in the prior month. This marks the 36th consecutive month of annual wage increases.

    Regular pay, which includes base salaries, rose 2.7% yoy, while special cash earnings—mainly reflecting winter bonuses—jumped 6.8% yoy, providing an additional boost to workers’ disposable income.

    Real wages, which adjust for inflation, climbed 0.6% yoy, marking the second straight month of positive growth. This improvement comes despite a notable acceleration in consumer inflation, with the price index used to calculate real wages—excluding rent but including fresh food—rising 4.2% yoy, up from 3.4% yoy in November and reaching the highest level since January 2023.

    China’s Caixin PMI services PMI drops to 51.0

    China’s Caixin Services PMI slipped to 51.0 in January, down from 52.2 and below expectations of 52.3. PMI Composite also edged lower from 51.4 to 51.1, marking a four-month low, as both manufacturing and services sectors struggled to gain momentum.

    According to Caixin Insight Group, while supply and demand conditions showed improvement, services growth lagged behind, pointing to weaker consumer activity.

    Wang Zhe, Senior Economist added, “Employment in both sectors fell significantly, and overall price levels remained subdued, particularly factory-gate prices in manufacturing.”

    New Zealand’s unemployment rate rises to 5.1%

    New Zealand’s labor market softened further in Q4, with unemployment rate climbing from 4.8% to 5.1%, in line with expectations and marking the highest level since 2016, excluding the brief spike following the 2020 Covid lockdown.

    Employment fell by -0.1% in the quarter, slightly better than the expected -0.2% decline, but still reflecting ongoing weakness in job creation. Meanwhile, wage growth continued to moderate, with the labor cost index rising 0.6% qoq, bringing the annual rate down to 3.3% from 3.8%.

    The latest data supports the case for further monetary easing by RBNZ, which remains committed to swiftly bringing the OCR down from the current 4.25% toward neutral level. A 50bps rate cut is still widely anticipated at the upcoming policy meeting this month.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 153.84; (P) 154.68; (R1) 155.18; More…

    USD/JPY’s fall from 158.86 short term top resumed by breaking through 153.70 and intraday bias is back on the downside. Deeper decline should be seen to 38.2% retracement of 139.57 to 158.86 at 151.49. Strong support could be seen from there to bring rebound. But further fall will remain in favor as long as 155.51 resistance holds, in case of recovery. Sustained break of 151.49 will raise the chance of bearish reversal.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Employment Change Q4 -0.10% -0.20% -0.50% -0.60%
    21:45 NZD Unemployment Rate Q4 5.10% 5.10% 4.80%
    21:45 NZD Labour Cost Index Q/Q Q4 0.60% 0.60% 0.60%
    23:30 JPY Labor Cash Earnings Y/Y Dec 4.80% 3.80% 3.00% 3.90%
    00:30 JPY Services PMI Jan F 53 52.7 52.7
    01:45 CNY Caixin Services PMI Jan 51 52.3 52.2
    07:45 EUR France Industrial Output M/M Dec -0.10% 0.20%
    08:50 EUR France Services PMI Jan F 48.9 48.9
    08:55 EUR Germany Services PMI Jan F 52.5 52.5
    09:00 EUR Eurozone Services PMI Jan F 51.4 51.4
    09:30 GBP Services PMI Jan F 51.2 51.2
    10:00 EUR Eurozone PPI M/M Dec 0.50% 1.60%
    10:00 EUR Eurozone PPI Y/Y Dec -0.10% -1.20%
    13:15 USD ADP Employment Change Jan 149K 122K
    13:30 USD Trade Balance (USD) Dec -97.1B -78.2B
    13:30 CAD Trade Balance (CAD) Dec 0.4B -0.3B
    14:45 USD Services PMI Jan F 52.8 52.8
    15:00 USD ISM Services PMI Jan 54.2 54.1
    15:30 USD Crude Oil Inventories 2.4M 3.5M

     



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  • Japan Jibun Bank Services PMI came in at 53, above forecasts (52.7) in January



    Japan Jibun Bank Services PMI came in at 53, above forecasts (52.7) in January



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  • Markets Stay Calm, Await Clarity from Trump-Xi Call

    Markets Stay Calm, Await Clarity from Trump-Xi Call


    Global markets remain stable as US session begins, with sentiment lifted by the delay of tariffs on Canada and Mexico. Nonetheless, investors remain cautious about ongoing tensions between the US and China, as Washington’s additional 10% tariffs on Chinese imports have taken effect. So far, there has been no scheduled phone call between US President Donald Trump and Chinese President Xi Jinping, raising uncertainty over whether negotiations will take place anytime soon.

    China responded swiftly with retaliatory tariffs of up to 15% on U.S. coal and liquefied natural gas, along with a 10% increase in duties on crude oil, farm equipment, and select automobiles, set to begin on February 10. Additionally, Beijing has opened an antitrust investigation into Google, signaling that trade tensions may extend beyond tariffs and into regulatory action against US firms operating in China.

    Unlike the previous trade disputes during Trump’s first term, the current tariff measures appear to be more of a bargaining tool for non-trade-related concessions, making a near-term resolution less likely. Given Beijing’s firm stance, the US may keep the tariffs in place while shifting focus to another geopolitical or economic issue. As a result, investors should prepare for prolonged trade frictions, with potential spillover effects into other sectors.

    In the markets, one development to note is the strong bounce in US 10-year yield as safe-haven flows reversed. Technically, 55 D EMA (now at 4.478) could be a spot to provide enough support to end the corrective pull back from 4.809. Break of 4.664 resistance would argue that rise from 3.603 is ready to resume through 4.809. In case the correction extends, downside should be contained by 38.2% retracement of 3.603 to 4.809 at 4.348. Dollar would likely follow yield for its next move, in particular in USD/JPY.

    In Europe, at the time of writing, FTSE is down -0.10%. DAX is up 0.22%. CAC is up 0.36%. UK 10-year yield is up 0.062 at 4.551. Germany 10-year yield is up 0.038 at 2.429. Earlier in Asia, Nikkei rose 0.72%. Hong Kong HSI rose 2.83%. Singapore Strait Times fell -0.09%. Japan 10-year JGB yield rose 0.0265 to 1.276.

    BoJ’s Ueda prioritizes underlying inflation trends, not short-term volatility

    BoJ Governor Kazuo Ueda reiterated the central bank’s commitment to achieving its 2% inflation target on a sustained basis, emphasizing that the focus remains on underlying inflation rather than temporary price fluctuations.

    Speaking before parliament, Ueda highlighted that BoJ filters out one-off factors such as fuel and volatile fresh food prices when assessing inflation trends.

    However, he acknowledged “that process at times could be difficult”, reinforcing the need for careful analysis before making policy adjustments.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.9065; (P) 0.9131; (R1) 0.9169; More…

    USD/CHF dips mildly today as consolidation from 0.9200 extends with another downleg. Deeper fall could be seen but outlook will stay bullish as long as 0.8956/64 support holds. Firm break of 0.9200/9223 will resume the whole rally from 0.8374 and carry larger bullish implication.

    In the bigger picture, decisive break of 0.9223 resistance will argue that whole down trend from 1.0342 (2017 high) has completed with three waves down to 0.8332 (2023 low). Outlook will be turned bullish for 1.0146 resistance next. Nevertheless, rejection by 0.9223 will retain medium term bearishness for another decline through 0.8332 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Building Permits M/M Dec -5.60% 5.30% 4.90%
    23:50 JPY Monetary Base Y/Y Jan -2.50% -0.50% -1.00%
    15:00 USD Factory Orders M/M Dec -0.70% -0.40%

     



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  • Markets Stabilize, But Trade Risks Persist as US Imposes China Tariffs, Beijing Strikes Back

    Markets Stabilize, But Trade Risks Persist as US Imposes China Tariffs, Beijing Strikes Back


    Global markets found some stability after the US agreed to a 30-day delay on tariffs against Mexico and Canada following agreements on fentanyl trafficking and border security measures. However, trade tensions remain elevated as Washington proceeded with the additional 10% tariff on all Chinese imports. In response, China retaliated by imposing a 15% tariff on US coal and LNG, along with a 10% levy on crude oil, farm equipment, and select automobiles, set to take effect on February 10.

    Further escalation could be on the horizon, as US President Donald Trump signaled that additional tariff hikes on China remain a possibility unless Beijing takes further steps to curb fentanyl exports. Meanwhile, trade friction with the EU is also building. Trump hinted over the weekend that European imports could be his next target, prompting EU leaders at a summit in Brussels to prepare countermeasures while expressing willingness for negotiations. Developments on both fronts will be closely monitored in the days ahead.

    In the currency markets, Canadian Dollar is leading gains for the week so far, rebounding strongly following the tariff delay. Japanese Yen follows as the second-strongest performer, benefiting from risk aversion, while British Pound holds up well. On the weaker side, New Zealand Dollar is underperforming, followed by Euro and Australian Dollar. Dollar has retraced most of its earlier gains and is now trading in the middle of the performance rankings alongside Swiss Franc.

    Technically, Gold hit another record high on risk aversion yesterday after initial volatility. For now, outlook will stay bullish as long as 2730.34 support holds. Next target is 38.2% projection of 1810.26 to 2789.92 from 2584.24 at 3074.07, which is close to 3000 psychological. This level will be crucial in determining the underlying momentum of Gold.

    In Asia, at the time of writing, Nikkei is up 0.82%. Hong Kong HSI is up 1.76%. China is still on holiday. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is up 0.0228 at 1.272. Overnight, DOW fell -0.28%. S&P 500 fell -0.76%. NASDAQ fell -1.20%. 10-year yield fell -0.026 to 4.543.

    CAD rebounds as US pauses tariffs for 30 days

    Canadian Dollar rebounded sharply after US President Donald Trump announced a 30-day pause on planned tariffs against Canadian imports, just hours after implementing a similar delay for Mexico.

    The decision came after negotiations between Trump and Canadian Prime Minister Justin Trudeau, who confirmed that Canada would take aggressive new measures to combat fentanyl trafficking, including deploying nearly 10,000 personnel to reinforce border security. Canada also committed to appointing a “Fentanyl Czar”, classifying cartels as terrorist organizations, and launching a Canada-US “Joint Strike Force” targeting organized crime and money laundering.

    Markets welcomed the de-escalation, as the tariff pause removes immediate downside risks for the Canadian economy. Trump emphasized that the suspension is conditional on further progress in security measures and that an “Economic deal with Canada” may still need to be structured.

    Technically, a short term top is likely formed at 1.4791 in USD/CAD after this week’s strong volatility. More sideway trading should now be seen in the near term. However, outlook will continue to stay bullish as long as 1.4260 cluster support holds (38.2% retracement of 1.3418 to 1.4791 at 1.4267), which is also close to 55 D EMA (now at 1.4267). USD/CAD’s up trend is still in favor to resume at a later stage when the consolidation completes.

    Fed officials stress patience on rate cuts amid tariff uncertainty

    A trio of Fed officials cautioned that new broad-based tariffs could add upward pressure to consumer and producer prices, suggesting a slower pace of rate cuts than previously anticipated.

    Boston Fed President Susan Collins highlighted yesterday that tariffs on both final and intermediate goods risk inflating costs throughout supply chains, requiring “patient” policy decisions.

    “It’s really appropriate for policy to be patient, careful, and there’s no urgency for making additional adjustments, especially given all of the uncertainty, even though, of course, we’re still somewhat restrictive,” Collins said.

    Chicago Fed President Austan Goolsbee also stressed “a ton of uncertainty,” warning that a premature return to lower rates could reignite inflation.

    “We’ve got to be a little more careful and more prudent of how fast rates could come down because there are risks that inflation is about to start kicking back up again,” Goolsbee said.

    Meanwhile, Atlanta Fed President Raphael Bostic noted that any tariff-related surge in prices or inflation expectations might warrant close monitoring before further easing steps are taken.

    BoJ’s Ueda prioritizes underlying inflation trends, not short-term volatility

    BoJ Governor Kazuo Ueda reiterated the central bank’s commitment to achieving its 2% inflation target on a sustained basis, emphasizing that the focus remains on underlying inflation rather than temporary price fluctuations.

    Speaking before parliament, Ueda highlighted that BoJ filters out one-off factors such as fuel and volatile fresh food prices when assessing inflation trends.

    However, he acknowledged “that process at times could be difficult”, reinforcing the need for careful analysis before making policy adjustments.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6130; (P) 0.6184; (R1) 0.6279; More…

    Intraday bias in AUD/USD is turned neutral as it recovered notably after dipping to 0.6087. Some consolidations would be seen first. But outlook will stay bearish as long as 0.6329 resistance holds. Break of 0.6087 will resume larger decline from 0.6941. Next target is 61.8% projection of 0.6687 to 0.6130 from 0.6329 at 0.5985.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6511) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Building Permits M/M Dec -5.60% 5.30% 4.90%
    23:50 JPY Monetary Base Y/Y Jan -2.50% -0.50% -1.00%
    15:00 USD Factory Orders M/M Dec -0.70% -0.40%

     



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  • US-Canada Talks Offer Hope, But Risk Aversion Keeps Yen in Demand

    US-Canada Talks Offer Hope, But Risk Aversion Keeps Yen in Demand


    After a burst of volatility earlier in the session, currency markets are taking a breather as traders reassess the evolving US tariff situation. Comments from White House National Economic Council Director Kevin Hassett helped cool tensions when he clarified that, “This is not a trade war, this is a drug war,” directing the focus toward fentanyl imports rather than a sweeping escalation of protectionist policies. His remarks have provided a temporary sense of relief, as markets take a step back to evaluate whether tariff measures could be adjusted or reversed if progress is made on fentanyl control.

    President Donald Trump’s updates on discussions with Canadian Prime Minister Justin Trudeau have also offered a glimmer of hope that a negotiated outcome could avert more severe tariff measures. Market sentiment hangs on the possibility that resolving fentanyl-related disputes could defuse tensions, but the risks for a breakdown in talks still looms. A failure to find common ground would likely re-energize the recent selloff and send safe-haven flows back into assets like the Japanese Yen, Swiss Franc and Dollar.

    Speaking of currencies, the Yen stands out as the day’s strongest performer so far, benefiting from sliding US Treasury yields and ongoing risk aversion. Dollar remains firm in second place. Sterling is surprising the third strongest, drawing relative support since it appears less threatened by new US tariffs than the European Union. Meanwhile, Swiss Franc has also gained ground on renewed risk-off sentiment. Kiwi, Euro, and Loonie lag behind while Aussie remains under pressure, despite taking a brief pause from its recent downward spiral.

    Technically, AUD/JPY’s fall from 102.39 resumed today by powering through 95.50 support. Immediate focus is now on 61.8% projection of 102.39 to 95.50 from 98.75 at 94.49. Decisive break there could prompt downside acceleration to 100% projection at 91.86. For now, risk will stay on the downside as long as 96.05 support turned resistance holds, in case of recovery.

    In Europe, at the time of writing, FTSE is down -1.57%. DAX is down -2.00%. CAC is down -1.76%. UK 10-year yield is down -0.0996 at 4.440. Germany 10-year yield is down -0.091 at 2.370. Earlier in Asia, Nikkei fell -2.66%. Hong Kong HSI fell -0.04%. China was on holiday. Singapore Strait Times fell -0.76%. Japan 10-year JGB yield rose 0.0075 to 1.249.

    US ISM manufacturing rises to 50.9, ending 26-month contraction

    The US manufacturing sector returned to expansion in January, with ISM Manufacturing PMI rising to 50.9 from 49.2, breaking a 26-month streak of contraction, above expectation of 49.3.

    The improvement was broad-based, signaling stronger demand and increased production capacity. Notably, new orders climbed to 55.1 from 52.1, reflecting growing demand, while production rose to 52.5 from 49.9, indicating that manufacturers are ramping up output in response.

    The employment index also showed a meaningful recovery, rebounding to 50.3 from 45.4, suggesting that firms are hiring again after months of labor market weakness. Meanwhile, input costs rose, with the prices index increasing to 54.9 from 52.5, signaling that inflationary pressures may be creeping back into the supply chain.

    Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, highlighted that the January PMI reading aligns with a projected 2.4% annualized GDP growth rate.

    Eurozone CPI rises to 2.5% in Jan, core unchanged at 2.7%

    Eurozone CPI rose from 2.4% yoy to 2.5% yoy in January, above expectation of 2.4% yoy. CPI core (ex-energy, food, alcohol & tobacco) was unchanged at 2.7% yoy, above expectation of 2.6% yoy.

    Looking at the main components, services is expected to have the highest annual rate in January (3.9%, compared with 4.0% in December), followed by food, alcohol & tobacco (2.3%, compared with 2.6% in December), energy (1.8%, compared with 0.1% in December) and non-energy industrial goods (0.5%, stable compared with December).

    Eurozone PMI manufacturing finalized at 46.6, still too early to talk about greenshoots

    Eurozone PMI Manufacturing was finalized at 46.6, up from December’s 45.1, marking an eight-month high. While still in contraction, the data suggests a slowdown in the sector’s decline. Germany’s PMI rose to 45.0, while France rose to 45.0. Austria (45.7) and Italy (46.3) also saw multi-month highs. Greece (52.8) and Spain (50.9) remained in expansion.

    According to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, despite the improvement, manufacturing remains under pressure. It is “too early” to signal a full recovery. Rising input costs, driven by nearly 7% increase in oil prices, pose risks for firms already facing weak demand. ECB’s easing path could also be complicated if inflationary pressures persist.

    The US is expected to impose tariffs on European exports. However, business confidence has improved, with future output expectations rising four points above the long-term average, partly driven by optimism surrounding upcoming elections in Germany and possibly France.

    While Germany and France remain the weakest performers, the pace of contraction has slowed across multiple sectors. De la Rubia noted that over 90% of Eurozone exports go to markets outside the US, limiting the immediate impact of potential tariffs.

    UK PMI manufacturing finalized at 48.3, outlook remains weak

    UK manufacturing sector remained in contraction at the start of 2025, with January’s final PMI rising slightly to 48.3 from December’s 11-month low of 47.0. Despite the modest improvement, four of the five key components—output, new orders, employment, and stocks of purchases—declined. The only positive indicator was longer average vendor lead times, which typically reflect supply chain constraints rather than stronger demand.

    Rob Dobson, Director at S&P Global Market Intelligence noted that Weak domestic and international demand remains a key drag on the sector, with no clear signs of recovery in sight. Rising cost pressures are also adding to the strain, with input price inflation reaching a two-year high.

    The effects of last year’s Budget changes, particularly increases in the minimum wage and employer National Insurance contributions, are expected to feed further into rising costs. These factors could keep pressure on profit margins and limit any near-term rebound in manufacturing activity. Business confidence remains low, hovering near December’s two-year low, reflecting ongoing uncertainty in both economic conditions and policy direction.

    BoJ opinions signal more rate hikes as inflation risks tilt higher

    BoJ’s Summary of Opinions from the January 23-24 meeting indicates a growing shift toward policy normalization, as multiple board members highlighted mounting inflationary pressures.

    Rising import costs driven by the weak yen have led more businesses to raise prices, prompting concerns that inflation could overshoot expectations.

    One member noted that with economic activity and prices remaining stable, “risks to prices have become more skewed to the upside,” emphasizing that rate hikes should be “timely and gradual.”

    Some policymakers warned that continued Yen depreciation and excessive risk-taking could lead to an overheating of financial activities. To counter this, one board member argued for additional rate hikes to stabilize the currency and prevent further distortions in market expectations regarding BoJ policy.

    At the January meeting, the BoJ raised its short-term policy rate from 0.25% to 0.50%, marking another step away from ultra-loose monetary policy. The central bank also revised its price forecasts higher, reinforcing its confidence that rising wages will sustain inflation near the 2% target.

    Japan’s PMI manufacturing finalized at 48.7, deepest contraction in 10 Months

    Japan’s PMI Manufacturing was finalized at 48.7 in January, down from December’s 49.6. This marks the sharpest decline in output since March 2024, as firms faced a steeper drop in new orders. Weak demand conditions forced manufacturers to scale back production, reflecting ongoing headwinds for the sector.

    According to S&P Global, businesses reacted to falling demand by cutting both inventories and raw material holdings, while also reducing input purchases at the fastest pace in nearly a year. Employment growth also slowed, highlighting a cautious approach to hiring amid economic uncertainty.

    Despite the downturn, manufacturers maintained a positive outlook for future output, though confidence fell to its lowest level since December 2022. While firms expect a recovery in demand, concerns persist over when such an improvement will materialize. The slowdown in input price inflation to a nine-month low provides some relief, but overall, sentiment remains fragile.

    Australia’s retail sales dip -0.1% mom in Dec, less than expected

    Australia’s retail sales turnover edged down by -0.1% mom in December, a smaller decline than the expected -0.7% mom. While the contraction marks a pullback from the strong growth seen in previous months—0.7% mom in November and 0.5% in October mom—it suggests that consumer spending remains relatively resilient.

    According to Robert Ewing, head of business statistics at the Australian Bureau of Statistics, retail activity was supported by extended promotional events, helping to smooth spending patterns over the quarter. He noted that Cyber Monday, which fell in early December, boosted demand for discretionary items, particularly furniture, homewares, electronics, and electrical goods.

    China’s Caixin PMI manufacturing slips to 50.1, growth momentum weakens

    China’s Caixin Manufacturing PMI edged down to 50.1 in January from 50.5 in December.

    According to Caixin Insight Group, manufacturers saw improved logistics and a slight pickup in supply and demand. However, employment levels deteriorated notably, and new export orders remained weak, reflecting sluggish global demand.

    External risks also remain a key concern, with rising geopolitical uncertainty adding pressure to China’s export environment. Disruptions in global trade policies could further dampen overseas demand, making it difficult for manufacturers to sustain current production levels.

    Domestically, consumer spending remains sluggish, highlighting the need for policy measures aimed at boosting disposable income and restoring confidence.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0328; (P) 1.0381; (R1) 1.0412; More…

    Intraday bias in EUR/USD remains on the downside for the moment. Decisive break of 1.0176 will resume whole fall from 1.1213. Next target will be 61.8% projection of 1.1213 to 1.0176 from 1.0531 at 0.9890. On the upside, above 1.0349 resistance will turn intraday bias neutral again first. But outlook will stay bearish as long as 1.0531 resistance holds, in case of strong recovery.

    In the bigger picture, immediate focus is back on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. For now, risk will stay on the downside as long as 1.0531 resistance holds, in case of rebound.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY BOJ Summary of Opinions
    00:30 AUD Retail Sales M/M Dec -0.10% -0.70% 0.80% 0.70%
    00:30 AUD Building Permits M/M Dec 0.70% 1.00% -3.60% -3.40%
    00:30 JPY Manufacturing PMI Jan F 48.7 48.8 48.8
    01:45 CNY Caixin Manufacturing PMI Jan 50.1 50.5 50.5
    08:30 CHF Manufacturing PMI Jan 47.5 48.4
    08:50 EUR France Manufacturing PMI Jan F 45 45.3 45.3
    08:55 EUR Germany Manufacturing PMI Jan F 45 44.1 44.1
    09:00 EUR Eurozone Manufacturing PMI Jan F 46.6 46.1 46.1
    09:30 GBP Manufacturing PMI Jan F 48.3 48.2 48.2
    10:00 EUR Eurozone CPI Y/Y Jan P 2.50% 2.40% 2.40%
    10:00 EUR Eurozone CPI Core Y/Y Jan P 2.70% 2.60% 2.70%
    14:30 CAD Manufacturing PMI Jan 51.6 52.2
    14:45 USD Manufacturing PMI Jan F 51.2 50.1 50.1
    15:00 USD ISM Manufacturing PMI Jan 50.9 49.3 49.3
    15:00 USD ISM Manufacturing Prices Paid Jan 54.9 52.6 52.5
    15:00 USD ISM Manufacturing Employment Index Jan 50.3 45.3
    15:00 USD Construction Spending M/M Dec 0.50% 0.30% 0.00%

     



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  • Trade War 2.0 Shakes Global Markets as Dollar Rallies

    Trade War 2.0 Shakes Global Markets as Dollar Rallies


    Global markets kicked off February under heavy strain as US President Donald Trump’s long-anticipated tariffs on Canada, Mexico, and China came into full effect. Investor sentiment turned sharply negative, with Japan’s Nikkei tumbling over 1,000 points in response. Dollar opened the week with a strong gap higher and maintained solid gains throughout Asian session. Commodity-linked currencies bore the brunt of the selloff, particularly New Zealand and Australian Dollars, which struggled even more than Canadian Dollar—despite Canada being directly targeted by the new tariffs. Meanwhile, Euro and Pound also weakened, though not as severely as the major commodity currencies.

    Looking ahead, the trade dispute theme should continue to dominate market sentiment for the foreseeable future. The US administration has hinted at the likelihood of expanding tariffs to Europe and possibly the UK, though there appears to be some willingness to discuss matters further with London. Beyond trade tensions, upcoming events such as BoE’s policy decision—which is widely expected to involve a 25bps rate reduction—will also command attention. Additionally, a series of key US data releases, including the ISM manufacturing and services indexes plus non-farm payrolls, could further influence the risk mood.

    Another noteworthy shift is taking shape in the cryptocurrency market, where both Bitcoin and Ethereum have taken a steep hit. Although the new tariffs reaffirm Trump’s commitment to his promises—such as turning the US into a major crypto hub—virtual currencies have not benefitted. Instead, global uncertainty has driven investors toward safer assets, prompting a retreat from riskier corners of the market.

    Technically, for now, there’s no panic for Bitcoin yet as 89127 support remains intact. The recent up trend is still in favor to resume for another take on 100k market at a later stage. However, firm break of 89127 support will complete a double top pattern, and could trigger deeper correction back to 73812 resistance turned support and possibly below.

    In Asia, at the time of writing, Nikkei is down -2.74%. Hong Kong HSI is down -0.74%. China is on holiday. Singapore Strait Times is down -0.29%. Japan 10-year JGB yield is down -0.0118 at 1.230.

    Trade War 2.0 kicks off, USD/CAD breaks key resistance with 1.50 in sight

    The long-anticipated escalation in trade tensions has officially materialized as US President Donald Trump imposed sweeping tariffs over the weekend. A 25% tariff is now in effect on imports from Canada and Mexico, while China faces a 10% levy on its exports to the US. The move, widely expected, marks the formal start of what is being called Trade War 2.0.

    In immediate response, Canada announced retaliatory tariffs of 25% on USD 155B worth of US goods, while China indicated that it would file a case against the US at the World Trade Organization.

    Dollar gapped higher as the week started in response to the development. USD/CAD broke through 1.4689 key resistance (2016 high) to resume the long term up trend. Technically, the next medium term target for USD/CAD is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993.

    Though given the scale of uncertainty surrounding the trade dispute, further upside cannot be ruled out. A lack of near-term resolution could see USD/CAD extend even higher toward 61.8% projection of 0.9406 to 1.4689 from 1.2005 at 1.5270 before topping.

    BoJ opinions signal more rate hikes as inflation risks tilt higher

    BoJ’s Summary of Opinions from the January 23-24 meeting indicates a growing shift toward policy normalization, as multiple board members highlighted mounting inflationary pressures.

    Rising import costs driven by the weak yen have led more businesses to raise prices, prompting concerns that inflation could overshoot expectations.

    One member noted that with economic activity and prices remaining stable, “risks to prices have become more skewed to the upside,” emphasizing that rate hikes should be “timely and gradual.”

    Some policymakers warned that continued Yen depreciation and excessive risk-taking could lead to an overheating of financial activities. To counter this, one board member argued for additional rate hikes to stabilize the currency and prevent further distortions in market expectations regarding BoJ policy.

    At the January meeting, the BoJ raised its short-term policy rate from 0.25% to 0.50%, marking another step away from ultra-loose monetary policy. The central bank also revised its price forecasts higher, reinforcing its confidence that rising wages will sustain inflation near the 2% target.

    Japan’s PMI manufacturing finalized at 48.7, deepest contraction in 10 Months

    Japan’s PMI Manufacturing was finalized at 48.7 in January, down from December’s 49.6. This marks the sharpest decline in output since March 2024, as firms faced a steeper drop in new orders. Weak demand conditions forced manufacturers to scale back production, reflecting ongoing headwinds for the sector.

    According to S&P Global, businesses reacted to falling demand by cutting both inventories and raw material holdings, while also reducing input purchases at the fastest pace in nearly a year. Employment growth also slowed, highlighting a cautious approach to hiring amid economic uncertainty.

    Despite the downturn, manufacturers maintained a positive outlook for future output, though confidence fell to its lowest level since December 2022. While firms expect a recovery in demand, concerns persist over when such an improvement will materialize. The slowdown in input price inflation to a nine-month low provides some relief, but overall, sentiment remains fragile.

    Australia’s retail sales dip -0.1% mom in Dec, less than expected

    Australia’s retail sales turnover edged down by -0.1% mom in December, a smaller decline than the expected -0.7% mom. While the contraction marks a pullback from the strong growth seen in previous months—0.7% mom in November and 0.5% in October mom—it suggests that consumer spending remains relatively resilient.

    According to Robert Ewing, head of business statistics at the Australian Bureau of Statistics, retail activity was supported by extended promotional events, helping to smooth spending patterns over the quarter. He noted that Cyber Monday, which fell in early December, boosted demand for discretionary items, particularly furniture, homewares, electronics, and electrical goods.

    China’s Caixin PMI manufacturing slips to 50.1, growth momentum weakens

    China’s Caixin Manufacturing PMI edged down to 50.1 in January from 50.5 in December.

    According to Caixin Insight Group, manufacturers saw improved logistics and a slight pickup in supply and demand. However, employment levels deteriorated notably, and new export orders remained weak, reflecting sluggish global demand.

    External risks also remain a key concern, with rising geopolitical uncertainty adding pressure to China’s export environment. Disruptions in global trade policies could further dampen overseas demand, making it difficult for manufacturers to sustain current production levels.

    Domestically, consumer spending remains sluggish, highlighting the need for policy measures aimed at boosting disposable income and restoring confidence.

    BoE Set to Cut, NFP to Steer Dollar Outlook

    This week’s forex market focus will largely center on BoE upcoming policy decision, where a 25bps rate cut to 4.50% is widely anticipated. Along with the rate announcement, traders will closely watch the MPC voting breakdown and the release of new economic projections.

    Data from the UK since November’s rate cut have painted a mixed picture: GDP growth has stagnated, inflation has eased, but wage growth has unexpectedly picked up. These conflicting signals leave the door open for surprises when the MPC releases its updated forecasts.

    The general consensus favors a gradual easing path for BoE, with a quarterly tempo of 25bps cuts, totaling 100bps for the entire year. However, market expectations are somewhat more conservative, pricing in just over 75bps of easing in 2025.

    Heightened uncertainty stems from several factors, including the domestic effects of the Autumn budget and the fallout from US tariff threats. The new projections and the voting details could help clarify the BoE’s assessment of these risks, especially regarding inflation and growth outlooks.

    MPC voting will be a prime area of focus. Known hawk Catherine Mann aligning with the broader committee in supporting a cut would send a notably dovish signal. Conversely, if the typically dovish Swati Dhingra refrains from advocating a 50bps cut, markets could interpret that as unexpectedly “hawkish”. The interplay of these votes will likely set the tone for Sterling, as traders decipher how unified or divided the committee is on monetary policy strategy.

    Beyond BoE decision, US non-farm payrolls report and ISM manufacturing and services data will grab attention too. After last week’s FOMC hold, Fed Chair Jerome Powell indicated explicitly that the central bank is not in a hurry to cut rates further, even though policy easing remains on course.

    The futures market currently suggests a better-than-even chance that Fed will keep policy on pause at least until May. Unless this week’s data delivers significant surprises—either in job growth or wage pressures—this expectation is unlikely to shift meaningfully.

    The key question revolves around the pace of easing in the second half of the year and the eventual terminal rate. However, given Powell’s recent comments, it’s unlikely that these questions will be answered in the near term.

    Elsewhere, key economic indicators from Eurozone, Japan, Canada, Australia, and New Zealand will also contribute to currency market movements. In particular, Eurozone’s CPI flash, Japan’s wage and household spending, Canada’s employment report, Australia’s retail sales and New Zealand’s employment data will be closely watched.

    Here are some highlights for the week:

    • Monday: BoJ summary of opinions, Japan PMI manufacturing final; Australia retail sales, build approvals; China Caixin PMI manufacturing; Swiss PMI manufacturing; Eurozone PMI manufacturing final, CPI flash; UK PMI manufacturing final; US ISM manufacturing.
    • Tuesday: Japan monetary base; US factory orders.
    • Wednesday: New Zealand employment; Japan labor cash earnings; China Caixin PMI services; Eurozone PMI services final, PPI; UK PMI services final; US ADP employment, trade balance, ISM services; Canada trade balance.
    • Thursday: Australia trade balance, NAB quarterly business confidence; Swiss unemployment rate; Eurozone retail sales; BoE rate decision; US jobless claims, non-farm productivity; Canada Ivey PMI.
    • Friday: Japan household spending, leading indicators; Germany industrial production, trade balance; Swiss foreign currency reserves; Canada employment; US non-farm payrolls.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6189; (P) 0.6226; (R1) 0.6249; More…

    AUD/USD’s fall from 0.6941 resumed by breaking through 0.6130 support today. Intraday bias is back on the downside fro 61.8% projection of 0.6687 to 0.6130 from 0.6329 at 0.5985 next. For now, outlook will stay bearish as long as 0.6329 resistance holds, in case of recovery.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6511) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY BOJ Summary of Opinions
    00:30 AUD Retail Sales M/M Dec -0.10% -0.70% 0.80% 0.70%
    00:30 AUD Building Permits M/M Dec 0.70% 1.00% -3.60% -3.40%
    00:30 JPY Manufacturing PMI Jan F 48.7 48.8 48.8
    01:45 CNY Caixin Manufacturing PMI Jan 50.1 50.5 50.5
    08:30 CHF Manufacturing PMI Jan 48.4
    08:50 EUR France Manufacturing PMI Jan F 45.3 45.3
    08:55 EUR Germany Manufacturing PMI Jan F 44.1 44.1
    09:00 EUR Eurozone Manufacturing PMI Jan F 46.1 46.1
    09:30 GBP Manufacturing PMI Jan F 48.2 48.2
    10:00 EUR Eurozone CPI Y/Y Jan P 2.40% 2.40%
    10:00 EUR Eurozone CPI Core Y/Y Jan P 2.60% 2.70%
    14:30 CAD Manufacturing PMI Jan 52.2
    14:45 USD Manufacturing PMI Jan F 50.1 50.1
    15:00 USD ISM Manufacturing PMI Jan 49.3 49.3
    15:00 USD ISM Manufacturing Prices Paid Jan 52.6 52.5
    15:00 USD ISM Manufacturing Employment Index Jan 45.3
    15:00 USD Construction Spending M/M Dec 0.30% 0.00%

     



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  • Dollar Unfazed by Core Inflation Uptick, Loonie Muted on GDP Contraction

    Dollar Unfazed by Core Inflation Uptick, Loonie Muted on GDP Contraction


    Forex markets remain largely subdued today, with Canadian Dollar being the exception as volatility rises ahead of the implementation of US tariffs tomorrow. Canada is reportedly well prepared to respond with retaliatory measures on US imports worth up to CAD 150B. This comes at a time when Canada’s economy is already under pressure, with November’s GDP data showing a larger-than-expected contraction. However, despite the looming economic strain, Loonie’s selloff remains contained for now, as traders assess the full impact of trade retaliation.

    Meanwhile, Dollar shrugged off the latest PCE inflation data, which showed an uptick in the headline rate while core inflation remained at elevated levels. Fed Governor Michelle Bowman noted at an event that while rate cuts are still expected, their timing will depend on incoming data, given persistent inflation risks. The latest data reinforces Fed’s cautious approach, suggesting that policymakers are unlikely to act at least until Q2.

    For the week, the broader currency market picture remains unchanged. Yen continues to lead as the strongest performer, followed by Dollar and Swiss Franc. Aussie remains the weakest, followed by Kiwi and Euro. British Pound and Loonie sit in the middle.

    Technically, as Gold is extending its record run, Silver is also picking up momentum. Immediate focus is now on 32.30 resistance in Silver. Firm break there should confirm that corrective fall from 34.84 has completed with three waves down to 28.74. While it may be early to confirm larger up trend resumption, in this case, further rally should at least be seen to retest 34.84 high.

    US PCE inflation rises to 2.6% in Dec, core PCE unchanged at 2.8%

    In December in the US, headline PCE price index rose 0.3% mom while core PCE price index rose 0.2% mom, both matched expectations.

    In the 12-month period, PCE price index accelerated from 2.4% yoy to 2.6% yoy. Core PCE price index (Excluding food and energy) was unchanged at 2.8% yoy. Both matched expectations.

    Personal income rose 0.4% mom or USD 92.0B, matched expectations. Personal spending rose 0.7% mom or USD 133.6B, stronger than expected 0.5% mom.

    Canada’s GDP contracts -0.2% mom in Nov, but Dec outlook improves

    Canada’s economy shrank by -0.2% mom in November, marking the largest contraction since December 2023 and coming in weaker than expectations of -0.1% mom decline. The downturn was broad-based, with 13 of 20 sectors reporting declines, underscoring underlying weakness across multiple industries.

    Goods-producing industries led the slowdown, contracting by -0.6% after a strong 0.9% expansion in October. Services sector, which had posted steady gains in previous months, also slipped by -0.1%, marking its first decline in six months.

    Advance estimates suggest that real GDP expanded by 0.2% mom in December, pointing to a rebound. Growth was driven by gains in retail trade, manufacturing, and construction, though this was partially offset by weakness in transportation, real estate, and wholesale trade.

    Tokyo inflation accelerates, keeping BoJ hikes alive

    Japan’s inflationary pressures picked up in January, with Tokyo’s core CPI (excluding fresh food) rising to 2.5% yoy from 2.4%, marking its fastest pace in nearly a year. Core-core measure (excluding food and energy) also edged higher to 1.9% from 1.8%. Meanwhile, headline CPI surged to 3.4% from 3.0%, its highest level in nearly two years, largely driven by rising prices for vegetables and rice.

    The data reinforces expectations that inflation in Japan could continue rising toward 3% in the coming months, as persistently weak yen drives up import costs. Some analysts see room for one or two more rate hikes by BoJ this year, particularly if inflation remains sticky and real wage growth improves. However, with Tokyo services inflation slowing to 0.6% yoy from 1.0% yoy, concerns remain about the sustainability of domestic price pressures.

    On the production side, industrial output rose 0.3% mom in December, matching forecasts. The Ministry of Economy retained its cautious assessment, stating that production “fluctuates indecisively,” though manufacturers expect a 1.0% rise in January and a further 1.2% increase in February.

    Retail sales, however, showed resilience, climbing 3.7% yoy, exceeding expectations of 2.9%. This suggests that consumer demand remains strong despite higher living costs.

    BoJ’s Ueda reaffirms support for economy while keeping rate hikes on the table

    BoJ Governor Kazuo Ueda reiterated the central bank’s is aiming for “gradual pickup” in prices, supported by a “solid increase in wages.” He emphasized that maintaining easy monetary conditions remains necessary to “support economic activity” and ensure that underlying inflation continues rising toward the 2% target.

    However, he also made it clear that BoJ’s stance remains unchanged, noting that it will “continue raising interest rates” and adjust monetary support if the economy and prices “move in line with our forecasts.”

    At the same parliamentary session, Prime Minister Shigeru reinforced the government’s priority of achieving sustainable inflation alongside wage growth. He highlighted that while stable price increases are important, “we must aim for wage growth higher than inflation while prices rise stably.” He also warned against the perception that falling prices are beneficial, arguing that such views prolonged Japan’s deflationary struggles in the past.

    USD/CHF Mid-Day Outlook

    Daily Pivots: (S1) 0.9069; (P) 0.9087; (R1) 0.9114; More…

    Intraday bias in USD/CHF stays mildly on the upside for the moment. Correction from 0.9200 could have completed at 0.8964 already. Further rise should be seen to retest 0.9200 and then 0.9223 key resistance. On the downside, below 0.9058 minor support will turn intraday bias neutral first. Further break of 0.8964 will resume the fall from 0.9200 to 38.2% retracement of 0.8374 to 0.9200 at 0.8884 next.

    In the bigger picture, as long as 0.9223 resistance holds, price actions from 0.8332 (2023 low) are seen as a medium term corrective pattern. That is, long term down trend is in favor to resume through 0.8332 at a later stage. However, sustained break of 0.9223 will be an important sign of bullish trend reversal.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Tokyo CPI Y/Y Jan 3.40% 3.00%
    23:30 JPY Tokyo CPI Core Y/Y Jan 2.50% 2.50% 2.40%
    23:30 JPY Tokyo CPI Core-Core Y/Y Jan 1.90% 1.80%
    23:30 JPY Unemployment Rate Dec 2.40% 2.50% 2.50%
    23:50 JPY Industrial Production M/M Dec P 0.30% 0.30% -2.20%
    23:50 JPY Retail Trade Y/Y Dec 3.70% 2.90% 2.80%
    00:30 AUD PPI Q/Q Q4 0.80% 0.90% 1.00%
    00:30 AUD PPI Y/Y Q4 3.70% 3.90%
    05:00 JPY Housing Starts Y/Y Dec -2.50% -3.40% -1.80%
    07:00 EUR Germany Retail Sales M/M Dec -1.60% -0.20% -0.60% 0.00%
    07:30 CHF Real Retail Sales Y/Y Dec 2.60% 0.60% 0.80% 1.40%
    08:55 EUR Germany Unemployment Change Dec 11K 14K 10K
    08:55 EUR Germany Unemployment Rate Dec 6.20% 6.20% 6.10%
    13:00 EUR Germany CPI M/M Jan P -0.20% 0.10% 0.50%
    13:00 EUR Germany CPI Y/Y Jan P 2.30% 2.60% 2.60%
    13:30 CAD GDP M/M Nov -0.20% -0.10% 0.30%
    13:30 USD Personal Income M/M Dec 0.40% 0.40% 0.30%
    13:30 USD Personal Spending M/M Dec 0.70% 0.50% 0.40% 0.60%
    13:30 USD PCE Price Index M/M Dec 0.30% 0.30% 0.10%
    13:30 USD PCE Price Index Y/Y Dec 2.60% 2.60% 2.40%
    13:30 USD Core PCE Price Index M/M Dec 0.20% 0.20% 0.10%
    13:30 USD Core PCE Price Index Y/Y Dec 2.80% 2.80% 2.80%
    13:30 USD Employment Cost Index Q4 0.90% 1.00% 0.80%
    14:45 USD Chicago PMI Jan 39.9 36.9

     



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  • Euro Gains Modestly After ECB Cut, Dollar Soft on GDP Miss

    Euro Gains Modestly After ECB Cut, Dollar Soft on GDP Miss


    Euro is trading slightly higher following the ECB’s widely expected 25bps rate cut, though the move lacks strong momentum. In her post-meeting press conference, President Christine Lagarde reinforced the bank’s “gradual easing path”.

    She stated that a larger 50bps cut was not even considered today, making it clear that an aggressive rate-cutting cycle is off the table for now.

    At the same time, Lagarde also emphasized that rates remain in “restrictive territory,” and ECB has not yet discussed ending its easing cycle, confirming that further rate cuts remain the way to go.

    Meanwhile, Dollar is under mild pressure after weaker-than-expected Q4 GDP data weighed on sentiment. The greenback slipped alongside US Treasury yields, with the 10-year yield briefly falling below 4.5% mark before recovering. Despite this, Dollar’s decline has been relatively contained outside of USD/JPY, where the Yen is benefiting from falling yields. There is little indication of a sustained Dollar decline at this stage.

    Across the broader forex market, Yen is currently the strongest performer of the day, followed by Euro and Pound. On the weaker side, Kiwi leads losses, followed by Dollar and Aussie. Loonie and Swiss Franc are trading in the middle of the pack.

    Technically, AUD/JPY’s decline is making progress today and breached 96.05 support. The development affirms the case that consolidation from 95.50 has completed at 98.75. Fall from 102.39 is likely ready to resume. Further decline should be seen through 95.50 to 61.8% projection of 102.39 to 95.50 from 98.75 at 94.49. However, touching of 55 4H EMA (now at 97.17) will delay the bearish case, and bring more consolidations first.

    US GDP growth slows to 2.3% in Q4, inflation pressures tick higher

    The US economy expanded at a 2.3% annualized rate in Q4, missing expectations of 2.6% and slowing from Q3’s 3.1% growth.

    The deceleration in growth was primarily driven by weaker investment activity, which offset gains in consumer and government spending. Meanwhile, imports declined, providing a slight boost to the overall GDP figure.

    Inflation data within the report signaled a modest pickup in price pressures. GDP price index rose 2.2% in Q4, up from 1.9% in the previous quarter, though below forecasts of 2.5%.

    PCE price index accelerated to 2.3% from 1.5%, while the core PCE price index (excluding food and energy), a key measure of inflation tracked by Fed, rose to 2.5% from 2.2%.

    US initial jobless claims falls to 207k vs exp 225k

    US initial jobless claims fell -16k to 207k in the week ending January 25, below expectation of 225k. Four-week moving average of initial claims fell -1k to 213k.

    Continuing claims fell -42k to 1858k in the week ending January 18. Four-week moving average of continuing claims rose 6k to 1872k.

    ECB cuts 25bps, disinflation well on track

    ECB delivered a widely expected 25bps rate cut, bringing main refinancing rate to 2.75%,  marginal lending rate  to 2.90%, and deposit rate to 3.15%.

    In its statement, ECB noted that the “disinflation process is well on track,” with inflation evolving broadly in line with projections. Policymakers expect inflation to reach the 2% medium-term target this year, with underlying inflation measures indicating price stability on a “sustained basis.”

    ECB acknowledged that domestic inflation remains elevated due to “wages and prices in certain sectors still adjusting to the past inflation surge with a substantial delay.” Despite this, the central bank noted that wage growth is “moderating,” and corporate profit margins are absorbing part of the cost pressures, preventing a stronger inflation rebound.

    Swiss KOF rises to 101.6, led by manufacturing and services

    Switzerland’s KOF Economic Barometer climbed to 101.6 in January, up from 99.6 and surpassing market expectations of 100.5. This data suggests modest pickup in economic momentum, particularly in production-side sectors.

    According to KOF, “the majority of the production-side indicator bundles included in the KOF Economic Barometer show positive developments.”

    The strongest contributions came from manufacturing, financial and insurance services, hospitality, and other service industries, signaling resilience in key sectors of the Swiss economy.

    However, the outlook remains uneven. While production indicators strengthened, demand-side indicators showed signs of weakness. KOF noted that both “the indicator bundles for foreign demand as well as for private consumption indicate a downward tendency,” highlighting subdued consumer activity and external trade concerns.

    BoJ’s Himino reiterates further hike possible if economic forecasts hold

    BoJ Deputy Governor Ryozo Himino reinforced expectations that the central bank could raise interest rates further if its economic and price projections are met.

    Speaking today, Himino stated, “If our economic and price forecasts are achieved, we will raise our policy rate accordingly and adjust the degree of monetary support.”

    Himino also highlighted concerns about Japan’s prolonged period of negative real interest rates, describing the situation as “not normal.”

    He explained that an ideal economic scenario for Japan would involve rising wages and corporate profits, fueling stronger consumption and investment, which would then support moderate and stable inflation. In such a case, Japan could see real interest rates turn positive.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0387; (P) 1.0415; (R1) 1.0449; More…

    EUR/USD recovers slightly but stays in range below 1.0531. Intraday bias remains neutral for the moment. Outlook is unchanged for now. On the downside, break of 1.0371 support will indicate rejection by 38.2% retracement of 1.1213 to 1.0176 at 1.0572 and retain near term bearishness. Retest of 1.0176 low should be seen next. On the upside, though, decisive break of 1.0572 will raise the chance of bullish reversal, and target 61.8% retracement at 1.0817.

    In the bigger picture, outlook is mixed as fall from 1.1274 (2023 high) could either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. Strong support from 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will favor the former case, and sustained break of 55 W EMA (now at 1.0722) will argue that the third leg might have started. However, sustained trading below 1.0199 will favor the latter case and bring retest of 0.9534 low.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Trade Balance (NZD) Dec 219M -1363M -437M -435M
    00:00 NZD ANZ Business Confidence Jan 54.4 62.3
    00:30 AUD Import Price Index Q/Q Q4 0.20% 1.50% -1.40%
    06:30 EUR France Consumer Spending M/M Dec 0.70% 0.10% 0.30% 0.20%
    06:30 EUR France GDP Q/Q Q4 P -0.10% 0.00% 0.40%
    07:00 CHF Trade Balance (CHF) Dec 3.49B 4.50B 5.42B 6.11B
    08:00 CHF KOF Economic Barometer Jan 101.6 100.5 99.5 99.6
    09:00 EUR Germany GDP Q/Q Q4 P -0.20% -0.10% 0.10%
    09:30 GBP Mortgage Approvals Dec 67K 65K 66K
    09:30 GBP M4 Money Supply M/M Dec 0.10% 0.20% 0.00%
    10:00 EUR Eurozone GDP Q/Q Q4 P 0.00% 0.10% 0.40%
    10:00 EUR Eurozone Unemployment Rate Dec 6.30% 6.30% 6.30%
    10:00 EUR Eurozone Economic Sentiment Indicator Jan 95.2 94.1 93.7
    10:00 EUR Eurozone Industrial Confidence Jan -12.9 -13.8 -14.1
    10:00 EUR Eurozone Services Sentiment Jan 6.6 6 5.9 5.7
    10:00 EUR Eurozone Consumer Confidence Jan F -14.2 -14.2 -14.2
    13:15 EUR ECB Deposit Rate 2.75% 2.75% 3.00%
    13:15 EUR ECB Main Refinancing Rate 2.90% 2.90% 3.15%
    13:30 USD Initial Jobless Claims (Jan 24) 207K 225K 223K
    13:30 USD GDP Annualized Q4 P 2.30% 2.60% 3.10%
    13:30 USD GDP Price Index Q4 P 2.20% 2.50% 1.90%
    13:45 EUR ECB Press Conference
    15:00 USD Pending Home Sales M/M Dec -0.90% 2.20%
    15:30 USD Natural Gas Storage -317B -223B

     



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  • Will closely monitor the impact of rate hike on economy

    Will closely monitor the impact of rate hike on economy


    Japan’s Economy Minister Ryosei Akazawa said on Tuesday that he ”will closely monitor the impact of the rate hike on the economy.”

    Separately, the Bank of Japan (BoJ) announced that it would provide JPY200 billion through the outright purchase of commercial paper.

    The Japanese central bank added that it would supply the US Dollar (USD) funds against pooled collateral.

    Market reaction

    USD/JPY is off the high but stays firm near 155.30 following these headlines, still up 0.50% on the day.

    Bank of Japan FAQs

    The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

    The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

    The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

    A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.

     



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  • Euro Strengthens on Optimistic PMI Data; Dollar and Yen Under Pressure

    Euro Strengthens on Optimistic PMI Data; Dollar and Yen Under Pressure


    Euro posted notable gains today as lifted by encouraging Eurozone PMI data that suggests the region is beginning the year on firmer footing. Private sector activity showed cautious growth, with reduced drag from manufacturing and moderate expansion in services. Most surprisingly, Germany, which struggled throughout 2024, returned to expansion. Sterling also gained on better PMI readings even though stagnation risks persist, particularly due to accelerated job cuts in the UK.

    Dollar extended its decline as risk-on sentiment dominated markets, despite US equity indices taking a breather after strong rallies earlier this week. The greenback is currently the weakest performer for the day, followed by Yen, which gave back its brief gains following BoJ’s widely anticipated rate hike. The Swiss Franc also underperformed, completing a trio of safe-haven currencies that lagged behind in today’s risk-driven market environment.

    Technically, Swiss Franc’s weakness warrants closer attention. The strong rally in GBP/CHF today suggest that fall from 1.1393 has completed at 1.1086 after defending 1.1106 support. The development keeps the rally from 1.0741 alive. Retest of 1.1393 would be seen next, and firm break there will extend the rise towards 1.1675 high.

    In Europe, at the time of writing, FTSE is down -0.75%. DAX is down -0.20%. CAC is up 0.36%. UK 10-year yield is down -0.001 at 4.639. Germany 10-year yield up 0.028 at 2.579. Earlier in Asia, Nikkei fell -0.07%. Hong Kong HSI rose 1.86%. China Shanghai SSE rose 0.70%. Singapore Strait Times fell -0.06%. Japan 10-year JGB yield rose 0.0255 to 1.235.

    US PMI composite falls to 9-mth low, optimism holds despite slowing growth and rising costs

    US PMI data for January painted a mixed picture. PMI Manufacturing rose from 49.4 to 50.1, reaching a seven-month high and signaling a return to slight expansion. However, PMI Services dropped sharply from 56.8 to 52.8, a nine-month low, dragging PMI Composite down from 55.4 to 52.4, also a nine-month low.

    Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted that US businesses are starting 2025 in an “upbeat mood,” with optimism about the new administration driving stronger economic growth. Despite the slowdown in output growth, “sustained confidence” among businesses suggests this deceleration may be temporary. Encouragingly, hiring has surged, with job creation reaching its fastest pace in two and a half years, signaling resilience in the labor market.

    However, inflationary pressures are resurfacing, posing risks to the economic outlook. Companies have reported “supplier-driven price hikes” and “wage growth amid poor staff availability.” Inflation in input costs and selling prices has been “broad-based across goods and services,” which, if sustained, could fuel concerns about hawkish policy approach from the Fed.

    UK PMI composite edges higher to 50.9, but stagflation risks cloud economic outlook

    UK PMI Composite rose slightly from 50.4 to 50.9 in January, indicating marginal growth. Manufacturing PMI improved from 47.0 to 48.2, while services PMI ticked up from 51.1 to 51.2. Despite these increases, the overall outlook remains gloomy, with underlying concerns about economic weakness and inflationary pressures persisting.

    Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, warned that the data “add to the gloom” surrounding the UK economy.

    Companies are cutting jobs at the fastest rate since the global financial crisis in 2009, reflecting falling sales and bleak business prospects. Business optimism remains at its lowest levels in two years, accompanied by subdued activity across sectors.

    Inflationary pressures have also “reignited,” creating what Williamson described as a “stagflationary environment” and a “policy quandary” for BoE.

    Eurozone PMI composite hits 50.2 as Germany returns to growth

    Eurozone PMI data for January showed cautious improvement, with PMI Composite rising from 49.6 to 50.2, a five-month high, signaling a return to marginal growth. Manufacturing PMI increased to 46.1, its highest in eight months, while services PMI slipped slightly to 51.4 but remained in expansion.

    Germany led the improvement, with its PMI Composite climbing from 48.0 to 50.1, marking a seven-month high and a return to expansionary territory. Meanwhile, France lagged behind, with its PMI Composite increasing to 48.3 but remaining below the 50 threshold, indicating continued contraction.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, described the data as “mildly encouraging.” He noted that the private sector had entered a phase of cautious growth, with reduced drag from manufacturing and moderate expansion in services. Germany’s strong rebound played a key role in offsetting the continued weakness in France.

    Inflationary pressures, however, remain a concern ahead of next week’s ECB meeting. Input prices in manufacturing rose for the first time in four months, driven by a weaker euro and Germany’s increased CO2 tax. In the services sector, cost inflation persisted, largely due to higher wages. Selling prices in services also remained elevated.

    Due to persistent inflation risks and the fragile state of the economy, ECB is likely stick to its gradual pace of cutting interest rates.

    BoJ delivers expected rate hike, upgrades core inflation forecasts

    BoJ raised its uncollateralized overnight call rate by 25bps to 0.50% as widely expected, marking the highest level since 2008. The decision, made by an 8-1 vote, saw dissent from board member Nakamura Toyoaki, who advocated for a delay until March.

    In the new economic projections, core CPI forecasts were significantly revised upward from 1.9% to 2.4% for fiscal 2025, and slightly from 1.9% to 2.0% for fiscal 2026. Core-core CPI (excluding energy and fresh food) forecast was also raised from 1.9% to 2.1% for fiscal 2025, remaining unchanged at 2.1% for fiscal 2026. Real GDP growth projections were left steady at 1.1% for fiscal 2025 and 1.0% for fiscal 2026.

    At the post-meeting press conference, Governor Kazuo Ueda downplayed the sharp inflation forecast revisions, stating, “The rise in underlying inflation is moderate. I don’t think we are seriously behind the curve in dealing with inflation.”

    He reiterated the importance of a gradual approach to policy adjustments, and there no “preset idea” on the timing and pace of rate hikes. He also highlighted the estimated neutral range of 1%-2.5%, emphasizing that the current rate of 0.5% still has “some distance” to reach neutral.

    Also released, CPI core (ex-food) jumped from 2.7% yoy to 3.0% yoy in December, marking the highest rate in 16 months. CPI core-core (ex-food & energy) was unchanged at 2.4% yoy. Headline CPI rose from 2.9% yoy to 3.6% yoy.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0379; (P) 1.0409; (R1) 1.0445; More…

    Intraday bias in EUR/USD remains on the upside as rebound from 1.1076 is in progress. Strong resistance might be seen from 38.2% retracement of 1.1213 to 1.0176 at 1.0572 to limit upside. Break of 1.0371 minor support will bring retest of 1.0176 low. However, sustained break of 1.0572 will raise the chance of bullish reversal, and target 61.8% retracement at 1.0817.

    In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:00 AUD Manufacturing PMI Jan P 49.8 47.8
    22:00 AUD Services PMI Jan P 50.4 50.8
    23:30 JPY National CPI Y/Y Dec 3.60% 2.90%
    23:30 JPY National CPI Core Y/Y Dec 3.00% 3.00% 2.70%
    23:30 JPY National CPI Core-Core Y/Y Dec 2.40% 2.70% 2.40%
    00:01 GBP GfK Consumer Confidence Jan -22 -18 -17
    00:30 JPY Manufacturing PMI Jan P 48.8 49.7 49.6
    00:30 JPY Services PMI Jan P 52.7 50.9
    03:23 JPY BoJ Interest Rate Decision 0.50% 0.50% 0.25%
    08:15 EUR France Manufacturing PMI Jan P 45.3 42.1 41.9
    08:15 EUR France Services PMI Jan P 48.9 49.4 49.3
    08:30 EUR Germany Manufacturing PMI Jan P 44.1 42.9 42.5
    08:30 EUR Germany Services PMI Jan P 52.5 51.1 51.2
    09:00 EUR Eurozone Manufacturing PMI Jan P 46.1 45.3 45.1
    09:00 EUR Eurozone Services PMI Jan P 51.4 51.4 51.6
    09:30 GBP Manufacturing PMI Jan P 48.2 46.9 47
    09:30 GBP Services PMI Jan P 51.2 50.6 51.1
    13:30 CAD New Housing Price Index M/M Dec -0.10% 0.20% 0.10%
    14:45 USD Manufacturing PMI Jan P 50.1 49.4
    14:45 USD Services PMI Jan P 52.8 56.8
    15:00 USD Existing Home Sales M/M Dec 4.24M 4.16M 4.15M
    15:00 USD Michigan Consumer Sentiment Jan F 71.1 73.2 73.2

     



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  • Greenback Falls With Risk-On Sentiment and Trump’s Softer Tone on China

    Greenback Falls With Risk-On Sentiment and Trump’s Softer Tone on China


    Dollar’s decline accelerated as the week progressed towards the last day, weighed down by strong risk-on sentiment and investor optimism. S&P 500 closed at a new record high on Thursday, with NASDAQ and DOW poised to follow soon.

    Contributing to this sentiment were remarks from US President Donald Trump at the World Economic Forum, where he linked falling oil prices to a demand for lower interest rates. However, analysts widely believe the Fed will maintain its independence, with no immediate response to such rhetoric. Fed fund futures currently show a 99.5% likelihood of a hold at next week’s meeting, while the probability of a May rate cut stands at 50%. Expectations for a second cut by year-end, nevertheless, have risen slightly to 55%.

    Another boost to market sentiment came from signals of potential improvement in US-China relations. In a Fox News interview, Trump expressed a preference for resolving trade disputes without resorting to tariffs, saying, “I’d rather not have to use [tariffs],” while acknowledging their leverage over Beijing. In the background, Trump granted a 75-day reprieve to TikTok earlier in the week, suggesting flexibility in implementing a law requiring the divestiture of its US business.

    All these gestures indicated a much softer tone from the White House, comparing to Trump’s election rhetoric, and raised hopes for renewed negotiations with China. These developments reinforced investor confidence and tempered fears of immediate tariff escalations, contributing to the broader risk-on mood.

    Currency markets reflect this shifting sentiment. Dollar is now the weakest performer of the week, pressured by strong risk appetite and fading concerns over immediate trade tensions. Yen follows as the second-worst performer, despite some recovery after BoJ’s rate hike today. Loonie rounds out the bottom three. Meanwhile, Kiwi and Aussie are the week’s strongest currencies, buoyed by the global risk-on mood, with Euro also gaining ground. Pound and Swiss Franc remain mixed in middle positions.

    Technically, EUR/USD’s break of 1.0435 resistance suggests that it’s correcting the whole fall from 1.1213 to 1.0176. Further rise should be seen to 38.2% retracement of 1.1213 to 1.0176 at 1.0572. Strong resistance should be seen there to limit upside, at least on first attempt. However, decisive break of 1.0572 will raise the chance of bullish trend reversal.

    BoJ delivers expected rate hike, upgrades core inflation forecasts

    BoJ raised its uncollateralized overnight call rate by 25bps to 0.50% as widely expected, marking the highest level since 2008. The decision, made by an 8-1 vote, saw dissent from board member Nakamura Toyoaki, who advocated for a delay until March.

    In the new economic projections, core CPI forecasts were significantly revised upward from 1.9% to 2.4% for fiscal 2025, and slightly from 1.9% to 2.0% for fiscal 2026. Core-core CPI (excluding energy and fresh food) forecast was also raised from 1.9% to 2.1% for fiscal 2025, remaining unchanged at 2.1% for fiscal 2026. Real GDP growth projections were left steady at 1.1% for fiscal 2025 and 1.0% for fiscal 2026.

    At the post-meeting press conference, Governor Kazuo Ueda downplayed the sharp inflation forecast revisions, stating, “The rise in underlying inflation is moderate. I don’t think we are seriously behind the curve in dealing with inflation.”

    He reiterated the importance of a gradual approach to policy adjustments, and there no “preset idea” on the timing and pace of rate hikes. He also highlighted the estimated neutral range of 1%-2.5%, emphasizing that the current rate of 0.5% still has “some distance” to reach neutral.

    Also released, CPI core (ex-food) jumped from 2.7% yoy to 3.0% yoy in December, marking the highest rate in 16 months. CPI core-core (ex-food & energy) was unchanged at 2.4% yoy. Headline CPI rose from 2.9% yoy to 3.6% yoy.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 155.59; (P) 156.23; (R1) 156.71; More…

    USD/JPY’s is staying above 154.77 temporary low despite today’s dip, and intraday bias remains neutral. Further decline remains in favor for now. Sustained trading below 55 D EMA (now at 154.73) will extend the correction from 158.86 to 38.2% retracement of 139.57 to 158.86 at 151.49 next. On the upside, though, above 156.74 minor resistance will bring retest of 158.86 instead.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:00 AUD Manufacturing PMI Jan P 49.8 47.8
    22:00 AUD Services PMI Jan P 50.4 50.8
    23:30 JPY National CPI Y/Y Dec 3.60% 2.90%
    23:30 JPY National CPI Core Y/Y Dec 3.00% 3.00% 2.70%
    23:30 JPY National CPI Core-Core Y/Y Dec 2.40% 2.70% 2.40%
    00:01 GBP GfK Consumer Confidence Jan -22 -18 -17
    00:30 JPY Manufacturing PMI Jan P 48.8 49.7 49.6
    00:30 JPY Services PMI Jan P 52.7 50.9
    03:23 JPY BoJ Interest Rate Decision 0.50% 0.50% 0.25%
    08:15 EUR France Manufacturing PMI Jan P 42.1 41.9
    08:15 EUR France Services PMI Jan P 49.4 49.3
    08:30 EUR Germany Manufacturing PMI Jan P 42.9 42.5
    08:30 EUR Germany Services PMI Jan P 51.1 51.2
    09:00 EUR Eurozone Manufacturing PMI Jan P 45.3 45.1
    09:00 EUR Eurozone Services PMI Jan P 51.4 51.6
    09:30 GBP Manufacturing PMI Jan P 46.9 47
    09:30 GBP Services PMI Jan P 50.6 51.1
    13:30 CAD New Housing Price Index M/M Dec 0.20% 0.10%
    14:45 USD Manufacturing PMI Jan P 49.4
    14:45 USD Services PMI Jan P 56.8
    15:00 USD Existing Home Sales M/M Dec 4.16M 4.15M
    15:00 USD Michigan Consumer Sentiment Jan F 73.2 73.2

     



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  • Yen Stabilizes in Weak Position as BoJ Rate Hike Awaited

    Yen Stabilizes in Weak Position as BoJ Rate Hike Awaited


    While Yen remains the worst performer of the week so far, it has stabilized as the markets await the highly anticipated BoJ rate hike in the upcoming Asian session. Expectations for this rate move were well set by comments from BoJ Governor Kazuo Ueda last week. Risks from US political developments—specifically tariff policies under President Donald Trump—have now been set aside too, clearing the way for BoJ to proceed with its monetary normalization. Policy rate should be raised by 25bps to 0.50%.

    The question now centers on how BoJ will portray Japan’s economic outlook and its policy path for the year. With signs of resurgent inflationary pressures, it’s unlikely that Ueda will strike a dovish tone. In fact, Japan’s upcoming CPI datad ue tomorrow too—expected to show core inflation rising for a second month to 3% in December—will support that view.

    Ueda’s comments in the post meeting press conference could be cautiously optimic. On the one hand, he would reiterate international uncertainties, and refrain from committing to a specific timeline for policy normalization. But the view towards domestic wage development could be upbeat. Inflation forecasts could also be raised in the new quarterly economic outlook report. Both would be seen as hawkish, albeit mildly. Currently, markets are seeing the chances of another hike in the middle of the year, and probably one more by the year-end to bring interest rate to a more neutral setting at 1.00%.

    USD/JPY would be logically a pair to pay attention to. Price actions from 158.86 are seen as developing in to a corrective pattern for sure. While initial support was seen above 55 D EMA (now at 154.67) to slow the pull back, a hawkish BoJ hike tomorrow could push USD/JPY lower towards 38.2% retracement of 139.57 to 158.86 at 151.49.

    Conversely, a robust rebound—even if BoJ sounds hawkish—might suggest that the correction from 158.86 is already done, and the rally from 139.57 could be ready to resume.

    Overall for the week so far, the rankings in the performance ladder didn’t chance much as trading has been rather subdued after volatility on Monday. Kiwi is currently the strongest, followed by Euro and then Aussie. Yen is the worst, followed by Dollar and then Loonie. Sterling and Swiss Franc are stuck in the middle.

    Canada’s retail sales stagnate in Nov as core sales down -1% mom

    Canada’s retail sales were flat in November, falling short of the expected 0.2% mom increase. The data revealed mixed performance across sectors, with declines in six out of nine subsectors.

    Sales at food and beverage retailers dropped by -1.6% mom, driving much of the weakness in the report. However, gains in motor vehicle and parts dealers (+2.0% mom) and gasoline stations and fuel vendors (+0.7% mom) helped offset the broader declines, preventing an outright contraction in overall retail activity.

    Core retail sales, which exclude the more volatile categories of motor vehicles and gasoline, declined by a notable -1.0% mom.

    US initial jobless claims rises to 223k, above exp 220k

    US initial jobless claims rose 6k to 223k in the week ending January 18, above expectation of 220k. Four-week moving of initial claims rose 750 to 213.5k.

    Continuing claims rose 46k to 1899 in the week ending January 11, highest since November 13, 2021. Four-week moving average of continuing claims rose 500 to 1866k.

    Japan posts first trade surplus in six months

    Japan recorded a trade surplus of JPY 130.9B in December, the first surplus in six months, driven by a 2.8% yoy rise in exports to JPY 9.91T. Imports also jumped, rising 1.8% yoy to JPY 9.8T.

    However, exports to the two largest trading partners saw declines, with shipments to China falling by -3.0% yoy and to the US by 2.1% yoy.

    On a month-on-month seasonally adjusted basis, exports rose 6.3% mom to JPY 9.44T. Imports increased 2.2% mom to JPY 9.47T, resulting in a seasonally adjusted trade deficit of JPY 33B.

    For the entirety of 2024, Japan’s trade deficit narrowed significantly, shrinking by 44% from the previous year to JPY -5.33T. Exports reached a record high of JPY 107.09T, up 6.2%, bolstered by strong demand for vehicles and semiconductor-related products. Imports also rose by 1.8% to JPY 112.42T.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0368; (P) 1.0401; (R1) 1.0461; More…

    Intraday bias in EUR/USD remains neutral for the moment. On the upside, firm break of 1.0435 resistance will extend the rebound from 1.0176 to 38.2% retracement of 1.1213 to 1.0176 at 1.0572. Rejection by 1.0435 will keep the correction from 1.0176 relatively short. Firm break of 1.0176 will resume whole fall from 1.1213.

    In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Trade Balance (JPY) Dec -0.03T -0.64T -0.38T -0.39T
    13:30 USD Initial Jobless Claims (Jan 17) 223K 220K 217K
    13:30 CAD Retail Sales M/M Nov 0.00% 0.20% 0.60%
    13:30 CAD Retail Sales ex Autos M/M Nov -0.70% 0.10% 0.10% -0.10%
    15:00 EUR Eurozone Consumer Confidence Jan P -14 -15
    15:30 USD Natural Gas Storage -270B -258B
    16:00 USD Crude Oil Inventories -0.1M -2.0M

     



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  • Dollar Softness Continues as Forex Markets Tread Calm Waters

    Dollar Softness Continues as Forex Markets Tread Calm Waters


    The forex markets remain unusually quiet today, with Dollar staying soft despite multiple attempts to rebound. The greenback has only managed meaningful gains against the weaker Yen and the struggling Canadian Dollar, while failing to build momentum against other major currencies. With little in the way of significant economic data on the calendar today, trading is expected to remain subdued. However, volatility could resurface, probably just temporarily, later in the week, with BoJ’s anticipated rate hike and key PMI releases from major economies slated for Friday.

    Loonie, nonetheless, could see movement today, with retail sales data due. BoC is widely expected to cut rates by 25 bps at its upcoming meeting next Wednesday, a view supported by a Reuters survey where 25 out of 31 economists forecast such a move. Additionally, median expectations point to another 25 bps cut in March, followed by a further reduction later in the year, bringing the overnight rate to 2.50%.

    For USD/CAD, however, the real driver for a decisive range breakout, beyond brief jitters, would lie in developments surrounding US-Canada trade relations. The market awaits details of tariffs expected to be announced on February 1, including their scope and which products will be affected.

    So far this week, Yen has been the weakest performer, followed by Dollar and Loonie. At the other end of the spectrum, the Kiwi remains the strongest, while Euro and Aussie. Sterling and Swiss are still stuck in middle positions.

    A key development this week has been the sharp decline in USD/CNH, which is viewed as a sign of a stabilizing risk sentiment toward global trade. Technically, a short term top should be formed at 7.3694, just ahead of 7.3745 key resistance (2022 high). More consolidative is expected in the near term with risk of deeper pull back. But downside should be contained by 38.2% retracement of 6.9709 to 7.3694 at 7.2172. Eventual upside break remains in favor.

    Gold surges on Dollar weakness, Silver lags

    Gold prices surged past 2750 mark this week, supported largely by a weaker Dollar. The overall market sentiment is on a relatively calmer backdrop, with US President Donald Trump’s decision to delay tariff implementations contributed to easing trade-related fears. Additionally, geopolitical tensions receded as a ceasefire between Israel and Hamas took hold earlier in the week.

    Hence, as whether Gold can break its record high of 2789 will depend largely on the depth of Dollar’s correction in the coming days.

    Technically, Gold’s rebound from 2536.67 is currently seen as the second leg of the corrective pattern from 2789.92 high. Strong resistance could be seen from this resistance to limit upside. Break of 2689.21 support will argue that the third leg of the pattern has started back towards 2536.67 support. Nevertheless, decisive break of 2789.92 will confirm up trend resumption.

    Silver’s performance, by comparison, has been relatively subdued. Its recovery from 28.74 remains weak and corrective in nature. For now, as long as 32.30 resistance holds, fall from 34.84 is still in favor to resume at a later stage, to 26.44 cluster support zone.

    Japan posts first trade surplus in six months

    Japan recorded a trade surplus of JPY 130.9B in December, the first surplus in six months, driven by a 2.8% yoy rise in exports to JPY 9.91T. Imports also jumped, rising 1.8% yoy to JPY 9.8T.

    However, exports to the two largest trading partners saw declines, with shipments to China falling by -3.0% yoy and to the US by 2.1% yoy.

    On a month-on-month seasonally adjusted basis, exports rose 6.3% mom to JPY 9.44T. Imports increased 2.2% mom to JPY 9.47T, resulting in a seasonally adjusted trade deficit of JPY 33B.

    For the entirety of 2024, Japan’s trade deficit narrowed significantly, shrinking by 44% from the previous year to JPY -5.33T. Exports reached a record high of JPY 107.09T, up 6.2%, bolstered by strong demand for vehicles and semiconductor-related products. Imports also rose by 1.8% to JPY 112.42T.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.4322; (P) 1.4357; (R1) 1.4412; More…

    Range trading continues in USD/CAD and intraday bias remains neutral. Further rise is expected as long as 1.4260 support holds. Break of 1.4516 will resume larger up trend to 1.4667/89 key resistance zone. Nevertheless, firm break of 1.4260 will turn bias to the downside for deeper pullback to 55 D EMA (now at 1.4205) and below.

    In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Trade Balance (JPY) Dec -0.03T -0.64T -0.38T -0.39T
    13:30 USD Initial Jobless Claims (Jan 17) 220K 217K
    13:30 CAD Retail Sales M/M Nov 0.20% 0.60%
    13:30 CAD Retail Sales ex Autos M/M Nov 0.10% 0.10%
    15:00 EUR Eurozone Consumer Confidence Jan P -14 -15
    15:30 USD Natural Gas Storage -270B -258B
    16:00 USD Crude Oil Inventories -0.1M -2.0M

     



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  • Greenback Eases Ahead of Trump’s Executive Actions, Bitcoin Takes Leads and Hits New Record

    Greenback Eases Ahead of Trump’s Executive Actions, Bitcoin Takes Leads and Hits New Record


    Dollar is trading slightly lower today as markets await Donald Trump’s inauguration as the 47th US President. Attention is focused on his inaugural speech, expected to confirm his policy priorities. However, the real market-moving event is likely to be the series of executive actions Trump has promised to enact immediately.

    Over 200 directives are anticipated, including legally binding executive orders and proclamations, with particular interest in measures affecting tariffs and deregulations in sectors like energy and cryptocurrencies.

    One key area of focus is Trump’s potential tariff policies, which would surely reshape US trade relationships with allies and adversaries and impact global market. Deregulation efforts, spanning traditional energy sectors to the fast-growing cryptocurrency industry, are also expected to influence investor sentiment.

    Meanwhile, Bitcoin has reached a new all-time high, reflecting the renewed bullish sentiment in cryptocurrencies. Technically, next near term target is 61.8% projection of 49008 to 108368 from 89127 at 125812. Outlook will stay bullish as long as 89127 support holds, even in case of pull back.

    While Trump’s inauguration and executive actions are dominating headlines, global markets are also preparing for several other key events. BoJ is widely expected to raise its policy rate. UK employment data will provide insight into the labor market’s response to the Autumn Budget. Inflation data from Canada and New Zealand will help shape monetary policy projections of BoC and RBNZ. PMI data from major economies will round out the week’s events.

    ECB’s Holzmann: January rate cut not as certain with elevated inflation risks

    Austrian ECB Governing Council member Robert Holzmann expressed skepticism over a potential rate cut at ECB’s upcoming January meeting. In an interview with Politico, Holzmann stated, “A cut is not a foregone conclusion for me at all,” emphasizing his commitment to approaching the discussion with an “open mind.”

    Holzmann highlighted that ECB decisions are fundamentally data-driven and noted that inflation remained “well above” 2% in December, with January figures expected to reflect similar levels. He cautioned that “cutting interest rates when inflation rises faster than anticipated, even temporarily, risks hurting credibility.”

    As a known policy hawk, Holzmann also revealed increased doubts about inflation settling around ECB’s 2% target by the end of the year. He cited unexpected developments since the December decision, including faster-than-expected depletion of gas reserves due to colder weather, the effective closure of the Ukraine gas transit, and the risks of persistently high energy prices.

    China maintains LPR as offshore Yuan recovers ahead of key support

    China’s central bank maintained its benchmark lending rates unchanged on Monday. The one-year loan prime rate was steady at 3.1%, while the over-five-year LPR, which influences mortgage rates, remained at 3.6%.

    The offshore Yuan strengthened notably against the Dollar, continuing to draw support from a a key long-term level. This comes despite market speculation that China might allow Yuan to weaken further to counteract the economic effects of new tariffs introduced under Donald Trump’s presidency.

    A weaker currency would bolster export competitiveness by making Chinese goods more affordable internationally. However, Beijing faces a dilemma: while a controlled depreciation could help exporters, an uncontrolled fall could lead to heightened volatility in domestic financial markets and reduced investor confidence.

    Acknowledging these risks, PBOC Governor Pan Gongsheng reaffirmed the central bank’s commitment to exchange rate stability last week, stating, “We will resolutely prevent the risk of the exchange rate overshooting, ensuring that the Yuan exchange rate remains generally stable at a reasonable, balanced level.”

    Technically, a short term top should be confirmed at 7.3694 in USD/CNH with today’s dip. But it’s early to call for bearish reversal as long as 55 D EMA (now at 7.2797) hits. Further rally remains in favor through 7.3745 (202 high) to resume the long term up trend.

    Nevertheless, firm break of 55 D EMA should bring deeper pull back to 38.2% retracement of 6.9709 to 7.3694 at 7.2172, which is close to 55 W EMA (now at 7.2097) even just as a correction to rise from 6.9709.

    From BoJ to inflation data and PMIs, global markets have more to focus on than Trump

    While the inauguration of Donald Trump dominates the headlines in US markets, global investors are turning their attention to a week packed with pivotal high-impact economic events that would provide crucial clues about the monetary policy paths of key economies.

    BoJ’s upcoming meeting is a top priority for global markets. After repeated signals from Governor Kazuo Ueda and other top officials, markets should be well-prepared for a 25bps rate hike, raising the policy rate to 0.50%. However, beyond the rate decision, the focus will shift to BoJ’s updated economic projections and policy guidance.

    While Ueda is expected to remain cautious about committing to a specific timeline for normalization, he may strike a more optimistic tone regarding wage growth, based on reports from branch managers. Additionally, BoJ could raise inflation forecasts in its quarterly outlook, both of which would add hawkish tones to the meeting.

    In the UK, attention is squarely on employment data, which will shed light on the labor market’s response to the government’s Autumn Budget. The markets are already pricing in over 75 basis points of BoE rate cuts in 2025. Meanwhile, IMF is projecting an even deeper 100bps reduction. The strength of the labor market will play a pivotal role in determining the scale of monetary easing this year, making this release a key driver for Sterling sentiment.

    Inflation data from Canada and New Zealand also hold significant importance. In Canada, BoC has indicated that the pace of rate reductions will slow, but uncertainty remains over the timing of pauses. A Reuters poll suggests an 80% chance of a 25bps cut on January 29, following December’s larger 50-bps move. CPI data will either reinforce or challenge this expectation.

    Meanwhile, New Zealand’s Q4 inflation report is expected to show further easing in price pressures, consistent with RBNZ’s forecasts. If the trend persists, RBNZ could deliver another 50bs rate cut at its February meeting

    Other data to watch this week include Germany’s ZEW Economic Sentiment Index and PMI reports from several major economies. These releases will provide additional context on global economic momentum and inform central bank decisions in the months ahead.

    Here are some highlights for the week:

    • Monday: Japan machine orders, tertiary industry index; Germany PPI; Swiss PPI; BoC business outlook survey.
    • Tuesday: New Zealand BNZ services; UK employment; Germany ZEW economic sentiment; Canada CPI.
    • Wednesday: New Zealand CPI; UK public sector net borrowing: Canada IPPI and RMPI.
    • Thursday: Japan trade balance; Canada retail sales; US jobless claims.
    • Friday: Australia PMIs; Japan CPI, PMIs, BoJ rate decision; Eurozone PMIs; UK PMIs; Canada new housing price index; US PMIs, US existing sales.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.0247; (P) 1.0289; (R1) 1.0313; More…

    EUR/USD recovers mildly today but stays in the middle of near term range above 1.0176. Intraday bias stays neutral and outlook remains bearish with 1.0435 resistance intact. On the downside, break of 1.0176 will resume the fall from 1.1213 and target 61.8% projection of 1.1213 to 1.0330 from 1.0629 at 1.0083. However, firm break of 1.0435 will confirm short term bottoming, and turn bias back to the upside for stronger rebound.

    In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Machinery Orders M/M Nov 3.40% -0.70% 2.10%
    00:01 GBP Rightmove House Price Index M/M Jan 1.70% -1.70%
    01:00 CNY 1-y Loan Prime Rate 3.10% 3.10% 3.10%
    01:00 CNY 5-y Loan Prime Rate 3.60% 3.60% 3.60%
    04:30 JPY Tertiary Industry Index M/M Nov -0.30% 0.10% 0.30% 0.10%
    04:30 JPY Industrial Production M/M Nov F -2.20% -2.30% -2.30%
    07:00 EUR Germany PPI M/M Dec -0.10% 0.30% 0.50%
    07:00 EUR Germany PPI Y/Y Dec 0.80% 1.10% 0.10%
    07:30 CHF PPI M/M Dec 0.00% 0.20% -0.60%
    07:30 CHF PPI Y/Y Dec -0.90% -1.50%
    15:30 CAD BoC Business Outlook Survey

     



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  • Japan Core Machinery Orders Rise 3.4% In November

    Japan Core Machinery Orders Rise 3.4% In November


    The value of core machinery orders in Japan was up a seasonally adjusted 3.4 percent on month in November, the Cabinet Office said on Monday – coming in at 899.6 billion yen.

    That exceeded expectations for a decline of 0.7 percent following the 2.1 percent increase in October.

    On a yearly basis, orders jumped 10.3 percent – again topping forecasts for 5.6 percent, which would have been unchanged from the October reading.

    Government orders plummeted 29.5 percent on month but surged 57.3 percent on year to 573.0 billion yen. Orders from overseas fell 5.3 percent on month but rose 1.6 percent on year at 1,274.2 billion yen. Orders through agencies climbed 6.7 percent on month and 8.7 percent on year to 128.4 billion yen.

    The total value of machinery orders received by 280 manufacturers operating in Japan decreased by 14.4 percent on month and gained 10.7 percent on year in November.

    For comments and feedback contact: editorial@rttnews.com

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    What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.





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  • Global Markets Look Beyond Trump’s Inauguration as Local Drivers Take the Lead

    Global Markets Look Beyond Trump’s Inauguration as Local Drivers Take the Lead


    Global markets are buzzing in anticipation of Donald Trump’s inauguration on January 20, yet the latest developments suggest investors may already be looking past the immediate impact. Despite speculation surrounding Trump’s policies—particularly tariffs—various benchmarks and asset classes are charting their own directions based on localized drivers and monetary policy expectations.

    In the US, the strong bounce in major stock indexes owes something to hopes of expansive fiscal stimulus under Trump. However, a significant portion of the rally can be traced to an improving inflation outlook and the view that Fed remains on track to further monetary easing. Additionally, the lack of significant concern over tariffs impacting inflation suggests that investors may not see Trump’s trade policies as an immediate threat to the US economy.

    Meanwhile record-breaking runs in FTSE and DAX signal distinct optimism. UK investors are banking on additional BoE easing after disappointing GDP, retail sales, and CPI data highlighted ongoing struggles. Germany’s DAX is supported by ECB’s dovish leanings as well as hopes of a political turnaround after snap elections in Germany in February. Market enthusiasm for Europe clearly isn’t driven by any expectation of beneficial tariffs; rather, local factors are in control.

    Japan, not a prime target of Trump’s tariff rhetoric, saw Nikkei weighed down by intensifying speculation about a looming Bank of Japan rate hike. This dynamic stands in sharp contrast to the overarching risk-on atmosphere elsewhere.

    In the currency markets, Yen emerged as the strongest performer last week, propelled by bets on BoJ action. Australian and New Zealand dollars followed suit, aided by the broader risk-on mood. On the weaker side of the spectrum, Canadian Dollar was the worst-performing currency, finally something reflecting potential vulnerability to Trump’s trade policies as BoC may have underestimated the economic risks posed by tariffs. Sterling also underperformed while Dollar was similarly subdued. Euro and Swiss Franc ended the week in middle positions.

    Risk Appetite Returns: DOW, S&P 500, NASDAQ End Week with Solid Gains

    Risk-on sentiment returned to US equity markets this week, with all three major indexes posting strong gains. DOW surged 3.69% for the week, S&P 500 rose 2.91%, and NASDAQ climbed 2.45%. Technically, the robust rebound eased fears of an imminent bearish reversal, affirming that recent pullbacks were likely just corrections within a broader uptrend.

    Market attention was drawn to Fed Governor Christopher Waller’s remarks at CNBC’s “Squawk on the Street”, interpreted by some as a dovish tilt. He expressed confidence that the inflationary stickiness seen in 2024 will begin to “dissipate” in 2025 and described himself as “more optimistic” about inflation than many of his Fed colleagues. Waller indicated the potential for three or four 25bps rate cuts this year, contingent on favorable inflation data.

    However, it should emphasized that Waller also tempered this optimism with caution, acknowledging that “If the data doesn’t cooperate, then you’re going to be back to two, maybe even one”.

    Waller left the door open for a rate cut in March, remarking that such a move “cannot be completely ruled out.” However, the message underlying was still consistent with market expectation that May or June might be more likely.

    Overall, despite the dovish interpretation by some, Waller’s comments suggest a flexible, data-dependent approach rather than a clear commitment to easing. The comments also largely aligned with market pricing.

    Nonetheless, inflation data for December did provide some relief. While, headline CPI rose from 2.7% to 2.9% yoy, core CPI edged down from 3.3% to 3.2%. This incremental progress reduces pressure on the Fed to maintain restrictive policy for an extended period. More importantly, that makes a return to tightening less likely.

    Futures pricing didn’t change much over the week, reflecting a 97.9% chance that Fed will hold rates steady at 4.25–4.50% at the January meeting, with a 72.4% chance of another hold in March. The probability of a May rate cut stands at 44%, rising to 66% by June. By year-end, markets still project a 52.1% chance of just one rate cut, reducing rates to 4.00–4.25%.

    Technically, DOW’s break of 55 D EMA (now at 43038.33) suggests that pullback from 45073.63 has completed at 41844.98 already. The medium term channel holds intact, as well as the up trend. Whether DOW is ready for another record run through 45073.63 would depend on the momentum of the next rise.

    But even in case that corrective pattern from 45073.63 is going to extend with another falling leg, downside looks more likely than not to be contained by cluster support level at around 40k, with 39889.05 resistance turned support, and 38.2% retracement of 32327.20 to 45073.63 at 40204.49.

    NASDAQ’s price actions from 20204.58 are also clearly corrective looking so far, with notable support from 18671.06 resistance turned support. With this support intact, larger up trend should resume through 20204.58 sooner rather than later.

    Yields and Dollar Index Form Short-Term Top With Improved Risk Sentiment

    Improved risk sentiment in US markets has triggered pullback in both 10-year Treasury yield and the Dollar Index, suggesting a temporary pause in their recent rally.

    Technically, a short term top is likely in place at 4.809 in 10-year yield, considering that D MACD has crossed below signal line. More consolidations should follow in the near term below 4.809, with risk of deeper pull back to 55 D EMA (now at 4.434). But outlook will continue to stay bullish as long as 38.2% retracement of 3.603 to 4.809 at 4.348 holds. Another rally through 4.809 to retest 4.997 high is expected, though breaking the psychological 5% level may prove challenging without stronger momentum.

    Dollar Index could have formed a short term top at 110.17 too, just ahead of 61.8% projection of 100.15 to 108.87 from 105.42 at 110.31, with D MACD crossed below signal line. Deeper retreat could be seen to 108.07 resistance turned support, or even further to 55 D EMA (now at 107.15). But near term outlook will stay bullish as long as 38.2% retracement of 100.15 to 110.17 at 106.34 holds. Firm break of 110.17 will resume the rally to 100% projection at 113.34.

    FTSE and DAX Surge to Record Highs

    Risk-on sentiment was also evident in the European equity markets, with FTSE 100 and DAX surged to new record highs. The optimism was fueled by expectations of rate cuts, positive economic projections, and hopes for political stability.

    In the UK, a trio of softer economic data—GDP, retail sales, and CPI—reinforced market expectations for BoE easing. Markets now anticipate more than 75 basis points of rate cuts throughout 2025, compared to just 50 basis points priced in the prior week. A 25bps rate cut in February is now universally expected.

    Supporting this sentiment, IMF upgraded its UK growth forecast for 2025 by 0.1 percentage points to 1.6%, making the UK the third-fastest-growing G7 economy after the US and Canada. IMF attributed this optimism to increased government investment, improved household finances, and anticipated rate cuts.

    That’s a strong nod to the Labour government despite wide criticism on its Autumn Budget. Meanwhile, IMF also projects BoE’s headline rate to fall from 4.75% to 3.75% by year-end.

    Technically, FTSE’s break of 8474.41 confirmed that triangle consolidation from there has completed at 8002.34, and larger up trend has resumed. Next target is 61.8% projection of 7404.08 to 8474.41 from 8002.34 at 8663.80.

    In Germany, DAX surged to new record on improving risk appetite and expectations of continued ECB easing.

    ECB’s December meeting minutes leaned towards the dovish side, and revealed discussions about a more aggressive 50-basis-point cut. The central bank ultimately favored a measured approach, with consensus on a more controlled pace of easing, to allow for checkpoints to confirm that disinflation remains on track.

    While IMF downgraded its 2025 growth forecasts for Germany and France, the outlook still points to modest recovery. Germany, previously expected to grow by 0.8%, is now forecasted to expand by just 0.3%, marking a slow rebound from two years of contraction. France’s growth forecast was also reduced by 0.3 percentage points to 0.8%. The positive side of the forecasts is that both economies are expected to regain some footing this year.

    It should also be noted that markets are probably pricing in a degree of optimism around the February 23 snap elections, which could lead to greater political stability and more consistent economic policies in Germany.

    Technically, DAX should now be on track to 100% projection of 14630.21 to 18892.92 from 17024.82 at 21287.52 next.

    Nikkei Weighed by BoJ Hike Risks, SSE Struggles to Rebound

    Investor sentiment in Asia, however, was much less optimistic, with Japan facing headwinds from growing expectations of Bank of Japan policy normalization, while China’s economic recovery struggles to inspire confidence amid external pressures.

    In Japan, speculation over a rate hike at the upcoming January 23–24 BoJ meeting has intensified. Governor Kazuo Ueda and Deputy Governor Ryozo Himino have repeatedly hinted at the possibility of policy tightening, with analysts interpreting their comments as preparation for market adjustments.

    Additionally, reports suggest BoJ is likely to raise its inflation forecasts in its quarterly outlook, highlighting upside risks fueled by the persistently weak Yen and elevated import costs. Internally, BoJ policymakers believe that stabilizing inflation expectations around the 2% target could allow short-term rates to rise as high as 1% without hindering economic growth.

    Traders are pricing in an 80% chance of a rate hike from 0.25% to 0.50%.

    Nikkei weakened for the week on expectations of BoJ’s normalization move, but stayed above 37651.07 support.

    Outlook is unchanged that price action from 42426.77 are developing in to a medium term three wave consolidation pattern, with rebound from 31156.11 as the second leg.

    For now, another rally cannot be ruled out, but strong resistance should emerge below 42426.77 to limit upside. Firm of 37651.07 support will in turn indicate that the third leg has likely commenced, and bring deeper fall to 35253.43 support and below

    In China, Shanghai SSE Composite struggled to generate meaningful gains other than a mild recovery.

    China’seconomy grew 5.4% yoy in Q4, lifting full-year GDP growth to 5.0%, matching the government’s target.Meanwhile, market rumors suggest Beijing is hesitant to use Yuan depreciation as a tool to counter tariffs from a second Trump presidency. Analysts believe sharp currency depreciation, as seen during Trump’s first term, could harm the struggling economy more than it would help.

    However, market confidence remains subdued, and the stock market recovery appeared technical rather than driven by fundamentals.

    SSE found support at the 50% retracement level of 2,635.09 to 3,674.40 at 3154.74, but remained capped below 55 D EMA (now at 3279.16).

    Risk remains on the downside for the near term for SSE. Break of 3140.90 will extend the corrective fall from 3674.40 to 61.8% retracement at 3032.11. Nevertheless, sustained break above the 55 D EMA will indicate that stronger near term rebound is underway back towards 3494.86 resistance.

    USD/CAD Weekly Outlook

    USD/CAD’s late break of 1.4466 resistance confirms larger up trend resumption. Initial bias is back on the upside this week for 1.4667/89 long term resistance zone. For now, outlook will stay bullish as long as 1.4302 support holds, in case of retreat.

    In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

    In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as long as 1.3418 support holds.



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