NFP, inflation from the US, China and Switzerland, retail sales from the US as well as Q4 GDP data from Eurozone and the UK will highlight the massive week ahead of us.
USD
ISM manufacturing PMI for the month of January showed economy start the year with a bang. The print was 52.6, big jump into expansion from 47.9 in December and a highest reading since August of 2022. There were big increases in production and new orders indexes with latter moving back into expansion at amazing 57.1. There was also an improvement in employment index as it now shows smaller declines and is inching closer to expansion. Prices paid moved up to 59 as expected from 58.5 in December. Are we perhaps seeking effects of Trump policies to bring back manufacturing or is this just a one-off print?
January ISM services PMI came in at 53.8, down from 54.5 in December, but smaller than expected decline (53.5). Business activity surged to 57.4 and that was the main positive. New orders and new export orders declined with latter barely staying in expansion. New export orders plunged almost 10 points and back to contraction. Prices paid component jumped to ominous 66.6 showing that inflation pressures are building within services sector. The reading stays well in expansion but the details flash warnings.
ADP employment report for January showed economy adding 22k jobs instead of 48k jobs as was expected. Goods producing jobs rose by 1k while services related jobs added 21k. Education and health were again biggest employers adding 74k jobs while professional services lost 57k jobs. Due to the partial government shutdown we did not get NFP data for the month of January. The data will be published on Wednesday February 11.
President Trump announced a trade deal with India which led to lowering of tariffs to 18% from 25% as India will stop oil imports from Russia in favor of those from the US. Additionally, India will remove its tariffs for goods coming from United States. This in turn led to appreciation in Indian Rupee. Anthropic Claude launched new Cowork plugin that will seriously damage software company margins which sent tech sector lower dragging the major indices with it, NASDAQ seeing biggest declines as it is tech heavy.
The yield on a 10y Treasury started the week at 4.21%, rose to 4.30% and finished the week at around 4.22%. The yield on 2y Treasury started the week at 3.51%, rose to 3.60% and finished the week at around 3.50%. Spread between 2y and 10y Treasuries started the week at 72bp and finished the week there. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 19% while probability of no change is at around 81%. Gold and silver managed to recoup some of the losses from the previous week with gold even rising above the $5000 level during the week only for silver to to give it all back and carve a base at around $75. Bitcoin’s plunged accelerated and saw it drop to $59k at one point, lowest level since November of 2024.
This week we will have consumption, employment and inflation data. Headline NFP number is seen at 40k with the unemployment rate ticking up to 4.5%.
Important news for USD:
Tuesday:
Retail Sales
Wednesday:
NFP
Friday:
CPI
EUR
Final services PMI was revised down to 51.6 from 51.9 due to downward revision to German reading and a big drop to Spanish reading, though both are still safely in expansion. Italy beat expectations and French reading was revised up but it is still in contraction. The report shows that there was almost no hiring in January. Services inflation remains sticky.
Preliminary January CPI for the Eurozone came in at 1.7% y/y as expected, down from 2% y/y in December. Prices declined 0.5% m/m. Services inflation slid to 3.2% y/y from 3.4% y/y the previous month while food inflation increased to 2.7% y/y from 2.5% y/y the previous month. Core inflation was unchanged at 2.3% y/y. German reading saw prices rise 2.1% y/y vs 1.8% y/y increase in December while French preliminary CPI dropped to 0.3% y/y from 0.8% y/y the previous month. It was a much bigger drop than 0.6% y/y expected as monthly reading showed deflationary -0.3%.
ECB has left deposit rate unchanged at 2% as was widely expected. The accompanying statement shows that economy is remains resilient but future outlook is uncertain. Jobs market is strong with low unemployment rate. Governing Council will make decision on future rate path based on inflation outlook. ECB remains data-dependent and decisions will be made meeting-by-meeting, without pre-committing to a particular path.
President Lagarde stated at the press conference that growth was concentrated in services, manly in IT and communications. She said that only issue in their “good place” is EUR strength, exchange rate, but clarified that they are not ready to cut rates just because of that. She added that decision to keep rates unchanged was unanimous and that risks to the economy are broadly balanced.
This week we will have second reading of Q4 GDP.
Important news for EUR:
Friday:
GDP
GBP
Final services PMI reading in January was revised down to 54 from 54.3 as preliminary reported and dragged composite to 53.7 from 53.9 as preliminary reported. The report shows rise in output and continued declines in the jobs market. Additionally, there were improvements in the business optimism and UK is starting the year on a strong footing.
BoE has left the bank rate unchanged at 3.75% as was widely expected. The vote was 5-4 with Dhingra, Breeden, Taylor and Ramsden voting for a 25bp rate cut. Governor Bailey cast decisive vote for a pause. Inflation is expected to drop to target from April. Growth is seen as subdued. The statement shows Inflation expectations have been slashed and now show inflation in one year’s time at 1.7% (previously 2.5%), in two years’ time at 1.8% (previously 2.0%) and in three years’ time is seen at 2% (previously 2.1%). “On the basis of the current evidence, Bank Rate is likely to be reduced further.” Members expect bank rate to fall to 3.25% and stay there which indicates additional 50bp of rate cuts by the end of the year. Decision about bank rate will be influenced by outlook on inflation.
Governor Bailey emphasized that the main message from today is one of good news as disinflation is on track and ahead of what was expected back in November. Upside risks to inflation continued to diminish. He clarified that now with every incoming rate cut it will be a closer call how much further should the rate go.
This week we will have preliminary Q4 GDP reading.
Important news for GBP:
Thursday:
GDP
AUD
RBA has raised cash rate by 25bp, as was expected by majority but not entire market, so the new rate is now at 3.85%. The decision was unanimous and it centered around inflation pressures picking up moderately in the second half of 2025 thus moving inflation risks to the upside. Inflation is now expected to stay above the target for some time indicating that bank will have to keep rates higher for longer. This was the first rate hike since 2023. Bank members put capacity pressures as the main reason for increase in underlying inflation pressures but clarified that it is unlikely that those pressures alone explain the majority of increase in inflation. The board emphasized their data dependence and uncertainty around restrictiveness of monetary policy, thus not committing to any pre-set path on monetary policy and keeping forward guidance flexible.
New projections see inflation reaching high of 4.2% in June of this year and then falling into targeted 2-3% range in June of 2027 with a 2.9% print. Cash rate is seen rising to 3.9% by June and 4.2% by December, indicating at least 2 more hikes this year, and then staying there until June of 2028. Growth is seen declining slowly but staying little below 2% for the projected period while the unemployment rate is seen rising to 4.3% by the end of the year and to 4.6% by June of 2028.
RBA Governor Bullock stated at the press conference that it will take longer time than previously projected for inflation to return to targeted range as inflation is too strong. It is important, she continued, to not let inflation get away and added that high reading is a result of multiple factors across broad range of components and sectors. She clarified that projections made today are based on the view that some factors pushing inflation higher are temporary. Bullock stated that economy is in a good place with a strong labor market. This was a hawkish meeting, with a hawkish press conference and almost fully hawkish projections which will put additional strength into AUD.
January PMI data from China showed economy losing momentum and dropping back in contraction. Manufacturing printed 49.3, down from 50.1 in December. Both new orders and new export orders declined indicating weak demand on both sides (domestic and foreign). Production has declined, but still stayed in expansion while both input prices and output costs increased indicating that inflation pressures are building. China is battling deflation due to intense competition among companies so these inflation pressures will be welcomed. Non-manufacturing dropped to 49.9 from 50.2 the previous month as both new orders and new export orders declined further into contraction which dragged composite to 49.8 from 50.7 in December. Weak start of the year for the economy shouts at the authorities for more support through stimulus.
RatingDog manufacturing PMI rose to in the month of January to 50.3 from 50.1 in December. RatingDog services PMI moved further into expansion with a 52.3 reading. Growth in new businesses as well as improving external demand seen in new export orders led the way. There was an increase in employment, first in the last six months. On the inflation front, input costs continued to rise but at a slower pace while selling prices were largely unchanged. Composite PMI was lifted to 51.6 from 51.3 in December.
This week we will have inflation data from China.
Important news for AUD:
Wednesday:
CPI (China)
NZD
Q4 employment report saw employment change jump to 0.5% q/q from being flat in Q3, higher than 0.3% q/q as expected. The unemployment rate ticked up to 5.4% but participation rate followed suit rising to 70.5% from 70.3% in the previous quarter. Private wages rose 2% y/y, ricking down from 2.1% y/y in Q3 while hours worked rose additional 1% q/q after rising by 1.1% q/q in the previous quarter. With inflation coming in a bit hotter and employment growing RBNZ will keep rates steady in the near-term as we may get rate hikes only in the second part of the year.
CAD
January employment report sent mixed signals. On the one hand, economy lost 24.8k jobs, more than 5k as expected. On the other hand, the unemployment rate plunged to 6.5% from 6.8% in December. Then again, participation rate plunged to 65% from 65.4% the previous month and could be considered the main culprit for the drop in the unemployment rate. Finally, all of the jobs added were full-time (44.9k) while losses were all concentrated in the part-time (-69.7k). Ultimately, wages growth eased to 3.3% y/y after 3.7% y/y increase in December.
JPY
Prime Minister Takaichi spoke about benefits of weak JPY for the economy during her election campaign. She argued that weakness in JPY helped ease external shocks, mainly coming from the US tariffs and added that it was beneficial for exporters. As a result JPY weakened further on Monday. Government officials tried to soften the effect of her speech and prevent further JPY bleeding.
Final January manufacturing PMI was unchanged at 51.5, the highest reading since August of 2022. The report shows output and new orders rising with employment growing at a faster pace. Final services PMI was revised up to 53.7 from 53.4 as preliminary reported and now marks the highest reading since February of 2025. Rising demand, as shown in new orders and new export orders, as well as continued growth in employment led the way. Input costs rose at the slowest pace in two years bringing much needed easing in inflation pressures, but companies passed cost increases to clients at the faster pace as indicated by the jump in selling prices. Composite was lifted to 53.1 from 52.7 as preliminary reported.
December household spending data dropped 2.9% m/m and 2.6% y/y showing that real incomes are pinched by high inflation and if spending is missing consumer cannot contribute to GDP which in turn raises concerns about growth and future BoJ rate hikes.
CHF
SNB total sight deposits for the week ending January 30 came rebounded to CHF452.7bn from CHF449.3bn the previous week as money was pouring back into Swissy on risk off concerns and from rotation out of metals and tech.
This week we will have January inflation data.
Important news for CHF:
Friday:
CPI
