BoJ meeting, Q4 GDP data from China, inflation data from the US, UK, New Zealand and Canada as well as employment data from the UK and Australia will highlight the week ahead of us. Monday is holiday in the US (Martin Luther King Jr. day) so liquidity will be thin. Economic forum in Davos will take place during the entire week.
USD
Federal prosecutors have opened a probe involving Fed Chair Powell regarding renovation of the Fed building. Powell replied by releasing a video statement saying that Department of Justice (DoJ) threatened with criminal charges against him. He called the attack unprecedented and politically motivated adding that it will have negative consequences on Fed’s independence. Treasury Secretary Bessent reportedly warned president Trump about potential destabilizing effects on financial markets if DoJ presses further.
December inflation report saw both headline and core number stay unchanged at 2.7% y/y and 2.6% y/y respectively. Former number came in as expected while latter came in lower than 2.7% y/y as expected. Headline showed a 0.3% m/m increase as expected while core rose by 0.2% m/m vs 0.3% m/m as expected. Food prices rose 0.7% m/m while energy services prices grew by 1% m/m on the back of surge in utility gas services (4.4%). Services less energy services rose by 0.3% m/m and 3% y/y while shelter, biggest component, rose by 0.4% m/m and 3.2% y/y. Supercore eased to 0.29% m/m from 0.35% in November. Data is encouraging but it is still plagued by government shutdown.
November retail sales showed growth of 0.6% m/m vs 0.4% m/m as expected but from downwardly revised -0.1% m/m October print. Control group, used for GDP calculation because it excludes volatile categories, came in at 0.4% m/m as expected. Biggest growth was seen in sporting goods, musical instruments and books category followed by miscellaneous store retailers and gas stations. Food services and drinking places, a good proxy for discretionary spending, rose 0.6% again indicating health of the consumer. Apart from department and furniture stores all categories posted monthly increases.
President stated that Hasset is very much needed at his current positiion and that he is doing a great job there. thus chances of him becoming next Fed Chair have diminished significantly. This puts Kevin Warsh as the main candidate for the next Fed chair. Over the weekend, Trump stated that he will be raising tariffs by 10% on European countries (Denmark, Norway, France, Sweden, Germany, The Netherlands, United Kingdom and Finland) starting from February 1. On June 1 these tariffs will be increased to 25% and will be due until a deal is reached for the complete purchase of Greenland.
The yield on a 10y Treasury started the week at 4.18%, rose to 4.25% and finished the week at around 4.24%. The yield on 2y Treasury started the week at 3.54%, rose to 3.60% and finished the week at around 3.59%. Spread between 2y and 10y Treasuries started the week at 66bp and finished the week at 65bp. FedWatchTool sees the probability of a 25bp rate cut at January meeting at around 5% while probability of no change is at around 95%. Silver climbed all the way above $93 while gold breached $4630.
This week we will get final Q3 GDP reading as well as PCE data for months of October and November.
Important news for USD:
Thursday:
GDP
PCE
EUR
Final December CPI print showed Germany, Spain, France and Italy unchanged at 1.8% y/y, 2.9% y/y, 0.8% y/y and 1.2% y/y respectively. After two years of negative GDP growth preliminary reading shows that Germany finished 2025 with economy expanding by 0.2% led by private and public consumption while net exports and investment were dragging it down. ECB Chief Economist Lane stated that there is no case for near-term changes in rates. He added that US inflation and USD volatility represent biggest threats and are key to monitor.
Important news for EUR:
Friday:
Manufacturing PMI (EU, Germany, France)
Services PMI (EU, Germany, France)
Composite PMI (EU, Germany, France)
GBP
GDP for the month of November showed economy growing by 0.3% m/m vs 0.1% m/m as expected and up from shrinking 0.1% m/m in October. Services sector rose by 0.3% m/m and led the improvement in the reading. There was also a surge in industrial and manufacturing activity with latter supported by surge in Jaguar Land Rover’s production coming after a cyberattack in September. BoE policymaker Taylor came out with a dovish sentiment stating that interest rates should fall further this year as easing domestic cost pressures, especially energy prices, should fall back.
Important news for GBP:
Tuesday:
Payrolls Change
Unemployment Rate
Wednesday:
CPI
Friday:
Manufacturing PMI
Services PMI
Composite PMI
AUD
China trade surplus for the month of December widened to $114.1bn with exports growing 6.6% y/y vs 3% y/y as expected and imports rising 5.7% y/y vs 0.9% y/y as expected. Rising imports are particularly encouraging as they indicate signs of life for domestic demand. Trade surplus for the entire 2025 reached staggering $1189bn with exports rising 5.5% and imports being flat on the year. Trade surplus rose by 20% in 2025 compared to 2024. Semiconductors, ships and autos were the biggest exports for the year while hi-tech dominated imports. By region, biggest growth in exports was seen in exports to Africa, ASEAN, Europe and India while biggest imports growth came from Indonesia, Singapore, India and the Netherlands.
This week we will have employment data from Australia as well as Q4 GDP and economic activity data from China.
Important news for AUD:
Monday:
GDP (China)
Industrial Production (China)
Retail Sales (China)
Thursday:
Employment Change
Unemployment Rate
NZD
NZIER business confidence, a good indicator for the overall state of the economy, surged to 48% in Q4, up from 18% in Q3 thus showing the highest quarterly print since 2014! The rebound was led by manufacturing sector while construction struggled. The report shows hiring and investment decision turning very positive while also showing contained inflation pressures. RBNZ is keeping rates on hold for now and this will vindicate their stance.
This week we will have Q4 inflation data.
Important news for NZD:
Thursday:
CPI
CAD
Canada and China agreed to lower tariffs and strengthen bi-lateral trade and strategic ties. Canada will allow 49 000 Evs from China at the most-favored-nation tariff rate of 6.1%. On the other hand, China will lower tariffs on canola seed from Canada to 15% from 85% previously. Reaction from Trump regarding the deal is highly anticipated.
This week we will have inflation data.
Important news for CAD:
Monday:
CPI
JPY
Nippon Ishin party confirmed that Prime Minister Takaichi will dissolve Lower House of the parliament and call snap elections at the start of Diet session on Monday January 19. There is still a debate whether elections will be held on February 8 or February 15. This move would help her gain majority as her popularity in the polls is at the high level. Nikkei reached new ATH on this news while JPY and JGBs plunged further with USDJPY crossing the 159 level and yield on 10y JGB rising to 2.18%. Finance Minister Katayama reiterated several times during the week that intervention remains an option thus supporting JPY and bringing USDJPY towards the 158 level.
This week we will have BoJ meeting. No change in rate is expected but tone of the statement will be closely monitored for any hints regarding market intervention.
Important new for JPY:
Friday:
BoJ Interest Rate Decision
CHF
SNB total sight deposits for the week ending January 9 came in at CHF459.8bn vs CHF452.4bn the previous week. A slight increase but still just reflecting normal fluctuations in the series.
