The Bank of England’s recent policy decision grabbed everyone’s attention with an unexpected "dovish split," while U.S. employment indicators kept investors on their toes ahead of this week’s Non-Farm Payroll (NFP) release.
In the oil market, prices dipped to new yearly lows due to geopolitical factors and comments from U.S. President Donald Trump.
Here’s a rundown of the key headlines you shouldn’t miss:
Australia’s goods trade surplus contracted significantly from 6.79 billion AUD to 5.09 billion AUD in December, falling short of the 6.52 billion AUD forecast.
BOJ official Tamura indicated that the frequency of interest rate hikes might not be biannual, suggesting that the pace will depend on how close they are to hitting their inflation target.
China’s Commerce Ministry stated they’re not looking to initiate trade disputes and are open to resolving ongoing issues.
Switzerland’s jobless rate held steady at 2.7% in January, aligning with expectations; the previous reading was slightly revised from 2.6% to 2.7%.
Germany’s factory orders jumped by an impressive 6.9% in January, beating the anticipated 1.9% rise and exceeding the upward revision to -5.2% from -5.4%.
The UK’s Construction PMI fell to 48.1 in January, missing the forecast of 53.5, down from 53.3.
The Eurozone reported a slight decline of 0.2% in retail sales for December, just below the expected -0.1% change.
The Bank of England cut interest rates by 0.25% as expected, but two members of the Monetary Policy Committee advocated for a larger 0.50% reduction.
President Trump also remarked on the intention to reduce oil prices, claiming "everything else will follow". Meanwhile, U.S. Treasury Secretary Scott Bessent considered boosting U.S. oil production by 3 million barrels per day.
Job cuts in the U.S. saw a sharp decline of 39.5% year-on-year in January, a stark contrast to the previous increase of 11.4%.
Initial jobless claims in the U.S. for the week ending January 30 rose to 219,000, above the expected 214,000 and up from 208,000 the previous week.
The U.S. preliminary unit labor costs for Q4 2024 showed an increase of 3.0% quarter-over-quarter, which fell short of the 3.4% expectation but was significantly higher than the previous 0.8%.
In Canada, the Ivey PMI dropped to 47.1 in January, missing the expected 53.0 and the previous 54.7.
Market Overview Analysis:
During Asian trading hours, risk assets saw a boost, with both crude oil and Bitcoin experiencing gains. This positive momentum stemmed from China’s commerce ministry expressing readiness to engage with the U.S. government in resolving trade tensions.
Interestingly, the U.S. dollar and Treasury yields also gained strength from hopes of avoiding a trade war, while gold’s earlier safe-haven appeal diminished.
However, the outlook shifted for crude oil after discussions surfaced about President Trump and Treasury Secretary Bessent potentially increasing production by 3 million barrels daily. Trump added that his administration aims to drive down oil prices, believing that "everything else will follow."
Bitcoin saw a retreat after nearing the $99,000 mark, and gold faced a bearish turn following the release of data showing fewer job cuts in January. Meanwhile, the S&P 500 managed to notch a 0.40% gain.
Forex Market Dynamics: U.S. Dollar versus Major Currencies:
In the foreign exchange realm, the spotlight was on the Bank of England’s dovish policy split, where despite a consensus to lower rates, some members of the committee argued for a steeper cut.
Earlier, the U.S. dollar had been gaining ground against most major currencies during the Asian session. The Japanese yen stood out once more, bolstered by hawkish comments from the BOJ. Optimism over a potential U.S.-China agreement to ease trade disputes continued to lend support to the dollar.
The London session saw a consolidation trend, with GBP/USD dropping sharply during the BOE announcement, only to bounce back swiftly. The dollar faced pressure despite a significant decrease in job cuts for January, as other labor-related data presented mixed signals: jobless claims were higher than anticipated, while preliminary unit labor costs fell short.
Looking Ahead: Economic Calendar Highlights:
- Germany’s industrial production and trade balance data releases at 7:00 am GMT.
- France’s preliminary private payrolls at 7:45 am GMT.
- SNB’s report on foreign currency reserves and the Swiss SECO consumer climate index at 8:00 am GMT.
- Canada’s employment report at 12:30 pm GMT.
- The highly anticipated U.S. non-farm payrolls report at 12:30 pm GMT.
- FOMC member Bowman’s speech at 2:25 pm GMT.
- U.S. preliminary University of Michigan consumer sentiment index at 3:00 pm GMT.
- FOMC member Kugler’s testimony at 5:00 pm GMT.
As we edge toward NFP Friday, all eyes will undoubtedly focus on the U.S. jobs report for January, as its outcome might sway the Federal Reserve’s policy, impact the dollar’s trajectory, and influence overall market sentiment. Concurrently, Canada’s January employment figures are also due, likely stirring some volatility in the Canadian dollar.
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