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National Australia Bank business survey, for December 2024.

Business Confidence -2

• prior -3.0

Business Conditions 6.0

• prior 2.0

• Sales increased 3 points to +9, profitability rose 4 points to +4, and the employment index gained 1 point to +4.
• Conditions improved across most industries, except for transport and utilities, construction, and wholesale.

NAB cite:

• supported by increased Christmas demand, particularly benefiting the struggling retail sector
• business confidence remained weak due to rising costs

According to NAB Chief Economist Alan Oster, service sectors remained the strongest, and retail returned to positive territory for the first time since November 2023.

The survey also noted that purchase costs increased slightly, but labour costs slowed to a quarterly pace of 1.4%, despite a strong job market. Oster suggested that the softening of wage pressures aligns with improving employment conditions.

AUD was slammed earlier on Trump and Bessent’s tariff comments:

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Background to this:

Between July and November 2024, the National Australia Bank (NAB) Business Survey reported fluctuations in business confidence and conditions across Australia:

October 2024 had a brief resurgence in confidence:

• Business Confidence: Experienced a notable increase, reaching +5 index points, the highest level since early 2023. This rise was observed across most industries, except for construction and retail.
• Business Conditions: Remained stable at +7 index points, with steady profitability and improved sales, although employment intentions saw a slight decrease.

November 2024:

• Business Confidence: Fell sharply by 8 points to -3 index points, reversing the gains from October and dropping below the long-term average. The decline was broad-based, with significant decreases in the retail and wholesale sectors.
• Business Conditions: Softened, with notable declines across most industries. Goods production and distribution sectors, particularly manufacturing and retail, were the weakest, while services sectors remained relatively stronger.

This article was written by Eamonn Sheridan at www.forexlive.com.

The data post is here:

• Japan data – Services PPI (December) 2.9% y/y (prior 3%)

I got pretty caught up with Trump’s tariff talks:

• More from Trump – will place tariffs on computer chips, pharmaceuticals
• USD surging again – Trump tariff threats, Bessent want tariffs too
• Trump says DeepSeek is a positive – a ‘wake up’ call. Meanwhile USD strong still.

So, back to Japan for a bit of added info on that data.

Japan’s service-sector inflation reached 2.9% in December

• was driven by rising prices in accommodation and transportation

While its down from November, its not by much and on balance would appear to reinforce expectations of further interest rate hikes by the Bank of Japan (BOJ). not any time soon though I wouldn’t think.

The BOJ is closely monitoring service-sector inflation as an indicator of whether sustained wage growth will encourage businesses to continue raising prices, keeping inflation around its 2% target.

Last week, the BOJ raised interest rates to their highest level since the 2008 financial crisis and upgraded its inflation outlook, signaling confidence that rising wages will help stabilize inflation at the target level. More here and here (those links are to the wraps on the day of the BoJ hike, with plenty of info and links to more).

BOJ Governor Kazuo Ueda indicated that the central bank will continue raising rates as wage and price increases spread. He also noted that there is room for further hikes before borrowing costs reach a neutral level for the economy.

This article was written by Eamonn Sheridan at www.forexlive.com.

UK British Retail Consortium (BRC) Shop Price Index -0.7% y/y in January

• expected -0.7%, prior -1.0%

Shop prices declined at a slower rate in January compared to December

• food prices saw their biggest monthly increase since April 2024, +0.5% m/m (December was +0.1%)
• BRC warned that inflationary pressures could grow due to rising costs, including tax increases introduced by finance minister Rachel Reeves in October

Earlier on the UK:

• ICYMI – Morgan Stanley slashes UK 2025 GDP growth forecast to 0.9% (from 1.3% previously)

This article was written by Eamonn Sheridan at www.forexlive.com.

Trump says he would soon impose tariffs on foreign pharmaceuticals, semiconductors and metals

Also, Trump said the news of DeepSeek’s apparent progress in artificial intelligence is “a positive” – its good that firms in China have come up with a quicker method of AI.

Trump’s tariff comments may be being read as putting Bessent firmly in his place:

• Bessent is pushing a starting 2.5% universal US tariff plan, which would rise each month

Bessie won’t be setting the tariff agenda, I will, is what Trump seems to be conveying.

The USD leapt higher.

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan PPI Services for December 2024 +2.9% y/y

• expected 3.2%, prior 3.0%

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Japan Services Producer Price Index (PPI) measures the average change over time in the prices received by service providers (in the private sector) for their services in Japan

• Data published by the Bank of Japan
• covers services such as transportation and communication, finance and insurance, wholesale and retail trade, and others

This article was written by Eamonn Sheridan at www.forexlive.com.

Trump continues to promise tariffs:

• More from Trump – will place tariffs on computer chips, pharmaceuticals

Earlier:

• Bessent wants a gradual rise in tariffs, could go as high as 20%

Bessent will be the Treasury Secretary. I argued in that post that Trump will do what Trump will do on tariffs, not what Bessent wants to do.

And here we are, Trump not backing down and the dollar roaring higher. EUR, AUD, GBP, CAD, NZD, all slammed.EUR/USD for example:

This article was written by Eamonn Sheridan at www.forexlive.com.

more to come

This article was written by Eamonn Sheridan at www.forexlive.com.

A majority of the US Senate votes to confirm Scott Bessent as Treasury Secretary.

Meanwhile, the Financial Times report that Bessent is pushing a gradual increasing universal US tariff plan. FT is gated, but in brief:

• new universal tariffs on imports to the US would start at 2.5%
• would then rise gradually
• would move higher by the same amount each month
• reasoning being it’d give business time to adjust
• could rise as high as 20%

FT cites unnamed sources.

All we seem to hear is someone will save us from Trump’s wild fancies. Then he goes and dumps 25% tariffs on Colombia at a whim. Even if only briefly. Trump is a man of action, even if sometimes it seems misguided. Trump will do what Trump will do.

By all means, hope for the best. But plan for the worst.

This article was written by Eamonn Sheridan at www.forexlive.com.

Justin had the news on this on Monday.

Morgan Stanley cited:

• recent slowdown
• signs of labour market weakness

MS added that the lingering effects of the 16-year Bank rate will weigh on growth:

• peak impact of the BoE’s policy tightening is likely behind us
• drag on the economy still persists

Bank of England Bank Rate is currently 4.75%

This article was written by Eamonn Sheridan at www.forexlive.com.

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

This article was written by Eamonn Sheridan at www.forexlive.com.

Via a note from RaboBank on the euro:

• expecting EUR/USD to drop to parity in Q2 of this year

Says that while the recovery in EUR/USD looks similar to 2017, during Trump’s first year, this time around the picture for the euro is more difficult, citing:

• Ukraine war
• ECB rate cuts
• lack of strong leadership in key economies of France and Germany

This article was written by Eamonn Sheridan at www.forexlive.com.

Closing changes in the main North American markets:

• S&P 500 -1.45%
• Nasdaq Comp -3.1%
• Russell 2000 -1.2%
• DJIA +0.6%
• Toronto TSX -0.7%

The headlines here don’t begin to tell the story as Nvidia’s 17% decline was the largest market cap wipeout in history, doubling the previous record.

There was broad pain in other chipmakers and power producers. High-flying Vistra was hit even worse with a 28% decline.

Despite that, far more stocks were up on the day than down as the market found many winners in a future where AI is cheaper and more-widely available. It’s just that the Mag7 is such a big part of the index.

This article was written by Adam Button at www.forexlive.com.