• Prior -0.6%

Death, taxes, and bad news from German economic data. This is a real bummer considering it is supposed to be the holiday period where we should see increased spending. Instead, this just adds further to the drop in retail sales in November. The only bright side is that overall retail sales was still up 1.8% compared to December 2023. As a whole in 2024, German retail sales was seen up by 0.9% after accounting for calendar and seasonal adjustments.

This article was written by Justin Low at www.forexlive.com.

• Prior +0.7%

UK house prices grew marginally to start the new year, though missing on estimates. It still reflects much resilience in the housing market though as Nationwide highlights that “affordability remains stretched by historic standards”.

This article was written by Justin Low at www.forexlive.com.

Global Markets:

•  Asian Stock Markets : Nikkei up 0.53%, Shanghai Composite down 0.06%, Hang Seng up 0.14% ASX up 0.45%
• Commodities : Gold at $2847.35 (0.13%), Silver at $32.65 (0.68%), Brent Oil at $76.49 (0.59%), WTI Oil at $73.34 (0.83%)
• Rates : US 10-year yield at 4.545, UK 10-year yield at 4.5590, Germany 10-year yield at 2.517

News & Data:

• (EUR) Man Refinancing  Rate  2.90% vs 2.90% expected
• (USD) Unemployment Claims  207K to 224K expected

Markets Update:

Asian markets mostly rose on Friday, tracking Wall Street’s gains as investors analyzed Big Tech earnings. Japan’s Nikkei 225 added 0.24%, while the Topix index climbed 0.21%. Tokyo’s core consumer price index rose 2.5% year-over-year in January, in line with expectations. Japan’s unemployment rate dipped to 2.4% in December but missed estimates, while retail sales grew 3.7%. Industrial output increased 0.3%, rebounding from a 2.2% decline in the previous month.

South Korea’s Kospi fell 1.14% after a four-day break, while the Kosdaq slipped 0.36%. Australia’s S&P/ASX 200 gained 0.45%, closing at a record high of 8,532.30, marking its third straight day of gains. The country’s producer price index rose 3.7% in the December 2024 quarter, according to data from the Australian Bureau of Statistics. Indian markets moved higher ahead of the Union Budget, with the Nifty 50 rising 0.71% and the BSE Sensex up 0.58%. Meanwhile, Hong Kong and Chinese markets remained closed for the Lunar New Year holiday.

In the U.S., all three major indexes advanced. The Dow Jones Industrial Average climbed 168.61 points (0.38%) to close at 44,882.13, after briefly gaining nearly 300 points. The S&P 500 rose 0.53% to 6,071.17, while the Nasdaq Composite added 0.25% to finish at 19,681.75. Investors reacted positively to earnings reports but remained cautious about potential economic headwinds.

Stocks trimmed gains late in the session following an announcement by U.S. President Donald Trump, who signaled plans to impose 25% tariffs on imports from Canada and Mexico. The news introduced fresh uncertainty into the markets, dampening the earlier rally.

Upcoming Events: 

• 01:30 PM GMT – CAD GDP m/m
• 01:30 PM GMT – USD Core PCE Price Index m/m
• 01:30 PM GMT – USD Employment Cost Index q/q

The post Friday 31st January 2025: Asian Markets Rise Amid Wall Street Gains first appeared on IC Markets | Official Blog.

IC Markets Europe Fundamental Forecast | 31 January 2025

What happened in the Asia session?

Following the rise in core inflation as reported by the Bank of Japan (BoJ) earlier this week, the Tokyo Core CPI edged higher in January increasing 2.5% YoY. This inflation metric had accelerated from 1.8% in October to 2.4% YoY in December before today’s result, highlighting broadening price pressures and providing further justification for the latest interest rate hike that took place last week. Demand for the yen is likely to remain elevated as USD/JPY dropped as low as 153.91 during this session.

What does it mean for the Europe & US sessions?

As widely expected, the ECB lowered its key interest rates by 25 basis points (bps) on Thursday, reducing the deposit facility rate to 2.75%, the main refinancing rate to 2.90%, and the marginal lending rate to 3.15%. This latest move reflects the ECB’s updated inflation outlook, with price pressures easing in line with projections. Should the latest CPI data out of Germany point to further easing of inflationary pressures, the Euro will likely remain under pressure on the final trading day of the week.

After expanding 0.3% MoM in October, Canada’s GDP is anticipated to decline by 0.1% in November to mark the first decline in 11 months. This contraction is attributed to lower output in extractive industries, transportation and warehousing; and financial services according to a flash estimate. The Loonie could face strong headwinds should GDP activity falter more than originally expected – a result that would lift USD/CAD.

The Dollar Index (DXY)

Key news events today

PCE Price Index (1:30 pm GMT)

Chicago PMI (2:45 pm GMT)

What can we expect from DXY today?

The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – showed headline PCE accelerating for the second consecutive month as it rose from 2.1% in September to 2.4% YoY in November while the core reading remained unchanged at 2.8% YoY. The forecasts for December point to a further increase in the headline PCE, climbing to 2.6% while the core is once again anticipated to hold steady. Should inflationary pressures continue to build, demand for the dollar could rekindle later today.

Meanwhile, the Chicago PMI continues to highlight weak economic growth as PMI activity contracted for the 13th consecutive month in December, recording its steepest decline since May – the decline was primarily driven by a fall in new orders and production. PMI activity is anticipated to edge higher in January but still remain in contraction. Volatility for the dollar is likely to increase during the U.S. session.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 29 January.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
• December’s Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025 totalling 50 bps, compared to the full percentage point of reductions projected in the previous quarter.
• GDP growth forecasts were revised upward for 2024 (2.5% vs. 2% in the September projection) and 2025 (2.1% vs. 2%), while remaining steady at 2% for 2026. Similarly, PCE inflation projections have been adjusted higher for 2024 (2.4% vs. 2.3%), 2025 (2.5% vs. 2.1%), and 2026 (2.1% vs. 2%).
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• The Committee will roll over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing in each calendar month that exceeds a cap of $25 billion per month and redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
• In addition, the Committee will reinvest the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding.
• The next meeting runs from 18 to 19 March 2025.

Next 24 Hours Bias

Medium Bullish

Gold (XAU)

Key news events today

PCE Price Index (1:30 pm GMT)

Chicago PMI (2:45 pm GMT)

What can we expect from Gold today?

The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – showed headline PCE accelerating for the second consecutive month as it rose from 2.1% in September to 2.4% YoY in November while the core reading remained unchanged at 2.8% YoY. The forecasts for December point to a further increase in the headline PCE, climbing to 2.6% while the core is once again anticipated to hold steady. 

Meanwhile, the Chicago PMI continues to highlight weak economic growth as PMI activity contracted for the 13th consecutive month in December, recording its steepest decline since May – the decline was primarily driven by a fall in new orders and production. PMI activity is anticipated to edge higher in January but still remain in contraction. Volatility for gold is likely to increase during the U.S. session, particularly following the release of the PCE Price Index.

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie marked its fourth consecutive day of decline as it briefly tumbled under the threshold of 0.6200 on Thursday. However, this currency pair stabilized around this threshold as Asian markets came online on Friday, edging higher towards 0.6220. However, overhead pressures remain in place and the Aussie is all but certain to register its first decline in three weeks.

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 10 December, marking the ninth consecutive pause.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. However, measures of underlying inflation are around 3.5%, which is still some way from the 2.5% midpoint of the inflation target.
• The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026 but the Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts with risks remaining in place.
• Growth in output has been weak as the economy grew by only 0.8% in the September quarter over the past year. Outside of the COVID-19 pandemic, this was the slowest pace of growth since the early 1990s.
• A range of indicators suggest that labour market conditions remain tight; while those conditions have been easing gradually, some indicators have recently stabilised. The unemployment rate was 4.1 per cent in October, up from 3.5 per cent in late 2022.
• Wage pressures have eased more than expected in the November SMP. The rate of wage growth as measured by the Wage Price Index was 3.5% over the year to the September quarter, a step down from the previous quarter, but labour productivity growth remains weak.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 18 February 2025.

Next 24 Hours Bias

Medium Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Like its Pacific neighbour, the Kiwi has fallen strongly this week as it dropped as low as 0.5622 on Thursday. This currency pair appeared to have found its footing at the beginning of the Asia session on Friday but strong headwinds remain in place.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 4.25% on 27 November, marking the third consecutive rate cut.
• The Committee assessed that annual consumer price inflation has declined and is now close to the midpoint of the MPC’s 1 to 3% target band; inflation expectations are also close to target and core inflation is converging to the midpoint.
• Economic activity remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.
• Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some service sectors have continued to grow.
• Consistent with feedback from business visits, high-frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery.
• Wage growth is slowing, consistent with inflation returning to the target midpoint while employment levels and job vacancies have declined, reflecting subdued economic activity; unemployment is expected to continue rising in the near term.
• Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved, providing the context and the confidence for the Committee to ease monetary policy restraint further.
• The next meeting is on 19 February 2025.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

Tokyo Core CPI (11:30 pm GMT 30th January)

What can we expect from JPY today?

Following the rise in core inflation as reported by the Bank of Japan (BoJ) earlier this week, the Tokyo Core CPI edged higher in January increasing 2.5% YoY. This inflation metric had accelerated from 1.8% in October to 2.4% YoY in December before today’s result, highlighting broadening price pressures and providing further justification for the latest interest rate hike that took place last week. Demand for the yen is likely to remain elevated as USD/JPY dropped as low as 153.91 during the Asia session.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 24 January, by an 8-1 majority vote, to set the following guidelines for money market operations for the inter-meeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• Japan’s economy has recovered moderately, although some weakness has been seen in part. Exports and industrial production have been more or less flat while corporate profits have been on an improving trend and business sentiment has stayed at a favourable level.
• The employment and income situation has improved moderately while private consumption has been on a moderately increasing trend despite the impact of price rises and other factors.
• On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been at around 3% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned.
• Inflation expectations have risen moderately while underlying CPI inflation has been increasing gradually toward the price stability target of 2%. With wages continuing to rise, there has been an increase in moves to reflect higher costs, such as increased personnel expenses and distribution costs, in selling prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 March 2025.

Next 24 Hours Bias

Medium Bearish

The Euro (EUR)

Key news events today

Germany CPI (Tentative)

What can we expect from EUR today?

As widely expected, the ECB lowered its key interest rates by 25 basis points (bps) on Thursday, reducing the deposit facility rate to 2.75%, the main refinancing rate to 2.90%, and the marginal lending rate to 3.15%. This latest move reflects the ECB’s updated inflation outlook, with price pressures easing in line with projections. Should the latest CPI data out of Germany point to further easing of inflationary pressures, the Euro will likely remain under pressure on the final trading day of the week.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 30 January to mark the fourth successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.90%, 3.15% and 2.75% respectively.
• The disinflation process is well on track and inflation is set to return to the Governing Council’s 2% medium-term target in the course of this year. Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 6 March 2025.

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Demand for the greenback picked up this week, aided by the Federal Reserve’s decision to hold the Fed funds rate at current levels on Wednesday. After falling as low as 0.8965 on Monday, USD/CHF has risen steadily to break above 0.9100 as Asian markets came online on Friday.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Medium Bullish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Cable hit an overnight high of 1.2476 before pulling away from this level. This currency pair was sliding towards 1.2400 at the beginning of the Asia session and looks all set to post its fourth decline over the past five weeks.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to maintain the Bank Rate at 4.75% on 19 December 2024 – three members preferred to reduce the Bank rate by 25 basis points, bringing it down to 4.50%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• Twelve-month CPI inflation had increased to 2.6% in November from 1.7% in September, slightly higher than previous expectations while services consumer price inflation had remained elevated, at 5.0%, while core goods price inflation had risen to 1.1%.
• Headline CPI inflation was slightly higher than previous expectations, owing in large part to stronger inflation in core goods and food, and is expected to continue to rise slightly in the near term.
• Most indicators of UK near-term activity have declined with Bank staff expecting GDP growth to be weaker at the end of the year than originally projected in the November Monetary Policy Report.
• Bank staff now expected zero GDP growth in 2024 Q4, weaker than the 0.3% that had been incorporated in the November Report, broadly consistent with the latest combined steer from business surveys and the available official data.
• The Committee now judges that the labour market is broadly in balance as annual private sector regular average weekly earnings growth picked up quite sharply in the three months to October but there remains significant uncertainty around developments in the labour market.
• Monetary policy has been guided by the need to squeeze remaining inflationary pressures out of the economy to achieve the 2% target both in a timely manner and on a lasting basis. Over recent quarters there has been progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.
• The Committee continues to monitor closely the risks of inflation persistence and will assess the extent to which the evolving evidence is consistent with more constrained supply, which could sustain inflationary pressures, or with weaker demand, which could lead to the emergence of spare capacity in the economy and push down inflation; a gradual approach to removing monetary policy restraint remains appropriate.
• Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 6 February 2025.

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

Key news events today

GDP (1:30 pm GMT)

What can we expect from CAD today?

After expanding 0.3% MoM in October, Canada’s GDP is anticipated to decline by 0.1% in November to mark the first decline in 11 months. This contraction is attributed to lower output in extractive industries, transportation and warehousing; and financial services according to a flash estimate. The Loonie could face strong headwinds should GDP activity falter more than originally expected – a result that would lift USD/CAD.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points bringing it down to 3% on 29 January; this marked the sixth consecutive meeting where rates were reduced.
• The bank announced its plan to complete the normalization of its balance sheet, ending quantitative tightening, and will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.
• Past cuts to interest rates have started to boost the economy and the recent strengthening in both consumption and housing activity is expected to continue. However, business investment remains weak while the outlook for exports is being supported by new export capacity for oil and gas.
• The Bank forecasts GDP growth will strengthen in 2025 and now projects GDP will grow by 1.8% in both 2025 and 2026, somewhat higher than potential growth.
• The labour market remains soft, with the unemployment rate at 6.7% in December. Job growth has strengthened in recent months, after lagging growth in the labour force for more than a year. Wage pressures, which have proven sticky, are showing some signs of easing.
• CPI inflation remains close to 2%, with some volatility due to the temporary suspension of the GST/HST on some consumer products. Shelter price inflation is still elevated but it is easing gradually, as expected
• A broad range of indicators, including surveys of inflation expectations and the distribution of price changes among components of the CPI, suggests that underlying inflation is close to 2% with forecasts that CPI inflation will be around the 2% target over the next two years.
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate a further 25 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The cumulative reduction in the policy rate since last June is substantial as lower interest rates are boosting household spending and the economy is expected to strengthen gradually and inflation to stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 12 March 2025.

Next 24 Hours Bias

Medium Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Crude oil prices stabilized on Thursday but this commodity is all but certain to register a second successive week of decline. WTI oil has tumbled nearly 6% over this period, falling as low as $72 per barrel overnight before prices steadied around $72.70. This benchmark climbed above the $73 level as Asian markets came online on the final trading day but overhead pressures continue to persist.

Next 24 Hours Bias

Medium Bearish

The post IC Markets Europe Fundamental Forecast | 31 January 2025 first appeared on IC Markets | Official Blog.

That’s one of the bolder forecasts I would say, even if being after the FOMC meeting decision this week. The Fed did alter their language in the statement a bit which may seem to look more “neutral”. However, Powell clarified that to say that they’re just “cleaning up” on their communique.

Earlier this month, Barclays also pared back expectations in forecasting just one rate cut for the Fed for this year. Meanwhile, Goldman Sachs reaffirms that they still see two rate cuts by the Fed after the events this week. That of course comes after having revised that from three rate cuts earlier in the year.

This article was written by Justin Low at www.forexlive.com.

Similarly, they also bumped up their average forecast for next year to $73. The previous forecast for 2026 was $71 previously.

Goldman Sachs says that they are looking for an average peak of around $80 in April to May this year. But the firm estimates that Brent oil could rise to as high as $93 when sanctioned supply falls – in the case of Iran and Russia. Meanwhile, they also see a scenario in which Brent oil could fall to the low $60s in 2026 amid a 10% universal tariffs scenario. As such, they are lowering their fair value estimate for the next 36 months to $68 (vs $70 previously).

This article was written by Justin Low at www.forexlive.com.

• Core inflation in Tokyo climbed to 2.5%, its fastest annual increase in nearly a year
• Still no word from Trump on what he has decided on Canadian oil tariffs
• Federal Reserve Board Governor Michelle Bowman is speaking on Friday
• US inflation (PCE) data due Friday – here are the critical ranges to watch
• The Federal Reserve is switching from data-dependent to increasingly more Trump-dependent
• Federal Reserve might conclude they’ve seen more inflation progress at its next meeting
• Trump threatens BRICs countries with 100% tariffs if they create a new currency
• ICYMI – BOJ deputy governor signals rate hikes if economic conditions align with forecasts
• ICYMI – Japan scrambled fighter jets to intercept Russian bombers, fighters, on Thursday
• Japan PM Ishiba says Japan will continue to invest and create jobs in the US
• Australian Q4 PPI +0.8% q/q (expected +1.0%)
• Australian December 2024 Private Sector Credit +0.6% m/m (expected +0.5%)
• Bank of Japan Governor Ueda is speaking soon – appearing in the Diet
• Reminder – China and Hong Kong markets closed today, Friday January 31, for a holiday
• FBI & White House investigating whether DeepSeek got Nvidia (NVDA) chips through Singapore
• US Congressional offices warned not to use DeepSeek
• Japan Industrial Production for December (preliminary): +0.3% m/m (expected +0.3%)
• Japan Retail sales for December: +3.7% y/y (expected +3.2%)
• Japan data: December Unemployment rate 2.4% (expected 2.5%)
• Tokyo area January inflation data: Headline 3.4% y/y (expected 3%, prior 3%)
• Fed likely to hold rates steady as labor market, inflation remain stubbornly strong
• Market swings on headlines shows “how on edge everyone is around tariffs”
• USD/CAD spiked near a 5-year high as Trump said Canada and Mexico tariffs coming Saturday
• ECB Lagarde predicts no European Union country will add Bitcoin to its monetary reserves.
• Forexlive Americas FX news wrap 30Jan:ECB cuts rates by 25 bp.Trump tariffs on Canada/Mex.
• Apple’s iPhone sales weaker in the December quarter
• Whirlpool shares on warning about the housing market
• Trade ideas thread – Friday, 31 January, insightful charts, technical analysis, ideas

After
the Trump-tariff-talk volatility late in the New York afternoon it
was a much more subdued session in Asia.

Equity
news was Q4 results from Apple (AAPL) with strong revenue but a
disappointment on sales growth. Woes in China were cited, where the
Chinese Communist Party has yet to approve Apple’s use of AI in the
latest iPhone model, while also creating obstacles for the company’s
efforts to shift manufacturing operations to India.

We
had a bundle of data from Japan today, of most note the Tokyo
inflation data for January. Core inflation in Japan’s capital hit a
1-year high. This will fuel further speculation of Bank of Japan rate
hikes ahead. Governor Ueda is speaking for the Diet (Japan’s
parliament) from 0535 GMT (0135 US Eastern time).

USD/JPY
tracked a 40 or so point range, circa 154.00/40. Other major FX
traded in small ranges only.

USD/CAD rose to a near 5-year high on the Trump tariff headlines late in NY time.

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

DXY (US Dollar Index):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price could potentially make a bearish reversal off the pivot and fall toward the 1st support.

Pivot: 108.54

Supporting reasons: Identified as an overlap resistance that aligns with the 50% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 107.10
Supporting reasons: Identified as a swing-low support, indicating a potential level where price could find support once more.

1st resistance: 109.39
Supporting reasons: Identified as an overlap resistance that aligns close to the 78.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

EUR/USD:

Potential Direction: Bullish

Overall momentum of the chart: Neutral

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance.

Pivot: 1.0345

Supporting reasons: Identified as an overlap support that aligns close to the 50% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 1.0251

Supporting reasons: Identified as a pullback support that aligns with the 78.6% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance: 1.0463
Supporting reasons:  Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

EUR/JPY:

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price could potentially make a bullish bounce off the pivot to rise towards the 1st resistance.

Pivot: 159.31

Supporting reasons: Identified as an overlap support that aligns close to the 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 158.02

Supporting reasons: Identified as a swing-low support that aligns with the 78.6% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 161.21
Supporting reasons: Identified as a pullback resistance, indicating a potential area that could halt any further upward movement.

EUR/GBP:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance.

Pivot: 0.8324

Supporting reasons: Identified as a pullback support that aligns close to the 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 0.8262

Supporting reasons: Identified as a swing-low support, indicating a potential level where price could find support once again.

1st resistance: 0.8389
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

GBP/USD:

Potential Direction: Bullish

Overall momentum of the chart: Neutral

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance.

Pivot: 1.2367

Supporting reasons: Identified as an overlap support that aligns with the 38.2% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 1.2246

Supporting reasons: Identified as a swing-low support level that aligns close to the 61.8% Fibonacci retracement, indicating a potential level where price could stabilize once more.

1st resistance: 1.2503
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

GBP/JPY:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish breakout through the pivot and could potentially fall toward the 1st support.

Pivot: 191.87

Supporting reasons: Previously identified as an overlap support which now has been broken due to the strong bearish momentum.

1st support:  189.66
Supporting reasons: Identified as a swing-low support that aligns close to the 61.8% Fibonacci projection, indicating a potential level where price could find support once again.

1st resistance: 193.20
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

USD/CHF:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish reversal off the pivot to fall towards the 1st support.

Pivot: 0.9107

Supporting reasons: Identified as a multi-swing-high resistance that aligns with a 50% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 0.9032
Supporting reasons: Identified as a pullback support that aligns with the 50% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance: 0.9188
Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

USD/JPY:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance.

Pivot: 153.46

Supporting reasons: Identified as an overlap support that aligns close to the 50% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 151.54
Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support once more.

1st resistance: 155.69
Supporting reasons: Identified as a swing-high resistance that aligns with the 38.2% retracement, indicating a potential area that could halt any further upward movement.

USD/CAD:

Potential Direction: Bullish

Overall momentum of the chart: Neutral

Price could fall towards the pivot and potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 1.4399
Supporting reasons: Identified as an overlap support that aligns close to a 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 1.4300
Supporting reasons: Identified as multi-swing-low support, indicating a key level where the price could stabilize once more.

1st resistance: 1.4516
Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential area that could halt any further upward movement.

AUD/USD:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 0.6242

Supporting reasons: Identified as an overlap resistance, indicating a potential area where selling pressures could intensify.

1st support: 0.6172

Supporting reasons: Identified as a multi-swing-low support that aligns with a 78.6% Fibonacci retracement, suggesting a potential area where the price could stabilize once again.

1st resistance: 0.6262
Supporting reasons: Identified as a pullback resistance that aligns close to a 50% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

NZD/USD

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 0.5666

Supporting reasons: Identified as a pullback resistance that aligns close to a 50% Fibonacci retracement, indicating a potential level where selling pressures could intensify.

1st support: 0.5574

Supporting reasons: Identified as a swing-low support that aligns close to a 78.6% Fibonacci retracement, suggesting a potential area where the price could stabilize once more.

1st resistance: 0.5716

Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement.

US30 (DJIA):

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could rise towards the pivot and potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 45,103.25

Supporting reasons: Identified as a swing-high resistance that aligns close to the all-time high, indicating a potential level where selling pressures could intensify

1st support: 44,525.60

Supporting reasons: Identified as an overlap support, indicating a potential level where the price could stabilize once again.

1st resistance: 45,541.75

Supporting reasons: Identified as a resistance that aligns with a 61.8% Fibonacci projection, indicating a potential area that could halt any further upward movement.

DE40 (DAX):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price is falling towards the pivot and could potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 21,528.30
Supporting reasons: Identified as a pullback support that aligns with a 38.2% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 21,114.40

Supporting reasons: Identified as a swing-low support, indicating a key level where the price could stabilize once more.

1st resistance: 22,010.86
Supporting reasons: Identified as a resistance that aligns with a 61.8% Fibonacci projection, indicating a potential area that could halt any further upward movement.

US500 (S&P 500): 

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could rise towards the pivot and potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 6,123.30

Supporting reasons: Identified as a swing-high resistance that aligns close to the all-time high, indicating a potential area where selling pressures could intensify.

1st support: 6,041.80

Supporting reasons: Identified as an overlap support, indicating a potential level where the price could stabilize once again.

1st resistance: 6,185.74

Supporting reasons: Identified as a resistance that aligns with a 61.8% Fibonacci projection, indicating a potential area that could halt any further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 105,502.78

Supporting reasons: Identified as a swing-high resistance, indicating a potential area where selling pressures could intensify.

1st support: 100,228.24
Supporting reasons: Identified as a swing-low support that aligns close to a 61.8% Fibonacci retracement, indicating a potential level where the price could stabilize once more.

1st resistance: 107,885.04
Supporting reasons: Identified as a multi-swing high resistance, indicating a potential area that could halt any further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 3,287.13

Supporting reasons: Identified as a pullback resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 3,028.93
Supporting reasons: Identified as a multi-swing-low support that aligns with a 78.6% Fibonacci retracement, indicating a potential level where the price could stabilize once again.

1st resistance: 3,473.97
Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential area that could halt any further upward movement.

WTI/USD (Oil):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 75.11
Supporting reasons: Identified as an overlap resistance that aligns close to a 23.6% Fibonacci retracement, indicating a potential area where selling pressures could intensify. The presence of the downward channel adds further significance to the strength of the bearish momentum.

1st support: 72.96
Supporting reasons: Identified as an overlap support that aligns close to a 61.8% Fibonacci retracement, indicating a key level where the price could stabilize once more.

1st resistance: 76.54
Supporting reasons: Identified as an overlap resistance that aligns close to a 38.2% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

XAU/USD (GOLD):

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price has made a bullish breakout through the pivot and could potentially rise towards the 1st resistance.

Pivot: 2,776.44

Supporting reasons: Previously identified as a swing-high resistance which now has been broken due to the strong bullish momentum.

1st support: 2,735.98

Supporting reasons: Identified as a multi-swing-low support, indicating a potential level where price could find support once again.

1st resistance: 2,820.28

Supporting reasons: Identified as a resistance that aligns with a 161.8% Fibonacci extension, indicating a potential area that could halt any further upward movement.

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The post Friday 31st January 2025: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 31 January 2025

What happened in the U.S. session?

As widely expected, the ECB lowered its key interest rates by 25 basis points (bps) on Thursday, reducing the deposit facility rate to 2.75%, the main refinancing rate to 2.90%, and the marginal lending rate to 3.15%. This latest move reflects the ECB’s updated inflation outlook, with price pressures easing in line with projections. However, domestic inflation remains elevated due to delayed wage and price adjustments. During her press conference, ECB President Christine Lagarde stated that the economy is set to remain weak in the near term but conditions for a recovery remain in place. The labour market remains robust while longer-term inflation expectations continue to stand at around 2%. President Lagarde also touched on the impact of tariffs imposed on the Euro Area, saying that if trade tensions do not escalate, exports should support recovery as global demand rises. The Euro initially surged upon the release of the statement, hitting an overnight high of 1.0467 before reversing sharply to dive towards 1.0420 as the press conference commenced.

What does it mean for the Asia Session?

Following the increase in core inflation as reported by the Bank of Japan (BoJ) earlier this week, the Tokyo Core CPI is expected to edge higher in January. This inflation metric had accelerated from 1.8% in October to 2.4% YoY in December, highlighting broadening price pressures and providing further justification for the latest interest rate hike that took place last week. The yen could receive another boost should inflation continue to come in ‘hot’ in the land of the rising sun, putting downward pressure on USD/JPY.

The Dollar Index (DXY)

Key news events today

PCE Price Index (1:30 pm GMT)

Chicago PMI (2:45 pm GMT)

What can we expect from DXY today?

The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – showed headline PCE accelerating for the second consecutive month as it rose from 2.1% in September to 2.4% YoY in November while the core reading remained unchanged at 2.8% YoY. The forecasts for December point to a further increase in the headline PCE, climbing to 2.6% while the core is once again anticipated to hold steady. Should inflationary pressures continue to build, demand for the dollar could rekindle later today.

Meanwhile, the Chicago PMI continues to highlight weak economic growth as PMI activity contracted for the 13th consecutive month in December, recording its steepest decline since May – the decline was primarily driven by a fall in new orders and production. PMI activity is anticipated to edge higher in January but still remain in contraction. Volatility for the dollar is likely to increase during the U.S. session.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 29 January.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
• December’s Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025 totalling 50 bps, compared to the full percentage point of reductions projected in the previous quarter.
• GDP growth forecasts were revised upward for 2024 (2.5% vs. 2% in the September projection) and 2025 (2.1% vs. 2%), while remaining steady at 2% for 2026. Similarly, PCE inflation projections have been adjusted higher for 2024 (2.4% vs. 2.3%), 2025 (2.5% vs. 2.1%), and 2026 (2.1% vs. 2%).
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• The Committee will roll over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing in each calendar month that exceeds a cap of $25 billion per month and redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
• In addition, the Committee will reinvest the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding.
• The next meeting runs from 18 to 19 March 2025.

Next 24 Hours Bias

Medium Bullish

Gold (XAU)

Key news events today

PCE Price Index (1:30 pm GMT)

Chicago PMI (2:45 pm GMT)

What can we expect from Gold today?

The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – showed headline PCE accelerating for the second consecutive month as it rose from 2.1% in September to 2.4% YoY in November while the core reading remained unchanged at 2.8% YoY. The forecasts for December point to a further increase in the headline PCE, climbing to 2.6% while the core is once again anticipated to hold steady. 

Meanwhile, the Chicago PMI continues to highlight weak economic growth as PMI activity contracted for the 13th consecutive month in December, recording its steepest decline since May – the decline was primarily driven by a fall in new orders and production. PMI activity is anticipated to edge higher in January but still remain in contraction. Volatility for gold is likely to increase during the U.S. session, particularly following the release of the PCE Price Index.

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie marked its fourth consecutive day of decline as it briefly tumbled under the threshold of 0.6200 on Thursday. However, this currency pair stabilized around this threshold as Asian markets came online on Friday, edging higher towards 0.6220. However, overhead pressures remain in place and the Aussie is all but certain to register its first decline in three weeks.

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 10 December, marking the ninth consecutive pause.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. However, measures of underlying inflation are around 3.5%, which is still some way from the 2.5% midpoint of the inflation target.
• The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026 but the Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts with risks remaining in place.
• Growth in output has been weak as the economy grew by only 0.8% in the September quarter over the past year. Outside of the COVID-19 pandemic, this was the slowest pace of growth since the early 1990s.
• A range of indicators suggest that labour market conditions remain tight; while those conditions have been easing gradually, some indicators have recently stabilised. The unemployment rate was 4.1 per cent in October, up from 3.5 per cent in late 2022.
• Wage pressures have eased more than expected in the November SMP. The rate of wage growth as measured by the Wage Price Index was 3.5% over the year to the September quarter, a step down from the previous quarter, but labour productivity growth remains weak.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 18 February 2025.

Next 24 Hours Bias

Medium Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Like its Pacific neighbour, the Kiwi has fallen strongly this week as it dropped as low as 0.5622 on Thursday. This currency pair appeared to have found its footing at the beginning of the Asia session on Friday but strong headwinds remain in place.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 4.25% on 27 November, marking the third consecutive rate cut.
• The Committee assessed that annual consumer price inflation has declined and is now close to the midpoint of the MPC’s 1 to 3% target band; inflation expectations are also close to target and core inflation is converging to the midpoint.
• Economic activity remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.
• Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some service sectors have continued to grow.
• Consistent with feedback from business visits, high-frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery.
• Wage growth is slowing, consistent with inflation returning to the target midpoint while employment levels and job vacancies have declined, reflecting subdued economic activity; unemployment is expected to continue rising in the near term.
• Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved, providing the context and the confidence for the Committee to ease monetary policy restraint further.
• The next meeting is on 19 February 2025.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

Tokyo Core CPI (11:30 pm GMT 30th January)

What can we expect from JPY today?

Following the increase in core inflation as reported by the Bank of Japan (BoJ) earlier this week, the Tokyo Core CPI is expected to edge higher in January. This inflation metric had accelerated from 1.8% in October to 2.4% YoY in December, highlighting broadening price pressures and providing further justification for the latest interest rate hike that took place last week. The yen could receive another boost should inflation continue to come in ‘hot’ in the land of the rising sun, putting downward pressure on USD/JPY.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 24 January, by an 8-1 majority vote, to set the following guidelines for money market operations for the inter-meeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• Japan’s economy has recovered moderately, although some weakness has been seen in part. Exports and industrial production have been more or less flat while corporate profits have been on an improving trend and business sentiment has stayed at a favourable level.
• The employment and income situation has improved moderately while private consumption has been on a moderately increasing trend despite the impact of price rises and other factors.
• On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been at around 3% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned.
• Inflation expectations have risen moderately while underlying CPI inflation has been increasing gradually toward the price stability target of 2%. With wages continuing to rise, there has been an increase in moves to reflect higher costs, such as increased personnel expenses and distribution costs, in selling prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 March 2025.

Next 24 Hours Bias

Medium Bearish

The Euro (EUR)

Key news events today

Germany CPI (Tentative)

What can we expect from EUR today?

As widely expected, the ECB lowered its key interest rates by 25 basis points (bps) on Thursday, reducing the deposit facility rate to 2.75%, the main refinancing rate to 2.90%, and the marginal lending rate to 3.15%. This latest move reflects the ECB’s updated inflation outlook, with price pressures easing in line with projections. Should the latest CPI data out of Germany point to further easing of inflationary pressures, the Euro will likely remain under pressure on the final trading day of the week.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 30 January to mark the fourth successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.90%, 3.15% and 2.75% respectively.
• The disinflation process is well on track and inflation is set to return to the Governing Council’s 2% medium-term target in the course of this year. Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 6 March 2025.

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Demand for the greenback picked up this week, aided by the Federal Reserve’s decision to hold the Fed funds rate at current levels on Wednesday. After falling as low as 0.8965 on Monday, USD/CHF has risen steadily to break above 0.9100 as Asian markets came online on Friday.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Medium Bullish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Cable hit an overnight high of 1.2476 before pulling away from this level. This currency pair was sliding towards 1.2400 at the beginning of the Asia session and looks all set to post its fourth decline over the past five weeks.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to maintain the Bank Rate at 4.75% on 19 December 2024 – three members preferred to reduce the Bank rate by 25 basis points, bringing it down to 4.50%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• Twelve-month CPI inflation had increased to 2.6% in November from 1.7% in September, slightly higher than previous expectations while services consumer price inflation had remained elevated, at 5.0%, while core goods price inflation had risen to 1.1%.
• Headline CPI inflation was slightly higher than previous expectations, owing in large part to stronger inflation in core goods and food, and is expected to continue to rise slightly in the near term.
• Most indicators of UK near-term activity have declined with Bank staff expecting GDP growth to be weaker at the end of the year than originally projected in the November Monetary Policy Report.
• Bank staff now expected zero GDP growth in 2024 Q4, weaker than the 0.3% that had been incorporated in the November Report, broadly consistent with the latest combined steer from business surveys and the available official data.
• The Committee now judges that the labour market is broadly in balance as annual private sector regular average weekly earnings growth picked up quite sharply in the three months to October but there remains significant uncertainty around developments in the labour market.
• Monetary policy has been guided by the need to squeeze remaining inflationary pressures out of the economy to achieve the 2% target both in a timely manner and on a lasting basis. Over recent quarters there has been progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.
• The Committee continues to monitor closely the risks of inflation persistence and will assess the extent to which the evolving evidence is consistent with more constrained supply, which could sustain inflationary pressures, or with weaker demand, which could lead to the emergence of spare capacity in the economy and push down inflation; a gradual approach to removing monetary policy restraint remains appropriate.
• Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 6 February 2025.

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

Key news events today

GDP (1:30 pm GMT)

What can we expect from CAD today?

After expanding 0.3% MoM in October, Canada’s GDP is anticipated to decline by 0.1% in November to mark the first decline in 11 months. This contraction is attributed to lower output in extractive industries, transportation and warehousing; and financial services according to a flash estimate. The Loonie could face strong headwinds should GDP activity falter more than originally expected – a result that would lift USD/CAD.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points bringing it down to 3% on 29 January; this marked the sixth consecutive meeting where rates were reduced.
• The bank announced its plan to complete the normalization of its balance sheet, ending quantitative tightening, and will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.
• Past cuts to interest rates have started to boost the economy and the recent strengthening in both consumption and housing activity is expected to continue. However, business investment remains weak while the outlook for exports is being supported by new export capacity for oil and gas.
• The Bank forecasts GDP growth will strengthen in 2025 and now projects GDP will grow by 1.8% in both 2025 and 2026, somewhat higher than potential growth.
• The labour market remains soft, with the unemployment rate at 6.7% in December. Job growth has strengthened in recent months, after lagging growth in the labour force for more than a year. Wage pressures, which have proven sticky, are showing some signs of easing.
• CPI inflation remains close to 2%, with some volatility due to the temporary suspension of the GST/HST on some consumer products. Shelter price inflation is still elevated but it is easing gradually, as expected
• A broad range of indicators, including surveys of inflation expectations and the distribution of price changes among components of the CPI, suggests that underlying inflation is close to 2% with forecasts that CPI inflation will be around the 2% target over the next two years.
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate a further 25 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The cumulative reduction in the policy rate since last June is substantial as lower interest rates are boosting household spending and the economy is expected to strengthen gradually and inflation to stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 12 March 2025.

Next 24 Hours Bias

Medium Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Crude oil prices stabilized on Thursday but this commodity is all but certain to register a second successive week of decline. WTI oil has tumbled nearly 6% over this period, falling as low as $72 per barrel overnight before prices steadied around $72.70. This benchmark climbed above the $73 level as Asian markets came online on the final trading day but overhead pressures continue to persist.

Next 24 Hours Bias

Medium Bearish

The post IC Markets Asia Fundamental Forecast | 31 January 2025 first appeared on IC Markets | Official Blog.

Trump said on Thursday afternoon that he’d probably decide that evening on whether to apply his planned 25% tariff to Canadian oil.

There hasn’t been any word on this. He may have decided but hasn’t said anything. Or he may not yet have decided.

A tariff on oil from Canada would hit a major sector and raise the cost of gasoline, particularly in the Midwest.

Earlier:

• Market swings on headlines shows “how on edge everyone is around tariffs”
• Trump threatens BRICs countries with 100% tariffs if they create a new currency

The spike lower in CAD late on Thursday saw USD/CAD to a near five year high. I posted this chart earlier and USD/CAD hasn’t done a lot since.

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

Due on Friday at 0830 US Eastern time (0130 GMT), the Core PCE data is the focus. The Personal Consumption Expenditures (PCE) data is a key measure of inflation that tracks changes in the prices of goods and services purchased by consumers. It is reported monthly by the Bureau of Economic Analysis (BEA) and is a critical tool used by the Federal Reserve to assess inflation and guide monetary policy.

There are two main types of PCE data:

1. Headline PCE: This measures the overall change in prices for all goods and services. It includes volatile components like food and energy, which can fluctuate sharply due to supply shocks, seasonal changes, or geopolitical events.

2. Core PCE: This excludes the more volatile food and energy prices to provide a clearer view of underlying inflation trends. Core PCE is the preferred inflation gauge for the Federal Reserve because it gives a more stable picture of long-term inflation pressures.

PCE is similar to the Consumer Price Index (CPI), but PCE is broader in scope and reflects changes in consumer behaviour, such as substituting products when prices rise.

You can see the median estimates for the various PCE data points below in the table.

The ranges for ‘core’ measures (why these are important is explained below) are:

Core PCE Price Index m/m

• 0.1% to +0.2%

and for the y/y

• 2.7% to 2.9%

***

Why is knowledge of such ranges important?

Data results that fall outside of market low and high expectations tend to move markets more significantly for several reasons:

• Surprise Factor: Markets often price in expectations based on forecasts and previous trends. When data significantly deviates from these expectations, it creates a surprise effect. This can lead to rapid revaluation of assets as investors and traders reassess their positions based on the new information.

• Psychological Impact: Investors and traders are influenced by psychological factors. Extreme data points can evoke strong emotional reactions, leading to overreactions in the market. This can amplify market movements, especially in the short term.

• Risk Reassessment: Unexpected data can lead to a reassessment of risk. If data significantly underperforms or outperforms expectations, it can change the perceived risk of certain investments. For instance, better-than-expected economic data may reduce the perceived risk of investing in equities, leading to a market rally.

• Triggering of Automated Trading: In today’s markets, a significant portion of trading is done by algorithms. These automated systems often have pre-set conditions or thresholds that, when triggered by unexpected data, can lead to large-scale buying or selling.

• Impact on Monetary and Fiscal Policies: Data that is significantly off from expectations can influence the policies of central banks and governments. The Fed are now waiting to see more progress towards their inflation goal.

• Liquidity and Market Depth: In some cases, extreme data points can affect market liquidity. If the data is unexpected enough, it might lead to a temporary imbalance in buyers and sellers, causing larger market moves until a new equilibrium is found.

• Chain Reactions and Correlations: Financial markets are interconnected. A significant move in one market or asset class due to unexpected data can lead to correlated moves in other markets, amplifying the overall market impact.

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

US Stocks Push Higher on Earnings – S&P Up 0.5%

US stock markets pushed higher again yesterday as investors continued to assess a mixed bag of earnings data from mega-cap firms. The Dow gained 0.38%, the S&P rose 0.53%, and the Nasdaq closed 0.25% in the black. The dollar surged towards the end of the day as President Trump reiterated plans to implement tariffs on Canada and Mexico this weekend. The DXY finished the day up 0.28% at 108.16, with notable losses for both the CAD and MXN.

Treasury markets were less impressed, finishing the day close to flat, with the 2-year yield losing just 0.6 basis points to move down to 4.207% and the 10-year dropping 1.4 basis points to 4.514%. Oil prices edged higher on the back of the tariff impact, with Brent up 0.73% to $77.23 and WTI rising 0.70% to $73.13 per barrel. Gold surged to a new all-time high of $2,798.24 and remained at elevated levels, closing at $2,794.11.

Currency Traders Prepare for More Tariff Volatility

Once again, sharp moves were seen in currency markets overnight following tariff updates from President Trump. While the dollar appreciated as expected, the real impact was felt in local currencies, with USDCAD soaring to fresh multi-year highs within seconds and USDMXN rallying close to last year’s peak.

Traders are now seeking ways to capitalise on ‘tariff trades’, with both pairs likely to break technical levels that could propel them into fresh higher ranges. Volatility is expected to remain high in these pairs, as well as the CNH, and there could be a particularly turbulent open in Asian markets on Monday if tariffs are implemented over the weekend when markets are closed. Options interest is likely to increase, with topside protection being favoured due to the potential for significant slippage in spot positions should key technical levels break.

Busy Day to End a Busy Week

It looks set to be a busy trading day to conclude an already eventful week for financial markets, as attention shifts away from central banks and towards geopolitical updates and economic data.

Geopolitical developments have already impacted the Asian open this morning as fresh tariff discussions hit the market, and traders anticipate continued volatility throughout the day. The economic calendar is packed, starting early with Japan’s latest Tokyo CPI data release. During the European session, the focus will be on German CPI data, with each individual state publishing its figures over the course of the day.

However, the US session is expected to dominate sentiment once again, with a series of major data releases due at the same time. Canadian GDP, the US Employment Index, and the Core PCE Price Index will all be published early in the New York session. Most traders anticipate that the Core PCE number will be the key market driver, as it is the Federal Reserve’s preferred inflation measure—especially if it deviates significantly from the expected 0.2% month-on-month increase. Nevertheless, traders should keep an eye on all data sets and remain prepared for market moves right up until the close.

The post General Market Analysis – 31/01/25 first appeared on IC Markets | Official Blog.