The USD is steady, oil prices weaken, equity markets are down, and US yields ease with caution on China and heading into rate decisions. The USD holds steady near three-week highs, while Bitcoin sets a record high. Global equity markets softened after a weaker-than-expected retail sales report in China weighed on risk sentiment. China's retail sales increased by just 3% y/y, falling below the forecasted 5% growth. Investors are cautious heading into the Fed, BoE & BoJ interest rate decisions, with markets expecting the Fed to cut by 25 bps on Wednesday. In Germany, Cthe ewhere, oil prices ease on demand and rate concerns. Bitcoin is at $104.6k, easing from a record high of $106, while Silver and Gold prices hold steady. This week sees a busy week of economic releases, Monday, US Global Manufacturing & Composite PMI, & BoC Governor Macklem's speech. Tuesday, UK Claimant Count Change, UK Unemployment rate, CAD CPI report, and US Retail Sales. Wednesday, UK CPI, Fed Interest Rate Decision, NZ GDP, and BoJ Interest Rate Decision. Thursday, UK Interest Rate Decision, US GDP, US Initial Jobless Claims. Friday UK Retail Sales, CAD Retail Sales. US Core PCE report & the Michigan Consumer Sentiment Index.
In other news. ECB's Lagarde says the 'darkest days' of high inflation are behind the Eurozone. French government bonds under pressure after Moody's downgrade. Trump transition team plans sweeping rollback of Biden EV, emission policies. Assad dispatched $250mn of Syria's cash to Moscow, while Russia pulled hundreds of troops out of Damascus. Bitcoin rises to a new record above $106,000 ahead of this week's Fed decision. Russia braced for mammoth rate hike amid fears it's losing the battle against inflation. The case against Brazil's coup plotters end decades of impunity. Canada Post workers are to return on Tuesday after the labour board ruling. Rescuers seek cyclone survivors in devastated Mayotte. Softbank CEO Son to announce a $100 billion investment in the US during a visit with Trump. The UK approves Czech billionaire's Royal Mail deal.
In currency markets. China's yuan eases amid weakening yields, the USD hovers near three-week highs, and the CAD remains under pressure from ongoing tariff threats. Norway's central bank to buy NOK and sell foreign currency to fund transfers to the government. CNY and Asian currencies ease by 0.1% on average against the USD. Trading currencies are mixed, with NOK tumbling by 0.6%, ZAR weakening, AUD easing by 0.15%, SEK down 0.1%, NZD & MXN flat, and CHF up 0.1% against the USD.
In commodity markets. Oil prices weakened by 1%. Natural Gas prices tumbled by 3.7%. Gold prices are flat. Silver & Soybean prices firmed by 0.25%. Copper prices eased by 0.5%, and Wheat prices strengthened by 0.65%.
CAD starts a fourth week under pressure against the USD, holding at four 1/2-year lows at 1.4244. The loonie continues under pressure from the combination of US trade tariffs/trade war and expectations of diverging interest rates between the Fed & BoC. This week, investors will be focused on Tuesday's CAD inflation report and the Fed's interest rate decision to help drive direction for the loonie.
EURCAD holds steady in early trading as markets are sidelined ahead of this week's Fed interest rate decision, Germany's No Confidence vote, and Canada's Inflation report.
EUR dips below 1.0500 in quiet trading amid EU PMI & ECB comments. The euro appears quiet ahead of the storm as investors are sidelined heading into Wednesday's Fed interest rate decision. ECB President Lagarde reiterated that the central bank will continue to cut rates if data shows disinflation in 2025. Domestically, German & French Manufacturing PMIs missed expectations, but positive EU PMI reports beat expectations. Politically, ongoing French political deadlock saw Moody's downgrade its credit rating. In Germany, the parliament declared a no-confidence vote for Chancellor Scholz, triggering elections for Feb 23rd.
GBPEUR rallies in early trading ahead of Thursday's BoE interest rate decision and increased political uncertainty in Germany & France.
GBP firms in early trading on positive PMI reports. The pound gained against the USD following the survey of business activity pointed to a rise in prices in the UK. UK businesses in December cut employees at the fastest pace in almost four years, increased pricing, and also turned more pessimistic about the economic outlook, a survey showed today. The pound gathers some strength as markets widely expect the Bank of England to keep interest rates on hold at its meeting on Thursday.
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