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Message: [QUOTE="katetrades, post: 240724, member: 21862"] [JUSTIFY][B]Forex Major Currencies Outlook (Jan 27 – Jan 31)[/B] Fed, ECB and BoC meetings coupled with inflation from Australia and the US as well as GDP from the US and Eurozone will dominate this event packed week ahead of us. [B]USD[/B] Donald J Trump was sworn in as 47th president of the United States on Monday. President Trump emphasized importance of border control and energy dominance. He will sign executive orders declaring national emergency on both border and energy in order to build critical infrastructure as well as sign out of some green policies signed by former president Biden. He will also establish External Revenue Service that will be tasked with collecting tariffs and duties with intention to tax foreign countries and enrich American citizens. Monday saw a big volatility in the markets as report, later confirmed by Trump official, stated that there will be no tariffs imposed on the Day 1. CAD, MXN and CNY were the biggest beneficiaries as USD longs unwound pushing dollar down. Later on during the evening, Trump mentioned that he is thinking about 25% tariffs on Canada and Mexico by February 1 and those currencies did a 180 turn and fell to new lows. On Tuesday night Trump mentioned tariffs on China and EU. President Trump spoke at the conference in Davos and stated that US will be the world capital of AI and crypto. He clarified that if products are not made in America they will be susceptible to tariffs. He pledged to ask Saudi Arabia and OPEC to bring prices of oil down and low oil prices will lead to end of war between Russia and Ukraine. Additionally, after oil prices come down Trump will be asking for interest rates to go down. We can expect him to keep the pressure on Fed to lower rates in the future. Later on in an interview he stated that he would rather not use tariffs on China as he thinks he can make deal with them. USD continued to decline as the week went on and tariff threats abated. The yield on a 10y Treasury started the week at 4.64%, rose to 4.65% and finished the week at around 4.63%. The yield on 2y Treasury started the week at 4.29% and reached the high of 4.31%. Spread between 2y and 10y Treasuries started the week at 33bp and finished the week at 36bp as curve steepened further. The 2y10y was inverted for over two years. FedWatchTool sees the probability of a 25bp rate cut at January meeting at around 1%, while probability of a no cut is around 99%. June is now the first meeting that sees above 50% probability of a rate cut. This week we will have Fed meeting, preliminary Q4 GDP reading as well as Fed’s preferred inflation metric PCE. Fed is expected to leave rates unchanged while investors will be on guard for any mention of changes to their QT program.[/JUSTIFY] Important news for USD: [JUSTIFY][I]Wednesday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]Fed Interest Rate Decision[/JUSTIFY] [/LIST] [JUSTIFY][I]Thursday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]GDP[/JUSTIFY] [/LIST] [JUSTIFY][I]Friday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]PCE[/JUSTIFY] [/LIST] [JUSTIFY][B]EUR[/B] World Economic Forum held in Davos Switzerland saw a slew of ECB members speaking and all of them basically advocating for another rate cut. Bundesbank president Nagel expressed his confidence that inflation will fall down to the 2% target by middle of this year. Markets are pricing around 100bp of rate cuts with Villeroy, Kazimir and Vujcic hinting that they are ok with that while Knot stated that he is ok with pricing for the next two meetings but needs to see more data in order to make decisions for the future. Preliminary PMI data for the month of January saw improvements in manufacturing (46.1 vs 45.1 the previous month) and composite (returning to expansion with a 50.2 vs 49.6) while services ticked down to 51.4 from 51.5 in December. Manufacturing improved in both Germany and France and with services sector holding on it makes for an encouraging start of 2025. Inflation pressures increased in both sectors and that is a cause for concern. This week we will have preliminary Q4 GDP reading and ECB meeting. Another 25bp rate cut, bringing rate down to 2.75%, is expected with focus remaining on inflation outlook, underlying inflation and strength of monetary policy transmission as well as data dependence. Important news for EUR: [I]Thursday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]ECB Interest Rate Decision[/JUSTIFY] [*][JUSTIFY]GDP[/JUSTIFY] [/LIST] [JUSTIFY][B]GBP[/B] December payroll change saw economy lose 47k jobs after a drop of 32k jobs the previous month. November ILO unemployment rate came in at 4.4% as expected while wages surged with both average wages and ex bonus printing 5.6% 3m/y after a 5.2% 3m/y print in October. While there are still issues with data quality, as noted by ONS, falling jobs and rising wages are painting a picture of softening jobs market are not something BoE wishes to see. January saw improvements in preliminary PMI data across the sectors. Manufacturing printed 48.2 after 47 in December while services printed 51.2 after 51.1 the previous month. Combined they lifted composite to 50.9 from 50.4 in December. Inflation pressures are seen intensifying in both manufacturing and services. [B]AUD[/B] PBOC has expanded its gold reserves in 2024 by 44.17 tons and total gold reserves now stand at record high 2279.57 tons. This putss China in sixth place in the list of countries with highest gold reserves. With tariff threats abating Yuan has had a great week strengthening to 7.24 against the USD. This week we will get very important Q4 inflation reading that will be used as a main input into RBA’s decision in February. Additionally, we will get official PMI data from China. Important news for AUD: [I]Monday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]Manufacturing PMI (China)[/JUSTIFY] [*][JUSTIFY]Services PMI (China)[/JUSTIFY] [*][JUSTIFY]Composite PMI (China)[/JUSTIFY] [/LIST] [JUSTIFY][I]Wednesday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]CPI[/JUSTIFY] [/LIST] [JUSTIFY][B]NZD[/B] Q4 inflation data saw headline number rise 0.5% q/q as expected and ease from 0.6% q/q in Q3 and 2.2% y/y, same as in the previous quarter. Tradable inflation, influenced by factors from outside of the country, rose by 0.3% q/q higher than 0.2% q/q in Q3 while non-tradable inflation, influenced by domestic conditions and policies, increased by 0.7% q/q easing from 1.3% q/q in the previous quarter. Sectoral factor model inflation, RBNZ’s preferred inflation measure, rose 3.1% y/y, down from 3.4% y/y increase seen in the previous quarter. RBNZ is targeting range of 1-3% so it is almost on the top of the range which combined with quarterly and yearly headline measures leads markets to print around 67% chance of another 50bp rate cut in February. [B]CAD[/B] CPI data for the month of December saw headline tick down to 1.8% y/y from 1.9% y/y in November while markets expected it to remain unchanged. Median and trim measures both declined to 2.4% y/y and 2.5% y/y respectively while common measure remained at 2% y/y. With inflation coming down and growth stalling BoC will continue with rate cuts at their incoming meeting. This week we will have a BoC meeting where a 25bp rate cut is fully expected. Canada is facing a deadly combination of falling growth and inflation and rising unemployment. Another 25bp rate cut would bring the rate to 3% and make it a total of 200bp rate cuts since the early summer. Important news for CAD: [I]Wednesday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]BoC Interest Rate Decision[/JUSTIFY] [/LIST] [JUSTIFY][B]JPY[/B] BoJ delivered a full 25bp rate hike, the highest rate hike since February of 2007 and thus brought the rate to 0.50%, highest since 2008. The vote was 8-1 in favour of a hike with Nakamura being the only dissenter. BoJ has indicated they plan to deliver more hikes if economy continues to move with forecasts. They now see underlying inflation gradually moving towards the target. New projections see core CPI higher with 2024 seen at 2.5% y/y vs 2.4% y/y in October, 2025 at 2.4% y/y vs 1.9% y/y in October and 2026 at 2% y/y vs 1.9% y/y in October. Real GDP is seen ticking down for 2024 to 0.5% from 0.6% in October while for 2025 and 2026 it was unchanged at 1.1% and 1% respectively. We got a hawkish statement and projections from BoJ. Governor Ueda stroke a more balanced tone during his press conference stating that there is no set path for future rate adjustments. He clarified that projected higher inflation should materialize by the middle of the year and after that they expect it to start dropping. Inflation is seen higher due to cost-push factors, that is due to rising input prices caused by weak JPY. Ueda clarified that they are still far away from neutral rates, although there is no exact level where they are as they are in a wide range. The board assessed that spring wage negotiations will lead to another year of strong rate hikes. Ueda concluded that next move in rates will depend more on price action. Preliminary January PMI saw further divide between sectors as manufacturing declined to 48.8 from 49.6 in December while services jumped to 52.7 from 50.9 the previous month and thus lifted composite to 51.1 from 50.5 in December. Output and new orders see stronger growth in services while stronger decline in manufacturing sector. Inflation pressures are persisting in services sector as both input and output prices showed stronger inflation. December CPI for the country of Japan saw headline number surging to 3.6% y/y from 2.9% y/y in November while a print of 3.4% y/y was expected. Ex energy category jumped to 3% y/y from 2.7% y/y the previous month. [B]CHF[/B] SNB total sight deposits for the week ending January 17 came in at CHF445.3bn vs CHF445.1bn the previous week. Virtually unchanged as SNB looks content with Swissy’s place in the markets for the time being. SNB Chairman Schlegel spoke at the conference in Davos and stated that they cannot rule out possibility of negative rates and that if they have to do it they are prepared to go that route. He added that inflation is well within their target range and reiterated their willingness to intervene in the FX market if necessary.[/JUSTIFY] [/QUOTE]

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