Weekly Analysis by ZitaPlus (3-7 Feb 2025)
Gold Hits $2,800, USD Strengthens on Fed News
The U.S. dollar index rebounded, supported by solid GDP growth, the Fed’s hawkish stance, and Trump’s 25% tariffs on Mexico and Canada.EUR/USD fell on ECB rate cut expectations, GBP/USD saw modest losses ahead of a possible BoE cut, while the Japanese yen strengthened to 154 per dollar on BoJ rate hike bets.
Gold surged to $2,800, hitting an all-time high amid tariff concerns and central bank easing. Silver reached seven-week highs as safe-haven demand grew. The Silver Institute projects a fifth consecutive market deficit in 2025, driven by strong industrial demand.
The 10-year U.S. Treasury yield dipped slightly, while Chinese and Japanese bond yields rose, and Eurozone yields declined.
Initial Jobless Claims
Initial jobless claims fell by 16,000 to 207,000 for the week ending January 25, well below the 220,000 forecast. Continuing claims dropped by 42,000 to 1,858,000, reinforcing the Fed’s view of a resilient labor market, allowing rates to remain restrictive.China Manufacturing PMI
China’s NBS Manufacturing PMI fell to 49.1 in January 2025, missing expectations and dropping from December’s 50.1. This marks the first contraction since September and the sharpest decline in five months, driven by weaker factory activity before the Lunar New Year.US New Home Sales (Dec)
New single-family home sales rose 3.6% to 698,000 in December 2024, the highest since September and above the 670,000 forecast. This increase came despite rising mortgage rates amid inflation concerns and the Fed’s hawkish stance.Durable Goods Orders (MoM) (Dec)
Durable goods orders fell 2.2% to $276.1 billion in December 2024, following a revised 2% drop in November, far below the expected 0.6% increase. The decline was mainly due to a 7.4% drop in transportation equipment, with nondefense aircraft and parts plunging 45.7%, likely due to lower Boeing orders.CB Consumer Confidence (Jan)
The Conference Board Consumer Confidence Index® dropped by 5.4 points in January, reaching 104.1 (1985=100). The December figure was revised upward by 4.8 points to 109.5, though it still marked a decrease of 3.3 points compared to the previous month.BoC Interest Rate Decision
The Bank of Canada cut its key interest rate by 25 basis points to 3%, as expected, bringing total reductions to 200 basis points since June 2024. It also ended quantitative tightening and will resume asset purchases in March to support liquidity.The Governing Council noted CPI inflation has aligned with the 2% target and is expected to remain stable, though US tariffs could challenge Canada’s recovery. Despite this, GDP is projected to grow 1.8% over the next two years, following an expected 1.3% expansion in 2024.
Fed Interest Rate Decision
The Fed kept the federal funds rate at 4.25%-4.5%, pausing after three consecutive cuts in 2024 totaling 100 basis points. Chair Powell signaled no urgency to cut further, awaiting more inflation progress.Policymakers noted solid economic growth, a strong labor market, and persistently elevated inflation. The Fed removed its reference to progress toward the 2% target and emphasized uncertainty in the economic outlook, closely monitoring risks to its dual mandate.
German GDP (Q4)
The German economy shrank by 0.2% in the fourth quarter of 2024, following a 0.1% growth in the third quarter, according to preliminary data released by Destatis on Thursday. This decline was worse than the market's expectation of a 0.1% drop. On an annual basis, the GDP contracted by 0.2% in Q4, an improvement from the 0.3% decline recorded in Q3, but still below the anticipated flat growth.EU Deposit Facility Rate (Jan)
As expected, the European Central Bank (ECB) lowered interest rates by 25 basis points during its January 2025 meeting, marking the fifth rate cut since the easing cycle began in June 2024. This reduction brings the key deposit rate to 2.75%, its lowest level since early 2023.U.S. GDP (Q4)
The US economy expanded at an annualized 2.3% in Q4 2024, the slowest in three quarters, down from 3.1% in Q3 and below the 2.6% forecast. Growth was driven by strong personal consumption, which rose 4.2%—the highest since Q1 2023. Goods spending increased by 6.6% and services by 3.1%.Fixed investment contracted for the first time since Q1 2023, declining 0.6%, mainly due to lower equipment (-7.8%) and structures (-1.1%) spending. Intellectual property investment grew 2.6%, while residential investment rebounded by 5.3%. Private inventories dragged growth by 0.93 percentage points. Exports and imports both fell by 0.8%, keeping net trade's impact neutral. Government spending slowed to 2.5% from 5.1%. For 2024, the US economy grew by 2.8%.
German CPI (MoM) (Jan)
Germany’s annual inflation dropped to 2.3% in January, down from 2.6% in December and below expectations. Food inflation slowed to 0.8% (from 2.0%), while services rose at a slightly slower pace (4.0% vs. 4.1%). Energy costs fell 1.6%, matching December’s decline. Core inflation eased to 2.9%, a three-month low. Monthly consumer prices fell 0.2%, missing the expected 0.1% increase.US Core PCE Inflation (Dec 2024)
The US PCE price index rose 0.3% in December, the largest gain in eight months, while core PCE increased 0.2%. Year-over-year, headline PCE inflation climbed to 2.6% (from 2.4%), marking a third straight rise, while core PCE held steady at 2.8%, in line with forecasts.Currencies
The U.S. dollar index rebounded from last week’s low, set to end the week higher. Strong GDP growth, despite missing expectations, and the Fed’s hawkish stance supported the dollar. Trump’s announcement of 25% tariffs on Mexico and Canada added to its strength.EUR/USD closed the week lower as expectations of additional ECB rate cuts weighed on the euro. The ECB lowered its deposit rate to 2.75% and signaled possible further cuts amid economic uncertainty. Eurozone GDP stagnated in Q4, missing the expected 0.1% growth.
The British pound posted modest losses against the dollar, pressured by its strength and expectations of a 25 basis point Bank of England rate cut next week. Investors remain cautious ahead of key economic data releases.
The Japanese yen strengthened to 154 per dollar, driven by rising expectations of further Bank of Japan rate hikes. BOJ Deputy Governor Himino suggested more hikes could come if economic growth and inflation remain on track. Tokyo’s core inflation hit an 11-month high of 2.5% in January, while retail sales, industrial production, and employment data surpassed forecasts.
The Canadian dollar weakened following the Bank of Canada’s 25 basis point rate cut to 3.0% and the end of its quantitative tightening program. The BoC plans to restart asset purchases in March, but concerns over U.S. tariffs remain a key risk. The Fed’s hawkish stance and the widening rate gap are adding pressure on the loonie.
Commodities
Gold surged toward $2,800 per ounce, hitting an all-time high as investors sought safe-haven assets amid Trump’s renewed tariff threats and trade war fears. The rally was fueled by easing monetary policies, with the ECB, BoC, and Riksbank cutting rates, while the PBoC and RBI signaled looser policies. US rates remained steady, reinforcing expectations of two cuts this year. Gold is set for its biggest monthly gain since March 2024.Silver jumped to a seven-week high as Trump reaffirmed 25% tariffs on Mexico and Canada, boosting safe-haven demand. The Silver Institute projected a fifth consecutive market deficit in 2025, driven by strong industrial demand for solar panels, EVs, and electronics, despite rising supply from China, Canada, and Chile.
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Weekly Analysis by ZitaPlus (10-14 Feb 2025)
Weak Jobs Data Fuels Rate Cut Speculation
The dollar index fell after a weak jobs report, raising speculation about Fed rate cuts.Treasury Secretary Bessent reaffirmed support for a strong dollar and denied pressure from Trump. The euro rose above $1.04 with trade tensions, while the ECB cut rates and may do so again in March. The pound gained despite a 25bps BoE rate cut, with markets expecting 94bps of cuts in 2025.
Gold hit a record high, marking its sixth straight weekly gain, driven by central bank purchases. Silver rose to $32.50 per ounce, boosted by a weaker dollar and strong industrial demand. The Silver Institute projects a fifth consecutive year of market deficits in 2025.
The US 10-year Treasury yield fell to 4.43%, while the 2-year held at 4.23%. In the UK, the 10-year bond yield dropped to 4.46% after the BoE’s rate cut.
Initial Jobless Claims
US jobless claims fell by 16,000 to 207,000 for the week ending January 25, marking the lowest level in months and signaling a resilient labor market despite economic concerns.Eurozone CPI (YoY) (Jan)
Inflation in the Euro Area rose to 2.5% in January, up from 2.4% in December, exceeding expectations. Energy prices surged 1.8% (vs. 0.1% in December), while services inflation eased to 3.9% (from 4.0%). Core inflation remained at 2.7% for the fifth month, slightly above forecasts but at its lowest since early 2022.US S&P Global Manufacturing PMI (Jan)
The PMI was revised up to 51.2 from 50.1, improving from 49.4 in December. New business orders rose for the first time since June, while production increased after six months of decline. Input costs surged, and selling prices saw their fastest rise since March 2024. Business confidence hit a 34-month high, marking its biggest monthly gain since November 2020.US ISM Manufacturing PMI (Jan)
The ISM Manufacturing PMI rose to 50.9 in January, up from 49.2 in December, marking the first expansion in the sector after 26 months of contraction. New orders increased to 55.1 (from 52.1), while production (52.5 vs. 49.9) and employment (50.3 vs. 45.4) improved. Supplier deliveries slowed slightly, inventories fell to 45.9 (from 48.4), and price pressures intensified to 54.9 (from 52.5). Rising costs were noted in steel, aluminum, copper, food, and natural gas, while plastic resins and diesel fuel prices declined.JOLTS Job Openings (Dec)
US job openings fell by 556,000 to 7.6 million in December, below the 8.0 million forecast, signaling a labor market slowdown. Declines were seen in professional/business services (-225K), healthcare/social assistance (-180K), and finance/insurance (-136K), while openings rose in arts/entertainment (+65K). The South and West saw the largest regional drops (-286K and -250K, respectively). Meanwhile, hires increased by 89,000 to 5.5 million, and separations rose by 38,000 to 5.3 million.ADP Nonfarm Employment Change (Jan)
Private businesses added 183,000 jobs in January, surpassing December’s revised 176,000 and beating the 150,000 forecast. Growth was driven by consumer-facing sectors, while business services and manufacturing lagged. The service sector added 190K jobs, led by trade/transportation/utilities (56K) and leisure/hospitality (54K), while the goods sector lost 6K jobs, mainly due to manufacturing (-13K). Annual pay growth was 4.7% for those staying in jobs and 6.8% for job changers.US S&P Global Services PMI (Jan)
The Services PMI fell to 52.9 in January from 56.8 in December, marking the slowest expansion since April. Despite the sharp slowdown, output continued growing, supported by new orders, while job creation accelerated to its fastest pace since 2022. Rising labor, material, and utility costs pushed input inflation to a three-month high, leading firms to take a cautious outlook for the next 18 months.US ISM Non-Manufacturing PMI (Jan)
The ISM Services PMI dropped to 52.8 from 54, reflecting slower growth in business activity (54.5 vs. 58) and new orders (51.3 vs. 54.4). Inventories contracted for the third month (47.5 vs. 49.4), but employment (52.3 vs. 51.3) and new export orders (52 vs. 50.1) improved. Price pressures eased (60.4 vs. 64.4), while businesses cited poor weather and concerns over potential US tariff actions as key challenges.BoE Interest Rate Decision (Feb)
The Bank of England cut its benchmark rate by 25bps to 4.5%, marking its third reduction since August. Contrary to forecasts of an 8-to-1 vote, all nine MPC members supported the cut, with two favoring a larger 50bps reduction. The Bank signaled a gradual easing path but lowered its growth forecast, acknowledging weak economic performance since November.Average Hourly Earnings (MoM) (Jan)
In January 2025, average hourly earnings rose by 0.5% (17 cents) to $35.87, exceeding the expected 0.3% increase. Earnings for private-sector production and nonsupervisory workers also grew 0.5% to $30.84. Over the past year, wages have increased by 4.1%.Nonfarm Payrolls (Jan)
The US added 143K jobs in January, well below December’s revised 307K and the expected 170K. Job gains were led by health care, retail, and social assistance. Revisions added 100K jobs to November and December totals, with November adjusted to 261K and December to 307K.Unemployment Rate (Jan)
The unemployment rate fell to 4.0%, the lowest since May, slightly beating forecasts of 4.1%. The number of unemployed dropped by 37K to 6.849 million. Labor force participation rose to 62.6%, and the employment-population ratio increased to 60.1%.Currencies
The dollar index weakened after a disappointing jobs report, raising expectations of two 25bps Fed rate cuts this year. Treasury Secretary Bessent reaffirmed support for a strong dollar, while reduced global trade war concerns contributed to the index’s decline. The euro rose above $1.04 USD, driven by Trump’s tariffs and China’s retaliation. The ECB cut rates and hinted at further easing in March, with investors now expecting the deposit rate to fall to 1.87% by December.The Canadian dollar strengthened as weak economic data reinforced expectations for a dovish Bank of Canada. The Ivey PMI fell to 47.1, the lowest since December 2020, while the BoC’s plans to resume asset purchases in March further supported this outlook. Earlier gains came from optimism that US-Canada trade talks could prevent 25% tariffs. The Japanese yen hit a two-month high past 151 per dollar, fueled by expectations of further BOJ rate hikes. BOJ member Naoki Tamura suggested a 1% policy rate by late 2025, while strong household spending and rising real wages added to speculation of another 5% wage increase in the upcoming spring negotiations.
The British pound ended higher despite the BoE’s 25bps rate cut, as two policymakers pushed for a 50bps cut. The central bank maintained a cautious stance while acknowledging progress on inflation. Traders now expect 94bps of cuts in 2025, implying three more reductions this year.
Commodities
Gold hit a new all-time high, set for its sixth weekly gain. Market volatility increased after Trump imposed 10% tariffs on Chinese imports, China retaliated on US energy products, and concerns rose over potential US involvement in Gaza. Rate cuts from the ECB, BoE, BoC, and expected easing from the Fed and RBI further supported gold.Silver rose to $32.50, marking its fifth gain in six weeks, helped by a weaker dollar and easing trade tensions. Trump and Xi Jinping's planned talks raised hopes of tariff relief. Markets expect two 25bps Fed cuts, while the Silver Institute projects a fifth year of market deficits in 2025, driven by industrial demand and retail investment.