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Eurozone PMI services finalized at 51.3, no major growth leap expected

    By
    ActionForex
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    Eurozone Composite PMI was finalized at 50.2 in January, up from 49.6 in December, marking the first month of economic expansion since August. However, PMI Services Index was finalized at 51.3, down from prior month’s1.6, suggesting that while the services sector remains in growth territory, momentum is fading.

    Among individual countries, Spain led the expansion with a Composite PMI of 54.0. Germany’s index climbed to 50.5, hitting an eight-month high, signaling tentative stabilization. Italy remained in contraction at 49.7, while France improved slightly to 47.6.

    According to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, the services sector has been instrumental in preventing a broader economic contraction in the Eurozone. Modest but accelerating new orders and employment offer some optimism that the sector could gain momentum in Q1 2025. However, rising costs in services, particularly due to wage pressures, remain a concern for the ECB.

    The services outlook is “modest”, with business expectations declining slightly and staying below historical averages since mid-2024. Political uncertainties in the Eurozone, including Germany’s upcoming elections and France’s fragile government, continue to weigh on sentiment.

    “No major growth leaps are expected in this sector for now,” de la Rubia added.

    Full Eurozone PMI services final release here.

    China’s Caixin PMI services PMI drops to 51.0

      By
      ActionForex
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      China’s Caixin Services PMI slipped to 51.0 in January, down from 52.2 and below expectations of 52.3. PMI Composite also edged lower from 51.4 to 51.1, marking a four-month low, as both manufacturing and services sectors struggled to gain momentum.

      According to Caixin Insight Group, while supply and demand conditions showed improvement, services growth lagged behind, pointing to weaker consumer activity.

      Wang Zhe, Senior Economist added, “Employment in both sectors fell significantly, and overall price levels remained subdued, particularly factory-gate prices in manufacturing.”

      Full China Caixin PMI services release here.

      Fed’s Jefferson and Daly signal no urgency for rate cuts

        By
        ActionForex
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        Fed Vice Chair Philip Jefferson reaffirmed the cautious approach to policy easing, stating that while a “gradual reduction” in monetary policy restraint towards neutral remains the most likely scenario, there is no urgency to change the current stance.

        “I do not think we need to be in a hurry to change our stance,” he said in a speech overnght.

        He emphasized that policy decisions will continue to be guided by incoming data and the evolving economic outlook, noting that monetary policy is “not on a preset course.”

        Jefferson outlined a “range of scenarios” for future policy moves. If economic activity remains robust and inflation fails to sustainably decline toward 2% target, Fed could maintain its restrictive stance for longer. Conversely, if the labor market weakens unexpectedly or inflation cools faster than expected, the central bank may need to ease policy at a quicker pace.

        Meanwhile, San Francisco Fed President Mary Daly echoed similar sentiments, describing the US economy as “in a very good place.” She emphasized that the central bank is in a strong position to “wait and see” before making any policy moves.

        Japan’s nominal wage growth surges 4.8% yoy in Dec, real wages rise for second month

          By
          ActionForex
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          Japan’s labor market showed strong wage growth in December, with labor cash earnings surging 4.8% yoy, significantly above expectations of 3.8% yoy and accelerating from 3.9% yoy in the prior month. This marks the 36th consecutive month of annual wage increases.

          Regular pay, which includes base salaries, rose 2.7% yoy, while special cash earnings—mainly reflecting winter bonuses—jumped 6.8% yoy, providing an additional boost to workers’ disposable income.

          Real wages, which adjust for inflation, climbed 0.6% yoy, marking the second straight month of positive growth. This improvement comes despite a notable acceleration in consumer inflation, with the price index used to calculate real wages—excluding rent but including fresh food—rising 4.2% yoy, up from 3.4% yoy in November and reaching the highest level since January 2023.

          New Zealand’s unemployment rate rises to 5.1%

            By
            ActionForex
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            New Zealand’s labor market softened further in Q4, with unemployment rate climbing from 4.8% to 5.1%, in line with expectations and marking the highest level since 2016, excluding the brief spike following the 2020 Covid lockdown.

            Employment fell by -0.1% in the quarter, slightly better than the expected -0.2% decline, but still reflecting ongoing weakness in job creation. Meanwhile, wage growth continued to moderate, with the labor cost index rising 0.6% qoq, bringing the annual rate down to 3.3% from 3.8%.

            The latest data supports the case for further monetary easing by RBNZ, which remains committed to swiftly bringing the OCR down from the current 4.25% toward neutral level. A 50bps rate cut is still widely anticipated at the upcoming policy meeting this month.

            Full NZ employment release here.

            BoJ’s Ueda prioritizes underlying inflation trends, not short-term volatility

              By
              ActionForex
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              BoJ Governor Kazuo Ueda reiterated the central bank’s commitment to achieving its 2% inflation target on a sustained basis, emphasizing that the focus remains on underlying inflation rather than temporary price fluctuations.

              Speaking before parliament, Ueda highlighted that BoJ filters out one-off factors such as fuel and volatile fresh food prices when assessing inflation trends.

              However, he acknowledged “that process at times could be difficult”, reinforcing the need for careful analysis before making policy adjustments.

              CAD rebounds as US pauses tariffs for 30 days

                By
                ActionForex
                -

                Canadian Dollar rebounded sharply after US President Donald Trump announced a 30-day pause on planned tariffs against Canadian imports, just hours after implementing a similar delay for Mexico.

                The decision came after negotiations between Trump and Canadian Prime Minister Justin Trudeau, who confirmed that Canada would take aggressive new measures to combat fentanyl trafficking, including deploying nearly 10,000 personnel to reinforce border security. Canada also committed to appointing a “Fentanyl Czar”, classifying cartels as terrorist organizations, and launching a Canada-US “Joint Strike Force” targeting organized crime and money laundering.

                Markets welcomed the de-escalation, as the tariff pause removes immediate downside risks for the Canadian economy. Trump emphasized that the suspension is conditional on further progress in security measures and that an “Economic deal with Canada” may still need to be structured.

                Technically, a short term top is likely formed at 1.4791 in USD/CAD after this week’s strong volatility. More sideway trading should now be seen in the near term. However, outlook will continue to stay bullish as long as 1.4260 cluster support holds (38.2% retracement of 1.3418 to 1.4791 at 1.4267), which is also close to 55 D EMA (now at 1.4267). USD/CAD’s up trend is still in favor to resume at a later stage when the consolidation completes.

                Fed officials stress patience on rate cuts amid tariff uncertainty

                  By
                  ActionForex
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                  A trio of Fed officials cautioned that new broad-based tariffs could add upward pressure to consumer and producer prices, suggesting a slower pace of rate cuts than previously anticipated.

                  Boston Fed President Susan Collins highlighted yesterday that tariffs on both final and intermediate goods risk inflating costs throughout supply chains, requiring “patient” policy decisions.

                  “It’s really appropriate for policy to be patient, careful, and there’s no urgency for making additional adjustments, especially given all of the uncertainty, even though, of course, we’re still somewhat restrictive,” Collins said.

                  Chicago Fed President Austan Goolsbee also stressed “a ton of uncertainty,” warning that a premature return to lower rates could reignite inflation.

                  “We’ve got to be a little more careful and more prudent of how fast rates could come down because there are risks that inflation is about to start kicking back up again,” Goolsbee said.

                  Meanwhile, Atlanta Fed President Raphael Bostic noted that any tariff-related surge in prices or inflation expectations might warrant close monitoring before further easing steps are taken.

                  DOW rebounds as US delays Mexico tariffs for border deal talks

                    By
                    ActionForex
                    -

                    Market sentiment rebounded sharply after the US announced a one-month pause on planned tariffs against Mexico, following an agreement on border security measures. DOW recovered to around 44,400 after initially dropping to 43,920 in early trading, reflecting renewed optimism that negotiations could lead to a resolution despite the aggressive tariff rhetoric from the US administration.

                    The shift in tone was confirmed by President Donald Trump’s Truth Social post, where he stated that he had a “very friendly conversation” with Mexico’s President Claudia Sheinbaum. As part of the agreement, Mexico will deploy 10,000 soldiers along its border with the US to curb fentanyl trafficking and illegal migration. Trump also announced that high-level negotiations, led by key officials including Secretary of State Marco Rubio, will take place over the next month to work toward a “deal.”

                    The move suggests that while tariffs remain a significant geopolitical risk, there is room for diplomatic efforts to prevent further economic disruption. The pause in Mexican tariffs could set a precedent for similar discussions with Canada and China, though uncertainty remains high regarding the administration’s broader trade strategy. For now, markets appear to be viewing this as a sign that Trump’s threats may be a negotiating tactic rather than an immediate escalation.

                     

                    US ISM manufacturing rises to 50.9, ending 26-month contraction

                      By
                      ActionForex
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                      The US manufacturing sector returned to expansion in January, with ISM Manufacturing PMI rising to 50.9 from 49.2, breaking a 26-month streak of contraction, above expectation of 49.3.

                      The improvement was broad-based, signaling stronger demand and increased production capacity. Notably, new orders climbed to 55.1 from 52.1, reflecting growing demand, while production rose to 52.5 from 49.9, indicating that manufacturers are ramping up output in response.

                      The employment index also showed a meaningful recovery, rebounding to 50.3 from 45.4, suggesting that firms are hiring again after months of labor market weakness. Meanwhile, input costs rose, with the prices index increasing to 54.9 from 52.5, signaling that inflationary pressures may be creeping back into the supply chain.

                      Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, highlighted that the January PMI reading aligns with a projected 2.4% annualized GDP growth rate.

                      Full US ISM manufacturing release here.

                      Eurozone CPI rises to 2.5% in Jan, core unchanged at 2.7%

                        By
                        ActionForex
                        -

                        Eurozone CPI rose from 2.4% yoy to 2.5% yoy in January, above expectation of 2.4% yoy. CPI core (ex-energy, food, alcohol & tobacco) was unchanged at 2.7% yoy, above expectation of 2.6% yoy.

                        Looking at the main components, services is expected to have the highest annual rate in January (3.9%, compared with 4.0% in December), followed by food, alcohol & tobacco (2.3%, compared with 2.6% in December), energy (1.8%, compared with 0.1% in December) and non-energy industrial goods (0.5%, stable compared with December).

                        Full Eurozone CPI flash release here.

                        UK PMI manufacturing finalized at 48.3, outlook remains weak

                          By
                          ActionForex
                          -

                          UK manufacturing sector remained in contraction at the start of 2025, with January’s final PMI rising slightly to 48.3 from December’s 11-month low of 47.0. Despite the modest improvement, four of the five key components—output, new orders, employment, and stocks of purchases—declined. The only positive indicator was longer average vendor lead times, which typically reflect supply chain constraints rather than stronger demand.

                          Rob Dobson, Director at S&P Global Market Intelligence noted that Weak domestic and international demand remains a key drag on the sector, with no clear signs of recovery in sight. Rising cost pressures are also adding to the strain, with input price inflation reaching a two-year high.

                          The effects of last year’s Budget changes, particularly increases in the minimum wage and employer National Insurance contributions, are expected to feed further into rising costs. These factors could keep pressure on profit margins and limit any near-term rebound in manufacturing activity. Business confidence remains low, hovering near December’s two-year low, reflecting ongoing uncertainty in both economic conditions and policy direction.

                          Full UK PMI manufacturing final release here.

                          Eurozone PMI manufacturing finalized at 46.6, still too early to talk about greenshoots

                            By
                            ActionForex
                            -

                            Eurozone PMI Manufacturing was finalized at 46.6, up from December’s 45.1, marking an eight-month high. While still in contraction, the data suggests a slowdown in the sector’s decline. Germany’s PMI rose to 45.0, while France rose to 45.0. Austria (45.7) and Italy (46.3) also saw multi-month highs. Greece (52.8) and Spain (50.9) remained in expansion.

                            According to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, despite the improvement, manufacturing remains under pressure. It is “too early” to signal a full recovery. Rising input costs, driven by nearly 7% increase in oil prices, pose risks for firms already facing weak demand. ECB’s easing path could also be complicated if inflationary pressures persist.

                            The US is expected to impose tariffs on European exports. However, business confidence has improved, with future output expectations rising four points above the long-term average, partly driven by optimism surrounding upcoming elections in Germany and possibly France.

                            While Germany and France remain the weakest performers, the pace of contraction has slowed across multiple sectors. De la Rubia noted that over 90% of Eurozone exports go to markets outside the US, limiting the immediate impact of potential tariffs.

                            Full Eurozone PMI manufacturing final release here.

                            BoJ opinions signal more rate hikes as inflation risks tilt higher

                              By
                              ActionForex
                              -

                              BoJ’s Summary of Opinions from the January 23-24 meeting indicates a growing shift toward policy normalization, as multiple board members highlighted mounting inflationary pressures.

                              Rising import costs driven by the weak yen have led more businesses to raise prices, prompting concerns that inflation could overshoot expectations.

                              One member noted that with economic activity and prices remaining stable, “risks to prices have become more skewed to the upside,” emphasizing that rate hikes should be “timely and gradual.”

                              Some policymakers warned that continued Yen depreciation and excessive risk-taking could lead to an overheating of financial activities. To counter this, one board member argued for additional rate hikes to stabilize the currency and prevent further distortions in market expectations regarding BoJ policy.

                              At the January meeting, the BoJ raised its short-term policy rate from 0.25% to 0.50%, marking another step away from ultra-loose monetary policy. The central bank also revised its price forecasts higher, reinforcing its confidence that rising wages will sustain inflation near the 2% target.

                              Full BoJ Summary of Opinions here.

                              China’s Caixin PMI manufacturing slips to 50.1, growth momentum weakens

                                By
                                ActionForex
                                -

                                China’s Caixin Manufacturing PMI edged down to 50.1 in January from 50.5 in December.

                                According to Caixin Insight Group, manufacturers saw improved logistics and a slight pickup in supply and demand. However, employment levels deteriorated notably, and new export orders remained weak, reflecting sluggish global demand.

                                External risks also remain a key concern, with rising geopolitical uncertainty adding pressure to China’s export environment. Disruptions in global trade policies could further dampen overseas demand, making it difficult for manufacturers to sustain current production levels.

                                Domestically, consumer spending remains sluggish, highlighting the need for policy measures aimed at boosting disposable income and restoring confidence.

                                Full China Caixin PMI manufacturing release here.

                                Japan’s PMI manufacturing finalized at 48.7, deepest contraction in 10 Months

                                  By
                                  ActionForex
                                  -

                                  Japan’s PMI Manufacturing was finalized at 48.7 in January, down from December’s 49.6. This marks the sharpest decline in output since March 2024, as firms faced a steeper drop in new orders. Weak demand conditions forced manufacturers to scale back production, reflecting ongoing headwinds for the sector.

                                  According to S&P Global, businesses reacted to falling demand by cutting both inventories and raw material holdings, while also reducing input purchases at the fastest pace in nearly a year. Employment growth also slowed, highlighting a cautious approach to hiring amid economic uncertainty.

                                  Despite the downturn, manufacturers maintained a positive outlook for future output, though confidence fell to its lowest level since December 2022. While firms expect a recovery in demand, concerns persist over when such an improvement will materialize. The slowdown in input price inflation to a nine-month low provides some relief, but overall, sentiment remains fragile.

                                  Full Japan PMI manufacturing final release.

                                  Australia’s retail sales dip -0.1% mom in Dec, less than expected

                                    By
                                    ActionForex
                                    -

                                    Australia’s retail sales turnover edged down by -0.1% mom in December, a smaller decline than the expected -0.7% mom. While the contraction marks a pullback from the strong growth seen in previous months—0.7% mom in November and 0.5% in October mom—it suggests that consumer spending remains relatively resilient.

                                    According to Robert Ewing, head of business statistics at the Australian Bureau of Statistics, retail activity was supported by extended promotional events, helping to smooth spending patterns over the quarter. He noted that Cyber Monday, which fell in early December, boosted demand for discretionary items, particularly furniture, homewares, electronics, and electrical goods.

                                    Full Australia retail sales release here.

                                    Trade War 2.0 kicks off, USD/CAD breaks key resistance with 1.50 in sight

                                      By
                                      ActionForex
                                      -

                                      The long-anticipated escalation in trade tensions has officially materialized as US President Donald Trump imposed sweeping tariffs over the weekend. A 25% tariff is now in effect on imports from Canada and Mexico, while China faces a 10% levy on its exports to the US. The move, widely expected, marks the formal start of what is being called Trade War 2.0.

                                      In immediate response, Canada announced retaliatory tariffs of 25% on USD 155B worth of US goods, while China indicated that it would file a case against the US at the World Trade Organization.

                                      Dollar gapped higher as the week started in response to the development. USD/CAD broke through 1.4689 key resistance (2016 high) to resume the long term up trend. Technically, the next medium term target for USD/CAD is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993.

                                      Though given the scale of uncertainty surrounding the trade dispute, further upside cannot be ruled out. A lack of near-term resolution could see USD/CAD extend even higher toward 61.8% projection of 0.9406 to 1.4689 from 1.2005 at 1.5270 before topping.

                                      US PCE inflation rises to 2.6% in Dec, core PCE unchanged at 2.8%

                                        By
                                        ActionForex
                                        -

                                        In December in the US, headline PCE price index rose 0.3% mom while core PCE price index rose 0.2% mom, both matched expectations.

                                        In the 12-month period, PCE price index accelerated from 2.4% yoy to 2.6% yoy. core PCE price index (Excluding food and energy) was unchanged at 2.8% yoy. Both matched expectations.

                                        Personal income rose 0.4% mom or USD 92.0B, matched expectations. Personal spending rose 0.7% mom or USD 133.6B, stronger than expected 0.5% mom.

                                        Full US personal income and outlays release here.

                                        Canada’s GDP contracts -0.2% mom in Nov, but Dec outlook improves

                                          By
                                          ActionForex
                                          -

                                          Canada’s economy shrank by -0.2% mom in November, marking the largest contraction since December 2023 and coming in weaker than expectations of -0.1% mom decline. The downturn was broad-based, with 13 of 20 sectors reporting declines, underscoring underlying weakness across multiple industries.

                                          Goods-producing industries led the slowdown, contracting by -0.6% after a strong 0.9% expansion in October. Services sector, which had posted steady gains in previous months, also slipped by -0.1%, marking its first decline in six months.

                                          Advance estimates suggest that real GDP expanded by 0.2% mom in December, pointing to a rebound. Growth was driven by gains in retail trade, manufacturing, and construction, though this was partially offset by weakness in transportation, real estate, and wholesale trade.

                                          Full Canada GDP release here.

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