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UK PMI Services was finalized at 50.8 in January, slipping from December’s 51.1, marking its joint-lowest level in 15 months. PMI Composite edged up slightly to 50.6, indicating that overall economic activity remains stagnant, with minimal expansion.

According to Tim Moore, Economics Director at S&P Global Market Intelligence, "stagflation conditions appeared to take a firmer hold", with weak output growth coupled with persistent cost pressures. Input cost inflation accelerated for the fifth consecutive month, reaching its highest level since April 2024.

Renewed decline in new business volumes adds to signs that the UK’s economic outlook remains weak, as firms report softening demand conditions. Business confidence has also taken a hit, with expectations for future activity dropping to their lowest level since December 2022.

The most concerning development is the sharp deterioration in employment trends, as service providers cut jobs at the fastest pace in four years. The "twin perils" of shrinking workloads and rising payroll costs has forced many firms to halt recruitment.

Full UK PMI services final release here.

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.

EUR/USD started a fresh increase above the 1.0310 resistance. USD/CHF declined and now struggling below the 0.9120 resistance.

Important Takeaways for EUR/USD and USD/CHF Analysis Today

• The Euro started a decent recovery wave from the 1.0210 zone against the US Dollar.
• There was a break above a connecting bearish trend line with resistance at 1.0340 on the hourly chart of EUR/USD at FXOpen.
•  USD/CHF declined below the 0.9160 and 0.9120 support levels.
• There was a break below a major bullish trend line with support at 0.9100 on the hourly chart at FXOpen.

EUR/USD Technical Analysis

On the hourly chart of EUR/USD at FXOpen, the pair started a recovery wave after a major decline, as mentioned in the last analysis. The Euro cleared the 1.02700 resistance to move into a short-term bullish zone against the US Dollar

The bulls pushed the pair above the 50-hour simple moving average and 1.0310. The pair cleared the 50% Fib retracement level of the downward move from the 1.0467 swing high to the 1.0210 low.

Besides, there was a break above a connecting bearish trend line with resistance at 1.0340. Immediate resistance on the EUR/USD chartis near the 1.0390 zone. The first major resistance is near the 1.0410 level and the 76.4% Fib retracement level of the downward move from the 1.0467 swing high to the 1.0210 low.

An upside break above the 1.0410 level might send the pair toward the 1.0465 resistance. The next major resistance is near the 1.0500 level. Any more gains might open the doors for a move toward the 1.0550 level.

Immediate support on the downside is near the 1.0340 level. The next major support is the 1.0310 level. A downside break below the 1.0310 support could send the pair toward the 1.0270 level. Any more losses might send the pair into a bearish zone toward 1.0210.

USD/CHF Technical Analysis

On the hourly chart of USD/CHF at FXOpen, the pair started a fresh decline from well above the 0.9180 zone. The US Dollar dropped below the 0.9160 support to move into a negative zone against the Swiss Franc.

The bears pushed the pair below the 50-hour simple moving average and 0.9075. Finally, the bulls appeared near the 0.9040 level. A low was formed near 0.9039 and the pair is now consolidating losses.

On the upside, the pair could face resistance near the 0.9075 level and the 23.6% Fib retracement level of the downward move from the 0.9196 swing high to the 0.9039 low. The next major resistance is near the 0.9120 level.

The 50% Fib retracement level of the downward move from the 0.9196 swing high to the 0.9039 low is also near 0.9120, above which the pair could test the 0.9160 zone.

If there is a clear break above the 0.9160 resistance zone, the pair could start another increase. In the stated case, it could even surpass 0.9200.

On the downside, immediate support on the USD/CHF chart is 0.9040. The first major support is near the 0.9020 level. The next major support is near 0.9000. Any more losses may possibly open the doors for a move toward the 0.8880 level in the coming days.

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This morning, New Zealand’s labour market data was released, showing unfavourable results. The unemployment rate rose to 5.1% in Q4, the highest since Q3 2020, signalling economic slowdown and reinforcing expectations of a rate cut by the Reserve Bank of New Zealand at its meeting in late February.

However, the weak labour market figures were widely anticipated and already priced in. A greater source of uncertainty is the ongoing trade war between the US and China, a key trading partner for both Australia and New Zealand.

Donald Trump stated that he is "in no rush" to speak with Xi Jinping after China retaliated against the 10% US tariffs on Chinese imports.

Technical analysis of the NZD/USD chart shows that:

→ The pair remains in a downward trend (marked in red), driven by a strengthening US dollar. The price is currently near the upper boundary of this trend.

→ The 0.555 level acted as support twice in 2025, as indicated by arrows. Notably, the price also reversed upwards from this area in 2022.

It is possible that buyers will gain confidence and attempt to break the upper boundary of the channel. The future trajectory of NZD/USD will largely depend on news related not only to central bank interest rate decisions but also to government actions on tariffs.

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Markets

he tariff story was a blitzkrieg at the start of this week, but it’s back to the trenches now as Mexico and Canada are given a month to come up with border control measures to slow migrants and drugs getting in the US while China retaliated on the opening 10% tariff hit. EMU stock markets gained around 1% with key US indices winning up to 1.35% for Nasdaq. EUR/USD managed to claw back to Friday’s levels just below 1.04. US yields lost 3.5 bps (2-yr) to 4.7 bps with the belly of the curve outperforming the wings even as Fed vice-chair Jefferson and SF Fed Daly joined the chorus of “caution” when it comes to adjusting policy rates further. Today’s US eco calendar contains ADP employment change and the services ISM. With US money markets currently positioned for a longer pause (next rate cut only fully discounted in July), we expect US data to lose some market moving potential short term with Trump-related volatility name of the game for now.

The ECB at the end of last year presented its new “wage trackers”. ECB Lagarde at several press conferences already referred to them with the message that they point to slowing wage growth and are more useful that the outdated/backward looking quarterly negotiated wage figures. Q4 2024 figures will for example be only released on February 25 with the previous and “latest” Q3 number clocking in at an EMU high of 5.4% Y/Y. The headline ECB wage tracker measures negotiated wage growth with smoothed one-off payments in the euro area. The ECB will publish four subseries on Wednesday in the week following the monetary policy meeting, which is today. In December, the tracker pointed to strong negotiated wage growth of 4.7% in 2024, easing to 3.2% this year. In monthly terms, this indicator is expected to peak at 5.4% at the end of 2024, the highest value recorded since the series began in January 2013. Today’s wage trackers are one of three key inputs this week for the central bank. January EMU inflation numbers were the first one on Monday. Both headline (2.5% Y/Y) and core CPI (2.7% Y/Y) were slightly above consensus, but didn’t get the usual media coverage in light of the tariff escalation. Finally, on Friday ECB staff is expected to publish insights on the level of neutral rates (r*) in Europe. ECB Lagarde dodged questions on the matter at last week’s presser, referring to this paper instead. It could be key in determining the remaining policy room to lower rates beyond the March meeting (25 bps cut to 2.5% expected). We stick to the view that the market reflex to put eggs in the ECB’s basket when it comes to shielding the EMU economy from whatever potential hit (eg tariffs) is the wrong one in a context where inflation remains stubbornly above the 2% inflation target. EMU money markets are again positioned too dovish (1.75% EoY policy rate) in our view.

News & Views

The New Zealand unemployment rate continued to increase in the final quarter of 2024. Rising to 5.1% from 4.8% in the quarter before, it was the highest since 2020Q3 (5.2%) compared to a series low of 3.2% end 2021. The employment rate eased to 67.4% from 69% a year ago. The annual fall reflected 32k fewer employed people which was the biggest decline since 2009. New Zealand’s participation rate fell slightly to 71% and is now below the peak seen prior to the pandemic. Wages (including overtime) grew 0.6% q/q and 3.3% in the year to the December quarter, this too is down from the 3.8% in 2024Q3. The numbers are broadly in line to marginally below expectations. The kiwi dollar shrugged though. NZD/USD (around 0.566) is already trading at weak levels with the overall US-Sino trade war narrative casting a long shadow over the currency. Equally, NZ money markets price in already a substantial amount of additional monetary easing of 125 bps+ in 2025 from the 4.25% currently.

The Financial Times citing officials reported that the EU is planning to hit US big tech should president Donald Trump slap tariffs on the bloc using its so-called “anti-coercion instrument”. This tool, dubbed a “bazooka”, is said to be the toughest response available without breaching international law and was created during Trump’s first term. It can be deployed when the EU determines a country is using tariffs to force changes in policy. A wide range of retaliatory measures include “revoking the protection of intellectual property rights or their commercial exploitation, for example software downloads and streaming service”, or “block foreign direct investment or restrict market access for banking, insurance and other financial services firms”. While the EU has a large trade surplus with the US in the goods sector (>€150bn in 2023), it’s running a >€100bn trade deficit in services.

The Chinese markets opened for the first time after a long Lunar New Year holiday, and they opened down on a set of weaker-than-expected PMI figures, on the news of 10% tariff on its exports toward Trump’s USA, and a further escalation of the trade war with the tit-for-tat measures announced yesterday from Beijing, including 15% tariffs on US coal and LNG imports and an antitrust probe into Google. But losses in the CSI 300 index remained measured, as the 10% tariffs from the US were considered as being quite modest – compared to the chatter of up to 60% tariffs, and China’s response to the US was also seen moderated. Many simply pointed out that 10% tariff could be absorbed by yuan devaluation and that Google is banned in China since 2010 for not censoring search results in accordance with Chinese government regulations.

Across the Pacific Ocean, Google hit a record high yesterday regardless of the Chinese threat. Magnificent 7 saw dip buying and rebounded near 1.80%. Palantir was the star of the day with a 24% rally in its share price after announcing lot better-than-expected quarterly results and amassing rating and PT upgrades from big banks on its capacity to cash in on the AI boom. In Europe, German Infineon also jumped 10% on better-than-expected revenue forecast from the company due to favourable currency effects and recovery from car industry.

Overall, the Stoxx 600 was also better bid on Tuesday on rising confidence that the EU could negotiate trade terms with Trump and avoid tariffs. Plus, the French PM Bayrou is expected to survive a no-confidence vote today and adopt a budget plan. Such outcome would further narrow the German, French yield spread and encourage a recovery in euro’s valuation, though the upside is seen limited by the European Central Bank (ECB) doves.

In the US, the S&P500 and Nasdaq 100 consolidated gains above the 50-DMA level on relief that Trump’s tariff tantrum quickly fizzled out, and also on the back of lower-than-expected job openings in the US that hinted that – after big increases in the recent months - the trend is back to softening. Softer job openings data hints at softer pressure for higher wages and potentially more supportive Federal Reserve (Fed) policy. As such, the US yields eased and the dollar softened yesterday. The EURUSD regained the 1.03 mark and Cable approached the 1.25 psychological resistance. Traders will focus on the US ADP report and ISM data today. A set of softer-than-expected figures could further pull the US dollar lower.

On the equities front, sentiment is much less cheery this morning as Google and AMD results – released after the bell – didn’t enchant investors. Google announced better-than-expected earnings per share but a slight miss on the revenue growth. More importantly, growth in Google Cloud was *just* 30% (lower than the 32% expected by analysts) and slowing. The combination of slowing cloud revenue and massive AI investment – which will reach reportedly $75bn at Google this year (!) – raises a few eyebrows among investors. By few eyebrows, I mean a 7% drop in the afterhours trading as reaction to the latest results.

AMD, on the other hand, posted better-than-expected earnings and revenue in Q4, its data center revenue nearly doubled last year but fell short of analyst expectations, leading to a nearly 9% drop in AMD’s stock price in the AH trading.

Discontent with Google and AMD results is weighing on US futures this morning, along with Trump risks and worries.

Note that, investors may look more relaxed now than they did at the start of the week, but havens continue to see increased demand on the back of growing global uncertainties under Trump’s hectic lead and with the prospects that the first weeks under Trump is just a foretaste of what’s to come in the next four years. And there is not a better hedge than gold for protecting a portfolio from Trump worries: the more chaotic international relations become, the greater the demand—especially from central banks looking to reduce US exposure should Trump turn his focus on them. As a result, gold hit a record high for the fourth straight session, reaching $2,860 per ounce in Asia for the first time ever. At this pace, Trump makes $3,000 look like an easy target…

In energy, US crude tipped a toe below the $71pb level on de-escalating tensions with Mexico and Canada, but recovered some of the losses on Trump’s renewed pressure on Iran. While the geopolitical risks remain tilted to the upside, Trump’s trade policies are looking bad for global growth prospects and the latter should keep the medium-term upside potential limited. Top sellers are expected to join in between $73/75pb range to make a fresh attempt on the $70pb psychological support in the foreseeable future.

In focus today

Today, we receive US private sector employment data from ADP, which will provide markets with the first sense of what to expect from Friday's nonfarm payrolls. ISM Services data is also due for release today, the flash services PMI released earlier surprised to the downside. The Fed's Barkin and Goolsbee will give speeches in the evening.

In the euro area, the final January services and composite PMI will be released. Earlier this week, the final manufacturing PMI was released, showing an increase to 46.6 from the preliminary 46.1, indicating more positive sentiment compared to previous months.

Economic and market news

What happened overnight

Update on the Middle East, during a talk with Israel's Prime Minister, Trump stated that the US will "take over" the Gaza Strip and suggested resettling its 2.2m residents in Egypt and Jordan, despite their previous rejection. This proposal could disrupt decades of US policy and provoke outrage across the Arab world. Trump did not clarify how the US would take control of Gaza. In addition, he signed a memorandum aimed to impose "maximum pressure" on Iran and reduce its oil exports to zero. Following this announcement, Brent crude futures traded around USD 76 a barrel, well above Tuesday's low of USD 74.15.
What happened yesterday

In the US, the JOLTs report showed a weaker-than-expected 7.6M job openings (cons: 8.0M, prior 8.09M), indicating a softened labour demand in December following a strong rebound in November. This could serve as a dovish signal for the Fed, suggesting the economy is not overheating and may face reduced inflationary pressures. However, involuntary layoffs decreased and remain at historically low levels, while hiring was slightly higher than the previous months. Overall, conditions remain solid, keeping the Fed on the sidelines.

China's package of retaliation measures against tariffs includes export controls on five metals used in defence, clean energy and other industries. This is an area where China can significantly impact the US, indicating a readiness to engage in conflict if Trump is inclined to do so. On 13 February, we are holding a webinar where we will attempt to shed light on this situation.

In Sweden, the January decision to cut was unanimous, with all members agreeing that the December rate path and forecasts largely hold. However, a majority wants to see evidence of an accelerating economic recovery and more balanced inflation risks in the coming months. Overall, the minutes support our view that more cuts are likely, with a cut expected in May. We also see potential downside risks to the Riksbank's growth and inflation forecasts in the coming months.

Equities: Global equities were higher yesterday, ending close to the day's high and reversing most of the losses from Monday related to the trade war tensions between the US, Canada, and Mexico. What is slightly interesting here is that we saw a massive cyclical outperformance, with most defensives being lower. This also demonstrates a rather strong "buy the dip" mentality still present in the market. "Buy the dip" has been a profitable strategy for the last two and a half years, and we argue that trade tensions are not enough to turn this around. We would need weaker macroeconomic data to see a stop to the "buy the dip" mentality.

In the US yesterday, Dow +0.3%, S&P 500 +0.7%, Nasdaq +1.4% and Russell 2000 +1.4%. Asian markets are mixed this morning. Chinese mainland markets are lower as they reopen after the Lunar New Year, and Trump and Xi did not have the expected talks that could bring a last-minute halt to tariffs. That said, it appears very much like consensus believes the Chinese retaliatory tariffs hitting "just" USD 14bn worth of imports from the US (just 5.8% of China's total imports from the US) is next to nothing. This should also be seen in relation to the 10%, not 60%, tariffs from the US side. Hence, consensus is now starting to adjust down their estimates for the US/China tariffs. US and European futures are lower this morning, negatively affected by some big earnings reports that came out in the US after the closing bell yesterday.

FI: There were modest movements in European government bond yields yesterday with 10Y Bunds trading around the 2.4%-level. The Bund ASW-spread is once again tightening and is trading around -2bp. We have a target of -10bp to -15bp for the Bund ASW-spread in Q1. In the US, yields dropped late in the afternoon in US trading hours after an initial rise. Today, the US Treasury will publish more on their funding plans for Q2, and markets will be looking for the split between bonds and bills.

FX: EUR/USD has seen a modest relief rally following a barrage of tariff headlines over the weekend and at the start of this week, now trading above 1.0350. The SEK has picked up momentum and is having its best week so far this year. That goes for the NOK as well. Both EUR/SEK and EUR/NOK have made a new year low at 11.38 and 11.66, respectively. The CAD continues to recover after the tariff postponement, whereas MXN has stayed flat overnight. Talking about year lows, let us also mention USD/JPY that has dropped 2.5% this year and was on the verge to break below 153 yesterday.

Daily Pivots: (S1) 191.89; (P) 192.53; (R1) 193.28; More...

Intraday bias in GBP/JPY stays neutral at this point. On the downside, firm break of 189.31 will suggest that corrective pattern from 180.00 has completed. But before that, the pattern could still extend. Break of 194.73 will bring stronger rebound instead.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 159.36; (P) 160.04; (R1) 160.88; More...

Intraday bias in EUR/JPY stays neutral at this point. Overall outlook is unchanged that consolidation pattern from 154.40 could still extend. On the downside, below 157.96 will target 156.16 support. However, break of 161.48 will turn bias back to the upside for 164.07 resistance.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

Daily Pivots: (S1) 0.8298; (P) 0.8315; (R1) 0.8331; More...

Further decline is expected in EUR/GBP with 0.8353 minor resistance intact. Corrective rebound from 0.8221 should have completed already. Fall from 0.8472 would target a retest of 0.8221 low. However, firm break of 0.8353 will turn bias back to the upside for stronger rebound.

In the bigger picture, a medium term bottom should be in place at 0.8221, just ahead of 0.8201 key support (2022 low). Sustained trading above 55 W EMA (now at 0.8442) will pave the way to 0.8624 cluster zone (38.2% retracement of 0.9267 to 0.8221 at 0.8621), even just as a correction to the down trend from 0.9267 (2022 high). But still, medium term outlook will be neutral at best as long as 0.8621/4 holds.