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Summary

The 4.7 point jump in the ISM manufacturing index is consistent with our call for a modest broadening in capital expenditures and manufacturing activity, though some year-end replenishing amid trade uncertainty could be exaggerating momentum. Prices at 59.0 is not terribly encouraging for the efforts to get inflation in check.

"A new year, with new challenges"

The ISM manufacturing index crossed back over into expansion territory after 10 straight months in the purgatory of contraction last year. Today's 52.6 reading for January signals a welcome bit of relief for manufacturing even if some year-end quirks are giving only a temporary boost to the numbers in today's report (chart).

Three out of five of the subcomponents that feed into the headline for the ISM manufacturing index are now in expansion territory. The biggest overall move was in new orders which jumped 9.7 points to 57.1 (chart). That's the biggest one-month pop outside the pandemic since 2001 and signals the fastest pace of expansion for this forward-looking measure in nearly four years. While we've highlighted the broadening out in durable goods orders as a signal traditional manufacturing and cap-ex might be gaining traction, this likely overstates the extent of order expansion as the release noted "post-holiday replenishment and customers’ desire to get ahead of additional tariff-driven price increases as possible reasons for the increase [in orders]".

Supplier deliveries came in at 54.4 in January and that too lifted the headline, although we should be wary of long wait-times amid evolving trade tensions. Production also jumped 5.2 points to hit 55.9 suggesting a somewhat brighter assessment of production despite lackluster industrial production data.

The select respondent comments continue to strike a tone of caution around activity due to tariffs. Nearly all respondents made direct mentions of tariffs last month, while three industries (Computer & Electronic Products, Chemical Products and Apparel & Leather) specifically mentioned moving manufacturing out of China. Others noted supply chain volatility, the inability to plan long-term and profit misses because of tariff costs.

The prices paid index inched higher to 59.0, indicating some stubbornness in prices with 11 industries reporting paying higher prices for raw materials last month (chart). Just under 30% of respondents reported paying higher prices, which is the highest in at least four months, but remains well below the 49.2% that reported so back in April 2025.

The employment index registered its highest reading in a year, although at 48.1 it remains consistent with a contraction in hiring in the sector. The release also noted that "for every comment on hiring, there were two on reducing head counts."

We continue to anticipate a modest broadening in capital expenditures this year, and even if the latest data overstate the current run rate of growth, the January ISM ultimately suggests some sign of stabilization in underlying manufacturing activity.

US ISM Manufacturing PMI jumped sharply from 47.9 to 52.6 in January, far above expectations of 48.3 and marking the first return to expansion since February 2025. The scale of the rebound points to a clear improvement in factory momentum rather than a marginal stabilization.

The details were notably strong. Production rose from 50.7 to 55.9, the highest level since February 2022. New orders surged from 47.4 to 57.1, expanding for the first time since August. Employment also improved, with the index rising from 44.8 to 48.1, though it remains in contraction territory. Price pressures edged higher but stayed contained, with the prices index ticking up from 58.5 to 59.0.

Based on the historical relationship tracked by the Institute for Supply Management, the January PMI reading is consistent with real GDP growth of around 1.7% annualized, reinforcing the view that US growth momentum has firmed at the start of the year.

Full US ISM manufacturing release here.

Market Overview

The crypto market has lost nearly 13% of its capitalisation over the past seven days, falling to $2.59 trillion at the time of writing. With the market bottoming out at $2.52T, it is only $0.1T above last April’s low. The sharp decline following consolidation signals the start of an extended downtrend. However, we also note that the current levels are in the strongest resistance zone for 2021–2024, which became support in 2025. Therefore, it is worth preparing for another and possibly quite protracted tug-of-war in the $2.3–2.7T range.

Bitcoin is trading near $78K, rebounding after this morning’s dip below $75K. The first cryptocurrency began its recovery in April from the same area, which probably served as a trigger for bold buyers. We consider it an important bearish signal that BTC began to sell off actively after an unsuccessful attempt to consolidate above the 50-day average. The main scenario for the markets now may be a fall towards $50K in the next month and a half to two months.

Bitcoin fell 11% in January to $78K; the decline has been ongoing since October. The last time BTC fell for four consecutive months was exactly seven years ago — from October 2018 to January 2019. After that, the first cryptocurrency showed impressive growth over five months. In terms of seasonality, February is considered the best month of the year for BTC. Over the past 15 years, Bitcoin has ended this month with growth in 11 cases and only declined in four. The average growth was 27.6%, and the average decline was 19.5%.

News Background

Investors withdrew $1.60 billion (-2.8%) from spot Bitcoin ETFs in the US in January. The outflow from funds has continued for a record three months in a row, amounting to almost $6.2B during this period. Investors withdrew $0.36 billion from spot Ethereum ETFs in the US in January; over the last three months, the outflow amounted to $2.4 billion. In January, investors invested $0.10 billion in SOL ETFs.

Bitcoin’s hash rate has fallen 12% over the past four months, according to Glassnode. This is the most significant correction since 2021, when Chinese authorities banned cryptocurrency mining.

According to The Block, mining company Bit Digital intends to completely abandon Bitcoin mining to focus on investments in Ethereum and strategies related to artificial intelligence.

In January, the average cost of mining one bitcoin reached $74,300, according to Capriole Investments. Large market players have a margin of safety, but the capitulation of some companies could lead to increased sales of mined coins to cover costs.

According to a report by auditing firm BDO, Tether’s profit for 2025 exceeded $10 billion. The USDT issuer’s excess reserves reached $6.3 billion. During the reporting period, Tether issued nearly 50 billion USDT, with the total issuance of the largest stablecoin exceeding 186 billion tokens.

Daily Pivots: (S1) 1.1809; (P) 1.1892; (R1) 1.1934; More….

EUR/USD's break of 1.1835 support confirms short term topping at 1.2081. Intraday bias is back on the downside for 55 D EMA (now at 1.1718). Firm break there will raise the chance of reversal on rejection by 1.2 psychological level, and target 1.1576 support. Nevertheless, decisive break above 1.2 will carry larger bullish implications.

In the bigger picture, as long as 55 W EMA (now at 1.1458) holds, up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2 key psychological level will add to the case of long term bullish trend reversal. Next medium term target will be 138.2% projection of 0.9534 to 1.1274 from 1.0176 at 1.2581. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.

Daily Pivots: (S1) 1.3638; (P) 1.3726; (R1) 1.3774; More...

Immediate focus is on 1.3641 minor support in GBP/USD. Firm break there will confirm short term topping at 1.3867. Intraday bias will be back on the downside for 55 D EMA (now at 1.3455). On the upside, though, break of 1.3867 will resume larger up trend towards 1.4284 key resistance.

In the bigger picture, rise from 1.0351 (2022 low) is resuming by breaking through 1.3787 high. Further rally should be seen to 1.4284 key resistance (2021 high). Decisive break there will add to the case of long term bullish trend reversal. For now, outlook will stay bullish as long as 1.3008 support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.7667; (P) 0.7699; (R1) 0.7762; More….

Immediate focus is on 0.7792 resistance as rebound from 0.7603 extends. Firm break there will confirm short term bottoming. Further rise should be seen to 55 D EMA (now at 0.7917. Meanwhile, break of 0.7603 will resume the larger down trend to 0.7382 projection level next.

In the bigger picture, larger down trend from 1.0342 (2017 high) is still in progress and resuming. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8166) holds.

Daily Pivots: (S1) 153.49; (P) 154.15; (R1) 155.42; More...

Intraday bias in USD/JPY remains mildly on the upside for the moment. Fall from 152.07 should have completed just a head of 38.2% retracement of 139.87 to 159.44 at 151.96. Rise from 152.07 is seen as the second leg of the corrective pattern from 159.44. Sustained trading above 55 D EMA (now at 155.52) will pave the way back to retest 159.44. However, decisive break of 151.96 will argue that it is reversing whole rise from 139.87. Deeper decline would then be seen to 61.8% retracement at 147.34.

In the bigger picture, outlook is unchanged that corrective pattern from 161.94 (2024 high) should have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. This will remain the favored case as long as 55 W EMA (now at 151.59) holds. However, sustained break of 55 W EMA will argue that the pattern from 161.94 is extending with another falling leg.

Daily Pivots: (S1) 0.6917; (P) 0.6986; (R1) 0.7033; More...

Intraday bias in AUD/USD remains neutral as consolidations continue. Risk will stay on the upside as long as 55 4H EMA (now at 0.6916) holds. Above 0.7093 will extend larger up trend to 100% projection of 0.5913 to 0.6706 from 0.6420 at 0.7213 next. Nevertheless, sustained break of 55 4H EMA will confirm short term topping, and bring lengthier consolidations before rally resumption. Deeper pullback would then be seen to 38.2% retracement of 0.6420 to 0.7093 at 0.6836.

In the bigger picture, current development argues that rise from 0.5913 (2024 low) is reversing whole down trend from 0.8006 (2021 high). Further rally should be seen to 61.8% retracement of 0.8006 to 0.5913 at 0.7206. This will remain the favored case as long as 0.6706 resistance turned support holds, even in case of deep pullback.

Dollar extended its rebound today, though upside momentum remains restrained. Price action suggests markets are still digesting recent shifts in policy expectations rather than embracing a full risk-off move. Attention remains on the implications of Kevin Warsh being lined up as the next chair of the Fed. While Fed rate cut probabilities have barely shifted, repricing has been far more visible in higher-beta assets, notably precious metals and cryptocurrencies.

Equities have so far been more resilient, but the tone is softening. US stock futures are slightly heavier, with NASDAQ underperforming. The move has been exacerbated by weakness in Nvidia, whose shares slipped in premarket trading after reports cast doubt on a proposed USD 100 billion investment linked to OpenAI. Nvidia’s drag on tech sentiment has added to concerns that risk repricing could broaden. If equity weakness starts to align more closely with the sharp selloff already seen in crypto over the past two sessions, markets may begin to reassess overall risk appetite more forcefully.

For now, it remains unclear how tightly the recent cryptocurrency slump will correlate with tech stocks and broader sentiment. The disconnect suggests investors are selectively reducing exposure rather than exiting risk wholesale.

Looking ahead, the RBA rate decision is the next major focal point. A 25bp hike to 3.85% is well priced and unlikely to surprise. The real question lies in forward guidance. Markets are pricing roughly 55bp of tightening by year-end, implying at least one additional hike. Whether the RBA signals a return to a tightening cycle or frames the move as a one-off adjustment will be critical.

AUD/USD has already shown signs of hesitation after breaching the 0.7000 mark last week. The next directional move will hinge on both global risk sentiment and how convincingly the RBA leans toward further tightening.

For now, Dollar leads performance on the day, followed by Sterling and Euro. Swiss franc lags, trailed by Loonie and Kiwi. Aussie and Yen are trading near the middle of the pack.

In Europe, at the time of writing, FTSE is up 0.63%. DAX is up 0.74%. CAC is up 0.60%. UK 10-year yield is down -0.024 at 4.506. Germany 10-year yield is up 0.011 at 2.858. Earlier in Asia, Nikkei fell -1.25%. Hong Kong HSI fell -2.23%. China Shanghai SSE fell -2.48%. Singapore Strait Times fell -0.26%. Japan 10-year JGB yield fell -0.013 to 2.238.

UK PMI manufacturing finalized at 17-month high, inflation risks return

UK PMI Manufacturing was finalized at 51.8 in January, up from December’s 50.6 and marking a 17-month high. The reading signals a solid start to 2026 for the sector, showing resilience despite a challenging backdrop of geopolitical tension and trade uncertainty.

According to Rob Dobson of S&P Global Market Intelligence, growth momentum improved notably. Output and order books expanded at a faster pace, while new export business rose for the first time in four years, led by demand from Europe, China, and the US. Business confidence also rebounded, reaching its highest level since before the 2024 Autumn Budget, as firms focused on opportunities ahead rather than near-term policy and geopolitical risks.

The labor market picture showed tentative stabilization. Although hiring remained weak, the pace of job cuts slowed to its mildest in 15 months. That said, inflation pressures are resurfacing, with higher Minimum Wage and employer National Insurance costs feeding through supply chains alongside rising metals prices, posing a potential constraint on margins in coming months.

Eurozone PMI manufacturing finalized at 49.5, recovery momentum at snail's pace

Eurozone PMI Manufacturing was finalized at 49.5 in January, up from December’s 48.8. According to Cyrus de la Rubia of Hamburg Commercial Bank, progress remains at a "snail’s pace". Order intakes continued to fall, albeit at a less severe pace than late last year, while sentiment twelve months ahead improved slightly, suggesting firms are cautiously more optimistic about future production.

The regional picture remains highly uneven. Greece led with a PMI of 54.2, a five-month high, while France surprised on the upside at 51.2 (a 43-month high). Germany showed tentative stabilization, with contraction easing to a three-month high of 49.1. In contrast, Italy (48.1)remained firmly in contraction, Austria (47.2) deteriorated sharply, and Spain (49.2) slipped into its second consecutive month of decline after previously outperforming peers.

Cost pressures also re-emerged as a key theme. Input price inflation rose noticeably, driven in part by a sharp increase in natural gas prices and firmer oil costs. At the same time, higher prices for industrial metals may reflect strengthening global demand rather than pure supply stress.

Japan PMI manufacturing finalized at 51.5, growth returns, inflation a risk

Japan’s manufacturing sector returned to expansion in January, with PMI Manufacturing finalized at 51.5. This marks the first improvement in operating conditions since mid-2025 and represents the strongest rate of growth since August 2022, offering early evidence of a cyclical recovery taking hold.

The details were encouraging. S&P Global Market Intelligence noted that output and new orders recorded their sharpest increases in almost four years, while export demand rose for the first time since 2022. Employment growth also accelerated to its fastest pace since September 2022, suggesting the sector is "gearing up for further increases in output in the months ahead."

That said, cost pressures are resurfacing as a potential constraint. Input price inflation climbed to a near one-year high, driven in part by the weaker yen, and firms passed some of those costs on to customers. Whether these price pressures intensify will be key in assessing how durable the recovery proves to be.

AUD/USD Mid-Day Report

Daily Pivots: (S1) 0.6917; (P) 0.6986; (R1) 0.7033; More...

Intraday bias in AUD/USD remains neutral as consolidations continue. Risk will stay on the upside as long as 55 4H EMA (now at 0.6916) holds. Above 0.7093 will extend larger up trend to 100% projection of 0.5913 to 0.6706 from 0.6420 at 0.7213 next. Nevertheless, sustained break of 55 4H EMA will confirm short term topping, and bring lengthier consolidations before rally resumption. Deeper pullback would then be seen to 38.2% retracement of 0.6420 to 0.7093 at 0.6836.

In the bigger picture, current development argues that rise from 0.5913 (2024 low) is reversing whole down trend from 0.8006 (2021 high). Further rally should be seen to 61.8% retracement of 0.8006 to 0.5913 at 0.7206. This will remain the favored case as long as 0.6706 resistance turned support holds, even in case of deep pullback.

The US dollar recorded its best one-day performance since May, after Trump selected Kevin Warsh as a candidate for Fed chair. He is believed to be committed to defending the independence of the central bank, which will restore investor confidence in the US currency. He is an expert with extensive experience in the FOMC. The White House will not be able to exert as much pressure on him as it does on candidates who are close to Donald Trump and less qualified.

In fact, Warsh faces challenging tasks. He must reduce the balance sheet without scaring the markets. He must slow inflation to 2% without raising rates. Finally, he must keep a distance from the influence of the White House, which wants to weaken monetary policy.

Kevin Warsh’s appointment is intended to strengthen confidence in the US dollar and halt the Sell America trade that has bloomed recently. Washington needs money to finance its budget deficit. According to Eurizon SLJ Capital, once the markets calm down, there could be a sudden and unexpected fall in the USD index thanks to coordinated currency interventions modelled on the Plaza Accord of 1985. Last year, investors actively discussed this topic.

The strengthening of the US dollar led to large-scale sales of precious metals. If confidence in the greenback returns thanks to Warsh, debasement trading will become irrelevant. As a result, silver lost 31% and gold fell 11% in just one day, the worst performance of these assets since March and January 1980, respectively.

Traders taking profits on long positions and banks hedging against the risk of a decline in precious metals certainly contributed to the collapse. The January rally in Gold and Silver was largely speculative in nature. At the end of the month, the bubble burst.

Japanese Prime Minister Sanae Takaichi attempted to stabilise the situation in the USDJPY. According to her, a weak yen has both advantages and disadvantages. In particular, it creates a tailwind for exporters, which is extremely important in the context of high tariffs. The LDP leader wants to build a strong economic structure that is resistant to exchange rate fluctuations.