Trade Tensions, U.S. Inflation & Eurozone Data in Focus
Today there’s data from the Eurozone and the U.S. Investors are watching German inflation and labor market figures for clues on the European Central Bank’s next steps. Meanwhile, the U.S. Core PCE inflation report, the Fed’s preferred inflation gauge, will indicate whether inflationary pressures persist.
At the same time, the Trump administration is weighing tariffs on imports from Mexico, Canada, and possibly China to address trade imbalances. With rising global trade tensions and potential tariff announcements this weekend, market volatility is expected to increase as investors react to today’s data.
Key Data Out Today
- Eurozone:
- Retail Sales (Dec): Expected at 0.2% MoM, recovering from -0.6% in November. The YoY figure is forecast at 2.5%, indicating steady consumer spending.
- German Unemployment (Dec): The change in jobless claims is projected at 14K, up from 10K, while the unemployment rate is seen ticking higher to 6.2%.
- Inflation Data (Jan, PREL): The CPI YoY is expected at 2.6%, in line with the previous reading, while the Harmonized Index of Consumer Prices (HICP) YoY is forecast at 2.8%. These figures will shape ECB expectations going forward.
- Canada:
- November GDP (MoM): Forecast at -0.1%, a slowdown from the 0.3% increase in October. A negative print could raise concerns about the Bank of Canada’s future rate path.
- United States:
- Core PCE Inflation (Dec): MoM expected at 0.2%, with YoY at 2.8%. This will be crucial in shaping expectations for Federal Reserve rate cuts later this year.
- Personal Spending (Dec): Estimated at 0.5%, signaling robust consumer activity.
- Employment Cost Index (Q4): Projected at 0.9%, reflecting stable wage growth.
- Chicago PMI (Jan): Expected at 40, remaining in contraction territory after December’s 36.9.
Commodities
- Crude Oil: Prices are slightly higher, with WTI at $73.36 (+0.87%) and Brent at $76.33 (+0.59%). Oil markets remain focused on U.S. trade policy developments and OPEC+ supply trends.
- Gold: The metal is slightly lower at $2,793.91 (-0.08%), as investors await inflation data for further guidance.
- Silver: Down 0.74% to $31.39, tracking gold’s moves ahead of key macro releases.
Currency Movements
EUR/USD
- EUR/USD: Trading slightly lower at 1.0387 (-0.03%), with traders awaiting inflation figures from Germany.
GBP/USD
- GBP/USD: Holding steady at 1.2420 (+0.04%), with investors focused on upcoming U.S. inflation data.
AUD/USD
- AUD/USD: Up 0.25% to 0.6225, supported by stable risk sentiment and firmer commodities.
NZD/USD
- NZD/USD: Down 0.10% to 0.5646, reflecting broader caution ahead of U.S. PCE data.
USD/JPY
- USD/JPY: Stronger at 154.88 (+0.38%), with markets pricing in prolonged Fed hawkishness.
USD/CNY
- USD/CNY: Up 0.12% to 7.3019, as traders watch for potential U.S. trade actions.
USD/CHF
- USD/CHF: Slightly higher at 0.9106 (+0.07%), reflecting dollar resilience.
USD/CAD
- USD/CAD: Flat at 1.4477 (-0.05%), as markets await Canadian GDP data.
USD/MXN
- USD/MXN: Down 0.34% to 20.6606, as the peso shows resilience despite U.S. trade concerns.
USD/INR
- USD/INR: Little changed at 86.6450 (-0.03%), as emerging markets remain cautious.
Market Outlook
With inflation reports and GDP data due today, markets are poised for potential volatility. If Eurozone inflation surprises higher, the ECB may maintain its cautious stance, supporting the euro. Meanwhile, U.S. Core PCE will dictate Fed rate expectations—a stronger-than-expected print could boost the dollar, while a softer reading might support risk assets.
Trade tensions remain a wildcard, as markets await the U.S. administration’s final decision on potential tariffs on Mexico, Canada, and China. This could have a significant impact on currencies and commodities heading into next week. Traders will remain cautious ahead of the weekend, with key levels in focus for FX and equities.