The third week of January is expected to bring high volatility to the financial markets. Following the recent US inflation data, investor focus is now shifting toward macroeconomic activity in major economies and significant geopolitical drivers. The highlights of the week include the inaugural anniversary and addresses of US President Donald Trump, the Bank of Japan’s policy meeting, and critical US GDP figures. Global investors will also be closely monitoring updates from the World Economic Forum in Davos.
Eurozone:
● 10:00 a.m. GMT: Consumer Price Index (CPI) (Year-over-Year) (December). (Forecast: 2.0%; Previous: 2.1%). Final inflation data for the region. A slowdown to the 2.0% target could provide the ECB with the flexibility needed to continue easing its monetary policy, which would be moderately bearish for the Euro.
Germany:
● 7:00 a.m. GMT: Producer Price Index (PPI) (Month-over-Month) (December). (Forecast: -0.1%; Previous: 0.0%). As a leading indicator of inflation, a continued decline in producer prices would confirm the lack of inflationary pressure within Germany's industrial sector.
United Kingdom:
● 9:45 a.m. GMT: Speech by the Bank of England’s Governor Andrew Bailey. Market participants will be scrutinizing his remarks for signals regarding the central bank’s readiness to respond to tomorrow’s inflation report.
United Kingdom:
● 7:00 a.m. GMT: Consumer Price Index (CPI) (Year-over-Year) (December). Forecast: 3.3%; Previous figure: 3.2%. UK inflation is expected to remain out of sync with the global disinflation trend, which could force the Bank of England to maintain a restrictive stance for longer than other major central banks.
Switzerland:
● 8:00 a.m. GMT: World Economic Forum (WEF) Annual Meetings. Markets will monitor risks and comments from global leaders, particularly regarding trade policy and geopolitical tensions.
United States:
● 1:30 p.m. GMT: Speech by US President Trump. This will be his first set of policy remarks one year after officially taking office. Any rhetoric related to tariffs, taxation, or fiscal policy is likely to trigger sharp volatility in the USD and US stock indices.
United States:
● 1:30 p.m. GMT: GDP (Quarter-over-Quarter) (Q3). Forecast: 4.3%; Previous figure: 3.8%. The preliminary GDP estimate. An acceleration to 4.3% would confirm the exceptional strength of the US economy and provide strong support for the dollar.
● 1:30 p.m. GMT: Initial Jobless Claims. Forecast: 203K; Previous figure: 198K.
● 3:00 p.m. GMT: Core PCE Price Index (MoM) (November). Forecast: 0.2%; Previous figure: 0.2%.
● 3:00 p.m. GMT: Core PCE Price Index (Year-over-Year) (November). Previous: 2.7%; Earlier: 2.8%. The Fed’s most important inflation indicator. A slowdown in annual inflation to 2.7% would be supportive for equities.
● 5:00 p.m. GMT: Crude Oil Inventories. Previous figure: 3,391M.
Japan:
● 3:00 a.m. GMT: Interest Rate Decision. Forecast: 0.75%; Previous figure: 0.75%. Rates are expected to remain unchanged, but the inflation outlook will be closely watched. Any indication of a potential rate hike in the spring could trigger a sharp strengthening of the JPY.
United States:
● 2:45 p.m. GMT: Services PMI (January). Forecast: 52.8; Previous figure: 52.5.
● 2:45 p.m. GMT: Manufacturing PMI (January). Forecast: 52.1; Previous figure: 51.8.
These leading indicators will reflect economic conditions at the start of the year. Readings above 50 signal expansion.
● Sterling in focus: The combination of Bailey’s speech on Tuesday and CPI data on Wednesday could drive heightened volatility in GBP/USD. If inflation exceeds 3.3%, a short-term rally in the pound is likely.
● Dollar dominance: Strong US GDP data on Thursday (forecasted at 4.3%) could undermine expectations of an imminent Fed rate cut, potentially opening the door for a breakout to new highs in the DXY.
● Japanese yen: Friday morning may bring surprises. USD/JPY will be highly sensitive to the tone of the BoJ press conference. If the central bank maintains a hawkish bias, downside targets near 142.00 come into focus.
Wishing you a productive trading week and profitable trades!
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