The BOE policy decision took the spotlight with its surprise “dovish split” while U.S. jobs indicators kept markets on edge ahead of this week’s NFP release.
Meanwhile, crude oil hit fresh yearly lows on geopolitical developments and another round of commentary from U.S. President Trump.
Here are the latest headlines you need to know!
Headlines:
- Australia goods trade surplus shrank from 6.79B AUD to 5.09B AUD (6.52B AUD forecast) in December
- BOJ official Tamura suggested that pace of rate hikes may not necessarily be once every half a year, citing that tightening may be in line with likelihood of achieving inflation target
- China’s Commerce Ministry: Won’t proactively provoke trade disputes, willing to resolve issues
- Swiss jobless rate at 2.7% in January (2.7% expected, previous reading revised from 2.6% to 2.7%)
- German factory orders in January: 6.9% m/m (1.9% expected, previous reading revised from -5.4% to -5.2%)
- U.K. construction PMI in January: 48.1 (53.5 expected, 53.3 previous)
- Eurozone retail sales in December: -0.2% m/m (-0.1% expected, 0.0% previous)
- BOE cut interest rates by 0.25% as expected, two MPC members called for a larger 0.50% reduction
- U.S. President Trump said that they will drive the price of oil down, “everything else will follow”
- U.S. Treasury Secretary Scott Bessent mulling an additional 3 million barrels per day in U.S. oil production
- U.S. Challenger job cuts in January: -39.5% y/y (+11.4% previous)
- U.S. initial jobless claims for the week ending Jan. 30: 219K (214K expected, 208K previous)
- U.S. preliminary unit labor costs for Q4 2024: 3.0% q/q (3.4% expected, 0.8% previous)
- Canada Ivey PMI in January: 47.1 (53.0 expected, 54.7 previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Risk assets were off to a running start during Asian market hours, with crude oil and bitcoin scurrying higher on improved sentiment thanks to remarks from China’s commerce ministry citing they are willing to work with the U.S. government to resolve trade issues.
Interestingly enough, the U.S. dollar and Treasury yields also drew support from the prospect of avoiding an all-out trade war while gold let go of some of its earlier safe-haven gains.
The tide turned for crude oil, however, on reports of Trump and Treasury Secretary Bessent discussing the idea of adding 3 million barrels per day in production. Trump added that they plan on driving the price of crude oil down and that “everything else will follow.”
BTC/USD also retreated after coming close to the $99K mark around this time while gold saw a larger bearish wave right around the release of U.S. Challenger job cuts data, which revealed fewer layoffs in January. Meanwhile, the S&P 500 index managed to squeeze out a 0.40% gain.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The big story in the forex market was the “dovish split” of the BOE, as policymakers agreed to cut interest rates as expected but a couple of MPC members called for a much larger reduction.
Prior to this, the U.S. dollar had been cruising mostly higher against majority of its peers during the Asian session, except the stronger yen which was once again propped up by hawkish BOJ commentary. Hopes for a peaceful dialogue between the U.S. and China when it comes to addressing trade concerns appeared to prop the U.S. currency higher.
Consolidation was the name of the game during London market hours, with GBP/USD falling sharply during the BOE event but swiftly recouping its losses. After all, the Greenback was slowly edging lower around this time, despite a large fall in Challenger job cuts for January, as other jobs-related indicators turned out mixed. The initial jobless claims came in higher than expected while preliminary unit labor costs fell short of consensus.
Upcoming Potential Catalysts on the Economic Calendar:
- Germany industrial production at 7:00 am GMT
- German trade balance at 7:00 am GMT
- French preliminary private payrolls at 7:45 am GMT
- SNB foreign currency reserves at 8:00 am GMT
- Swiss SECO consumer climate index at 8:00 am GMT
- Canada’s employment report at 12:30 am GMT
- U.S. non-farm payrolls report at 12:30 am GMT
- FOMC member Bowman’s speech at 2:25 am GMT
- U.S. preliminary UoM consumer sentiment index at 3:00 am GMT
- FOMC member Kugler’s testimony at 5:00 pm GMT
It’s NFP Friday, ladies and gents!
All eyes and ears are likely to be on the U.S. jobs report for January, as traders are keen to find out if the results could impact the Fed’s policy stance, USD direction, and overall market sentiment. At the same time, Canada will also be printing its January employment data, likely contributing to CAD volatility as well.
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