EXECUTIVE SUMMARY
- BOJ LIFTS RATE TO 0.50%; UEDA FLAGS MORE HIKES BUT NO CLEAR TIMELINE
- TRUMP WOULD ‘RATHER NOT’ PUT TARIFFS ON CHINA, MAINTAINS THREAT
- EUROZONE PMIS SHOW PICK UP IN INFLATIONARY PRESSURES
- JAPAN CORE CPI RISES 3.0% IN DECEMBER VS. 2.7% PRIOR
Figure 1: PMIs show inflationary pressures up across the Eurozone
NEWS
BOJ (MNI): BOJ Lifts Rate to 0.50%; Highest Since Oct 2008
President Donald Trump said he’d prefer not to have to impose tariffs on China, his latest dovish remark toward the world’s second-biggest economy even as he continues to threaten sweeping action. “We have one very big power over China, and that’s tariffs, and they don’t want them,” the US leader told Fox News host Sean Hannity in an interview that aired Thursday in the US. “And I’d rather not have to use it. But it’s a tremendous power over China.”
US (FT): Donald Trump Piles Pressure on Federal Reserve Chair Jay Powell to Cut Interest Rates
Donald Trump has raised the pressure on Federal Reserve chair Jay Powell to cut borrowing costs, setting up a potential clash between the two men less than a week before the US central bank meets to set interest rates. During an appearance in the Oval Office on Thursday to sign several new executive orders, Trump said he knew rates “much better” than the Fed, and he would like to see them come down “a lot”.
US (BBG): Trump’s Cabinet Set for Confirmation, Weekend Votes Expected
Republican senators are scrambling to get President Donald Trump’s cabinet appointees confirmed, promising to vote through the weekend if necessary. It’s been slow going in the procedure-heavy Senate since Monday’s inauguration, with only two of Trump’s top picks - Secretary of State Marco Rubio and CIA Director John Ratcliffe - confirmed by Thursday afternoon. But there are a slew of controversial hearings and votes expected over the coming days, with acute intrigue around the confirmation prospects of Trump’s embattled pick to run the Pentagon, Pete Hegseth.
US (WSJ): Swaths of U.S. Government Grind to a Halt After Trump Shock Therapy
The gears of government slowed to a halt this week after President Trump axed major federal initiatives across Washington, causing even routine functions to hit the skids. The Transportation Department temporarily shut down a computer system for road projects. Health agencies stopped virtually all external communications in a directive that risked silencing timely updates on infectious diseases. A hiring freeze left agencies wondering how parts of the government could adapt to new demands. Confusion loomed over how agencies should disburse funds allocated by the previous administration.
POLITICAL RISK (MNI): ECB President & IMF MD to Speak on 2025 Econ Outlook at Davos
The final sessions of the 2025 World Economic Forum (WEF) annual meeting are underway in Davos, Switzerland. The final half-day of the meeting often lacks the major political speakers seen in the preceding days. Nevertheless, before WEF president and CEO Brge Brende closes the event at 1200CET, at 1100CET (0500ET, 1000GMT) ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva, and Saudi Economy Minister Faisal Alibrahim (among others) will take part in a discussion on the world economic outlook in 2025. Livestream will be available here.
EU/RUSSIA (MNI): EU Ambassadors Meet on Rolling Over Sanctions, Eyes on Hungary
Permanent representatives to the EU are meeting in Brussels to decide on whether to roll over sanctions on Russia for another six months. Given that unanimity among member states is required to maintain the measures, there has been focus on whether the Hungarian gov't will utilise its veto. On 21 Jan, Hungarian PM Viktor Orban posted on X: "It’s time to talk about sanctions! Did they bring the war to an end? - No. [...]The time for change has come!".
SINGAPORE (MNI): MAS Eases, Reducing SGD NEER Slope Slightly
The MAS has eased monetary policy, with its policy statement noting it will slightly reduce the pace of SGD NEER appreciation. There is no change to the width of the policy band or where the SGD NEER is centered. The market consensus was for an easing, although there were some forecasters who saw no change. This was also our bias, although we noted it was a close call.
CORPORATE (FT): Commerzbank Boss Refused to Meet UniCredit Andrea Orcel for Deal Talks
Commerzbank chief Bettina Orlopp shot down an invitation from Andrea Orcel to hold informal talks about a potential tie-up with UniCredit, and has instead insisted on receiving a written proposal before engaging, according to people familiar with the situation. UniCredit’s chief executive met Orlopp in November at the sidelines of a JPMorgan Chase conference in London, the people said.
DATA
EUROZONE DATA (MNI): Inflationary Pressures Pick Up Across The Eurozone
- EUROZONE JAN FLASH MANUF PMI 46.1 (FCST: 45.4); DEC 45.1
- EUROZONE JAN FLASH SERVICES PMI 51.4 (FCST: 51.5); DEC 51.6
- EUROZONE JAN FLASH COMPOSITE PMI 50.2 (FCST: 49.7); DEC 49.6
As was a running theme last year, the Eurozone ex-France and Germany outperformed the two largest economies in the PMIs. We note that increased inflationary pressures were seen across the region, with the exception of France. The Eurozone manufacturing (46.1 vs 45.4 cons, 45.1 prior) and composite (50.2 vs 49.7 cons, 49.6 prior) January flash PMIs were stronger than expected, following beats in the French and German prints earlier this morning. The services PMI was broadly in line with consensus at 51.4 (vs 51.5 cons, 51.6 prior).
GERMANY DATA (MNI): Jan Flash PMIs Stronger Than Expected With Inflationary Uptick
- GERMANY JAN FLASH MANUF PMI 44.1 (FCST: 42.7); DEC 42.5
- GERMANY JAN FLASH SERVICES PMI 52.5 (FCST: 51.0); DEC 51.2
Both the services and manufacturing components were stronger-than-expected in the German January flash PMIs, helping the composite reading tick back into expansionary territory for the first time since June 2024. In contrast to France, input cost pressures were passed into output charges, helping the hawkish reaction post-data to stick.
FRANCE DATA (MNI): Jan Flash PMI Composite Beats, But Overall Conditions Still Weak
- FRANCE JAN FLASH MANUF PMI 45.3 (FCST: 42.5); DEC 41.9
- FRANCE JAN FLASH SERVICES PMI 48.9 (FCST: 49.4); DEC 49.3
Although the French manufacturing and composite PMIs were stronger-than-expected, overall demand conditions in France remain weak, with employment continuing to fall. Meanwhile, rises in input costs were not passed through to output charges, limiting inflationary pressure. Overall, the report appears conducive to sequential ECB easing through the first half of this year.
UK DATA (MNI): Something for Everyone in Flash UK PMI Data
- UK JAN FLASH MANUF PMI 48.2 (FCST: 47.0); DEC 47.0
- UK JAN FLASH SERVICES PMI 51.2 (FCST: 50.8); DEC 51.1
Upside surprise for manufacturing of 1.2 points vs consensus, 0.4 points for services and 0.8 points for composite. However, the details look to give something for both the hawks and doves here. On the cost / inflation side, there were some concerning aspects which will be noted by Mann (and potentially some of the other centrists on the MPC), with costs increasing leading to both the highest level of input price inflation since May 2023 and the highest increase in prices charged for 18 months.
UK DATA (MNI): UK GfK Consumer Confidence Lowest Since Dec 2023
- UK JAN GFK CONSUMER CONFIDENCE INDEX -22
UK GfK Consumer Confidence in January was firmly below consensus at -22 (vs -18 consensus, -17 in Dec). This fall more than reverses the past two consecutive monthly rises and takes the print to its lowest level since Dec 2023. All 5 subcomponents declined. In particular, 'General Economic Situation over the next 12 months' reading fell 8 points to -34. The Savings Index (which is not included in the calculation of the overall index score) rose 9 points to 30. The survey was conducted among a sample of 2007 individuals between January 2nd and January 16th 2025.
SPAIN DEC PPI 0.9% M/M, 2.3% Y/Y (MNI)
SWEDEN DATA (MNI): Participation Rates Off Autumn '24 Highs, January Cut Still in Play
- SWEDEN DEC UNEMPLOYMENT 8%
The Swedish December LFS unemployment rate was in line with consensus at 8.5%, two tenths above November's levels. That keeps the 3mma of the unemployment rate steady at 8.40%, in line with the Riksbank's December MPR forecast. Taken alongside the Public Employment Service's unemployment claims data, the deterioration of the Swedish labour market appears to be easing, but overall conditions remain subdued. There should still be enough evidence to support a 25bp cut at next week's gathering, but it may be a close call, with the Board divided on how fast to proceed with additional easing.
JAPAN DATA (MNI): Japan Dec Core CPI Rises 3.0% vs. Nov 2.7%
- JAPAN DEC CORE CPI +3.0% Y/Y; NOV +2.7%
- JAPAN DEC CORE-CORE CPI +2.4% Y/Y; NOV +2.4%
- JAPAN DEC SERVICES PRICES +1.6% Y/Y; NOV +1.5%
The year-on-year rise of Japan's annual core consumer inflation rate accelerated to 3.0% in December as expected from November’s 2.7% due to higher prices of energy and foods excluding perishables, data released by the Ministry of Internal Affairs and Communications showed on Friday. December’s index stayed above the Bank of Japan’s 2% target for the 33rd consecutive month. The index was boosted by higher prices of energy (+10.1% vs. +6.0%) and food excluding perishables (4.4% vs. 4.2%). The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) rose 2.4% y/y in December, unchanged from 2.4% in November.
RATINGS: DM & EM Updates Due After Hours
Sovereign rating reviews of note scheduled for after hours on Friday include:
- Fitch on the Netherlands (current rating: AAA; Outlook Stable)
- Moody’s on the Czech Republic (current rating: Aa3; Outlook Stable), Latvia (current rating: A3; Outlook Stable) & Turkey (current rating: B1; Outlook Positive)
- S&P on Luxembourg (current rating: AAA; Outlook Stable)
- Morningstar DBRS on Belgium (current rating: AA, Stable Trend)
- Scope Ratings on Belgium (current rating: AA-; Outlook Negative) & Malta (current rating: A+; Outlook Stable)
- Please use this link to access the indicative sovereign rating review schedule covering the five most notable rating agencies for 2025. Note that this schedule is indicative only and ratings can be reviewed on an ad-hoc basis. Rating agencies may also adjust their schedules during the year.
FOREX: PMIs Trigger EUR Squeeze, Showing Sensitivity to Good News
- USDJPY moved higher during the BoJ press conference at which Governor Ueda noted that the board has no preconception on the pace of rate hikes going forward - helping keep USD/JPY contained above the post-rate decision low. This keeps initial resistance at 156.82 (50.0% retracement of the Jan 10 - 21 bear leg) firmly intact.
- EUR is holding a post-PMI rally, with EUR/USD briefly topping the $1.05 handle for another YTD high. There's still a way to go before revisit post-US election highs ($1.0630 the level here) but we're seeing strong participation in the rally this morning, evident in EUR futures volumes being close to 80% above average for this time of day, and on track for the busiest session of the week so far. We see the technical break in EUR this week signalling scope for further strength - with 1.0574 marking an important retracement point, and the next hurdle before post-election highs.
- Cross-selling of USD vs. particularly the EUR and GBP has pressured the greenback this morning, with added weight on the currency coming alongside Trump's comments overnight, in which he stated that he would "rather not" put tariffs on China, although retained the option of doing so. The potential softening in stance has helped support risk, with stock futures trading generally firmer in Europe.
- The schedule ahead sees prelim US PMI numbers for January cross, ahead of both the final UMich sentiment read and existing home sales. There remain no Fed speakers on the schedule given the pre-decision media blackout period.
EGBS: Curves Bear Flatten Following Stronger-Than-Expected Flash PMIs
Year-end ECB implied rates have risen ~5.5bps today following the stronger-than-expected Eurozone January flash PMIs. EGB curves have bear flattened as a result, with 2-year Schatz yields 4bps higher and 30-year Bund yields up 1.5bps.
- The PMIs also highlighted an acceleration in inflationary pressures across the Eurozone (with the exception of France), helping the initial hawkish reaction stick.
- However, we note that German and French demand conditions remain subdued, according to the PMIs. Handelsblatt have reported this morning that the German government is set to downgrade its 2025 and 2026 domestic growth projections.
- Bund futures are -31 ticks at 131.25. The 20-day EMA capped upside earlier this week, helping to keep the medium-term bear trend intact. Initial support is the Jan 16 low at 131.00.
- 10-year peripheral spreads to Bunds have tightened despite the hawkish ECB repricing, with European equities rallying and the PMIs signalling continued growth outperformance for periphery countries relative to Germany and France.
- ECB President Lagarde is currently speaking on a panel in Davos. Don’t expect any monetary policy signals though, with the ECB now in its pre-meeting quiet period.
GILTS: Selling Off Following PMIs
Gilts sell off in the wake of the stronger-than-expected preliminary PMI data.
- Pre-existing concern surrounding post-Budget downside risks to UK economic growth amplified the initial market reaction, with the headline survey figures dominating.
- A closer look at the details reads hawkish on inflation but dovish on growth and the labour market (see our macro team’s bullet for greater detail), allowing UK FI markets to stabilise after the initial sell off.
- Futures printed fresh session lows at 91.55 following the data after trading as high as 92.25 this morning, yesterday’s low has been pierced. Contract back to 91.75 last.
- Bearish technical setup remains in place in the contract, initial support and resistance located at 91.10/92.52
- Yields now 1-2bp higher, curve a touch steeper.
- 2s10s and 5s30s both on track for fresh cycle closing highs.
- 10-Year spread to Bunds unwinds some of the early tightening following the data, last 207.5bp, ~1bp tighter on the day. Early November closing low at 204bp remains intact.
- BoE-dated OIS little changed to 5bp more hawkish vs. pre-data levels.
- 90% odds of a cut still priced for next month’s meeting, followed by 40bp priced through December (vs. 42.5bp heading into the data) and 66bp of cuts priced through year-end (vs. 71bp pre-data).
- SONIA futures flat to -3.0.
- Cross-market cues eyed for the remainder of the day.
EQUITIES: E-Mini S&P Remains Firm, Trading Close to Dec Highs
A bull cycle in the Eurostoxx 50 futures contract remains intact and the contract is trading higher again, today. Recent gains have resulted in a breach of 5054.00, the Jan 8 high, to confirm a resumption of the uptrend. Sights are on 5268.50, a Fibonacci projection point. Key short-term support has been defined at 4931.00, the Jan 13 low. Initial firm support lies at 5071.06, the 20-day EMA. S&P E-Minis remain firm and the contract has traded higher this week. Gains undermine a recent bearish theme. The contract has traded through the 50-day EMA and note that resistance at 6107.50, the Dec 26 high, has been breached. The clear break strengthens a bullish theme and opens 6178.75, the Dec 6 high and a key resistance. Initial firm support to watch is 5961.75, the Jan 16 low.
- Japan's NIKKEI closed lower by 26.89 pts or -0.07% at 39931.98 and the TOPIX ended 0.7 pts lower or -0.03% at 2751.04.
- Elsewhere, in China the SHANGHAI closed higher by 22.462 pts or +0.7% at 3252.626 and the HANG SENG ended 365.63 pts higher or +1.86% at 20066.19.
- Across Europe, Germany's DAX trades higher by 95.4 pts or +0.45% at 21507.8, FTSE 100 lower by 25.03 pts or -0.29% at 8540.52, CAC 40 up 78.21 pts or +0.99% at 7972.11 and Euro Stoxx 50 up 40.37 pts or +0.77% at 5259.
- Dow Jones mini down 45 pts or -0.1% at 44705, S&P 500 mini down 6.5 pts or -0.11% at 6145.5, NASDAQ mini down 33.5 pts or -0.15% at 22004.5.
Time: 09:50 GMT
COMMODITIES: Trend Condition in WTI Futures Still Bullish Despite Pullback
The trend structure in WTI futures remains bullish despite the recent pullback. The move down is allowing an overbought trend reading to unwind. Support to watch is the 20-day EMA, at $74.24. It has been pierced, a clear break would signal scope for a deeper retracement and expose the 50-day EMA, at $72.01. A reversal higher would highlight the end of the correction and refocus attention on $79.48, the Apr 12 ‘24 high and a key resistance. Gold continues to trade higher this week. The yellow metal has breached resistance at 2726.2, the Dec 12 high and a key short-term resistance. The clear break of this hurdle strengthens a bullish theme and signals scope for an extension near-term. Sights are on $2790.1, the Oct 31 all-time high. On the downside, the first key support to watch is $2664.6, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
- WTI Crude up $0.21 or +0.28% at $74.84
- Natural Gas down $0.09 or -2.38% at $3.847
- Gold spot up $17.8 or +0.65% at $2772.79
- Copper up $4.85 or +1.12% at $437.9
- Silver up $0.38 or +1.26% at $30.8315
- Platinum up $5.77 or +0.61% at $952.19
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 24/01/2025 | 1100/1100 | ** |  GB | CBI Distributive Trades |
| 24/01/2025 | 1100/1200 |  EU | ECB's Cipollone in panel discussion on the effects of CB digital currencies | |
| 24/01/2025 | 1330/0830 | ** |  US | WASDE Weekly Import/Export |
| 24/01/2025 | 1330/0830 |  CA | StatsCan Labour Force Survey: Revisions, 1987 to 2024 | |
| 24/01/2025 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 24/01/2025 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 24/01/2025 | 1500/1000 | *** | US | NAR existing home sales |
| 24/01/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 24/01/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |