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It’s time for central banks

by SuperiorInvest


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While Fed and ECB officials pushed back interest rate cuts later than expected due to strong data and a rebound in inflation, the coming week is expected to remain at the center of the central bank debate. In addition, key data is expected in the US as well as preliminary PMIs on both sides of the ocean.

On the US calendar, the manufacturing and services flash PMIs for the month of January are due on January 24 ahead of a host of data releases on January 25: Durable goods orders, further revisions to the 4th quarter GDP growth rate, weekly initial claims, the Chicago Fed National Activity Index and Sale of new houses. Rounding out the week is another version of inflation, this time tracked by PCE along with personal income, personal spending and pending home sales. Stronger-than-estimated results from key fundamentals and their impact on Fed rate cut bets were the main drivers of the USD Index (DXY) during the past week. In light of these upcoming releases, the previous 2024 high around 103.70 could be challenged.

In the euro docket, the European Commission will publish its preliminary print of consumer confidence for the current month on January 23. Advanced January PMIs are also due in Germany and the wider Euroland on 25 January. On January 26, the IFO Institute will publish its Business Climate Index in Germany, while GfK will measure its consumer confidence for the month of February. Meantime, EUR/USD It seems to have met some assertion around 1.0840, a region also strengthened by the 200-day SMA.

In Japan, December trade balance data is available, along with flash PMIs (January 24) and BoJ minutes on January 26. USD/JPY kept its bullish outlook intact this week, moving to seven-week highs at levels just below 149.00 .

Across the Channel, public sector finances will take center stage on January 23, followed by preliminary PMIs (January 24) and Gfk consumer confidence on January 26. GBP/USD closed the week with moderate losses, although it maintained a yearly consolidation between 1.2600 and 1.2800.

Flash PMIs take center stage in Australia (January 23), ahead of the Westpac Leading Index (January 24). Australian markets will be closed on January 26 for Australia Day. AUD/USD extended its bearish start to the year for another week, although a decent rebound in the second half of the week allows for some short-term recovery.

The central bank galaxy sees the PBoC cut its 1-year LPR and 5-year LPR by 10bps to 3.35% and 4.10% (Jan 21). No surprises are expected from the BoJ at its event on 23 January, nor from the BoC and BNM when they meet on 24 January. January 25 Norges Bank does not rule out a 25 basis point rate hike, while the ECB is widely expected to leave rates unchanged and uncertainty remains around the CBRT interest rate decision.

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