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Canadian Prime Minister Justin Trudeau dpoke in an interview with CNBC on Sunday:

“As we did last time, we are ready to respond with tariffs as necessary”

Trudeau is referring here to 2018, when Canada slapped dollar-for-dollar tariffs on U.S. steel and aluminum in response to the Trump tariffs on Canada’s steel and aluminum during NAFTA negotiations.

Trudeau on electricity exports to the U.S.:

• “No American wants to pay 25 percent more for electricity or oil and gas coming in from Canada”

• “And that’s something that I think people need to pay a little more attention to … . will increase the cost of living for Americans and harm a trading relationship that works extremely well”

Info via Politico, more at the link.

Trudeau will be CAD PM until March.

This article was written by Eamonn Sheridan at www.forexlive.com.

The US administration imposed tougher sanctions on Russian oil:

• target more than 200 entities and individuals including traders, officials, insurance companies, hundreds of oil tankers
• UK will join the US in directly sanctioning energy companies Gazprom Neft and Surgutneftegas

Via BBC (more at the link):

• Some of the measures announced by the US Treasury on Friday will be put into law, meaning the incoming Trump administration will need to involve Congress if it wants to lift them.
• Washington is also moving to severely limit who can legally purchase Russian energy, and going after what it called Moscow’s “shadow fleet” of vessels that ship oil around the world.

This article was written by Eamonn Sheridan at www.forexlive.com.

New Zealand home consents for November 2024:

+5.3% m/m

• -5.2% the prior month

+4.8% y/y

Stats NZ says that “While the number of homes consented each month has fluctuated, the trend has remained relatively steady for the last year”

***

NZD barely moving.

This article was written by Eamonn Sheridan at www.forexlive.com.

Markets returned from their post-New Year’s break with aplomb last week, culminating in a lively final session as the US Non-Farm Payrolls came in much stronger than expected and the unemployment rate dipped.

This week sees more key US data on the schedule, with the focus shifting from employment to inflation. Investors will also concentrate on the upcoming inauguration of Donald Trump, with plenty of volatility expected from updates related to the new government as well as some key data releases from other jurisdictions, particularly the UK.

Here is our usual day-by-day breakdown of the major risk events this week:

Asian markets will have reduced liquidity as Japanese markets are closed for the day. There is little on the event calendar across all three trading sessions; however, investors expect movements as the market continues to react to Friday’s significant US employment data update.

Japanese markets return to the Asian session, although there is once again little on the event calendar to drive significant movement. A similar trend persists during the London session. However, the first major US data release of the week, the PPI numbers, is scheduled soon after the New York open.

The event schedule starts to pick up on Wednesday. While the Asian session remains relatively quiet, the latter two sessions feature some of the week’s most significant data releases. CPI data for both the UK and the US is due, and both events have the potential to strongly move their respective markets, given recent changes in rate expectations for both jurisdictions. Additionally, the Empire State Manufacturing Index data will be released during the US session, and several FOMC members are scheduled to speak.

Thursday is likely the busiest day of the week for macroeconomic data. Australian markets will take center stage early with the release of key employment numbers. The London session features more critical UK data, this time in the form of GDP figures. US markets will face a barrage of releases, including Retail Sales numbers, weekly unemployment claims, and the Philly Fed Manufacturing Index, all scheduled simultaneously.

Friday could also see plenty of activity during the first couple of sessions. A significant data drop from China is expected midway through the Asian session, including GDP, Industrial Production, and Retail Sales figures. During the European session, UK markets will be in focus again with the release of the latest Retail Sales data. The New York session is expected to be quieter than the previous days, with only the Building Permits numbers for traders to monitor.

The post The Week Ahead – Week Commencing 13 January 2025 first appeared on IC Markets | Official Blog.

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

This article was written by Eamonn Sheridan at www.forexlive.com.

more to come

China’s exports are expected to have expanded at a faster pace in December than in November, with firms hurrying to move inventory to major markets ahead of Trump’s return to the White House this month and the accompanying fresh trade risks.

Imports are expected to have fallen, for the third month in a row.

ECB board member Philip Lane will speak as part of a “policy dialogue” at the Asian Financial Forum (AFF) 2025, being held in Hong Kong.

• With monetary policy expected to turn more accommodative globally, policymakers may find themselves at a unique juncture to implement strategies that can revitalise our economies and power the next growth engine. Speakers in this session will discuss these opportunities and challenges, the evolving innovative landscape, and how national authorities can strategically position themselves to turbo-charge growth in their economies.
• Dr Olli Rehn, Governor Bank of Finland, will be on the same panel

This article was written by Eamonn Sheridan at www.forexlive.com.

As is usual for a Monday morning, market liquidity is very thin until it improves as more Asian centres come online … prices are liable to swing around, so take care out there.

ps. It’s a Japanese holiday today, which will keep it thinner for longer. Singapore and Hong Kong will return liqudiituy to markets when bums hit seats in these centres.

Indicative rates, little change from late Friday:

• EUR/USD 1.0241
• USD/JPY 157.82
• GBP/USD 1.2199
• USD/CHF 0.9165
• USD/CAD 1.4424
• AUD/USD 0.6150
• NZD/USD 0.5559

This article was written by Eamonn Sheridan at www.forexlive.com.

UPCOMING
EVENTS:

• Monday: NY Fed Inflation Expectations.
• Tuesday: US NFIB Small Business Optimism Index, US PPI.
• Wednesday: UK CPI, US CPI.
• Thursday: Japan PPI, Australia Employment report, UK GDP,
  US Retail Sales, US Jobless Claims, US Import Prices, US NAHB Housing
  Market Index, New Zealand Manufacturing PMI.
• Friday: China activity data, UK Retail Sales, US
  Housing Starts and Building Permits, US Industrial Production and Capacity
  Utilization.

Tuesday

The US PPI Y/Y is
expected at 3.0% vs. 3.0% prior, while the M/M measure is seen at 0.3% vs. 0.4%
prior. The Core PPI Y/Y is expected at 3.2% vs. 3.4% prior, while the M/M
measure is seen at 0.2% vs. 0.2% prior. The CPI coming the day after will be
more important, but the PPI might set the sentiment going into the CPI.

Wednesday

The UK CPI Y/Y is
expected at 2.7% vs. 2.6% prior, while the Core CPI Y/Y is seen at 3.4% vs.
3.5% prior. The market is pricing a 65% chance of a 25 bps cut at the
upcoming meeting and a total of 47 bps of easing by year-end. Higher than
expected data will likely take the rate cut off the table for now, while a soft
report should increase the probabilities in favour of a cut.

The US CPI Y/Y is
expected at 2.8% vs. 2.7% prior, while the M/M measure is seen at 0.3% vs. 0.3%
prior. The Core CPI Y/Y is expected at 3.3% vs. 3.3% prior, while the M/M
reading is seen at 0.2% vs. 0.3% prior.

This is the most
important release of the month, and another hot report will likely cause
some trouble in the markets with the stock market looking as the most
vulnerable right now. Following the strong NFP report, the expectations are
now for just one rate cut this year, which is below the Fed’s projection of two
cuts.

The repricing has
been pretty aggressive in the last few months and the data definitely made the
50 bps cut look like a big mistake. Nonetheless, the Fed has paused the easing
cycle and switched its focus back to inflation with several members citing inflation
progress as a key factor for the next rate cut.

The best
outcome would be a soft report given the overstretched moves in the markets caused by the repricing in
rate cuts expectations. That would likely reverse most of the recent trends
and trigger a rally in bonds, risk assets like stocks and bitcoin and lead to a
selloff in the US Dollar.

Thursday

The Australian
Employment report is expected to show 10.0K jobs added in December vs. 35.6K in
November and the Unemployment Rate to tick higher to 4.0% vs. 3.9% prior. As a
reminder, the RBA softened further its stance at the last policy decision as it nears
the first rate cut.

The market is
seeing a 62% chance of a 25 bps cut in February following the soft monthly
inflation data, although the first fully priced in cut is seen in April. A soft
report could see the market strengthening the
case for a cut in
February.

The US Jobless
Claims continue to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims
continue to hover around cycle highs although we’ve seen some easing recently.

This week Initial
Claims are expected at 214K vs. 201K prior, while there’s no consensus for
Continuing Claims at the time of writing although the prior release saw an
increase to 1867K vs. 1834K prior.

The US Retail
Sales M/M is expected at 0.5% vs. 0.7% prior, while the ex-Autos M/M measure is
seen at 0.4% vs. 0.2% prior. The focus will be on the Control Group figure
which is expected at 0.4% vs. 0.4% prior.

Consumer spending
has been stable which is something you would expect given the positive real
wage growth and resilient labour market. We’ve also been seeing a steady pickup
in consumer sentiment which suggests that consumers’ financial situation is
stable/improving.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• US stocks close sharply lower
• Key economic data releases next week. Earnings calendar begins.
• Crude oil settles at $76.57
• Baker Hughes oil rig count -2 at 480
• European stock markets struggle on Friday but post gains on the week
• Goldman Sachs expects Fed to cut by 50 basis points this year versus 75 bps previously
• Bank of America says it no longer expects any more Fed rate cuts
• US unveils broad sanctions on Russian oil and LNG
• Judge sentence Trump to unconditional discharge over hush money case
• Fed’s Goolsbee: Jobs report makes me more comfortable that the employment market stable
• UMich January prelim consumer sentiment 73.2 vs 73.8 expected
• What’s priced in for the Federal Reserve after non-farm payrolls
• US December non-farm payrolls +256K vs +160K expected
• Canada December employment change 90.9 vs 25.0K estimate
• ForexLive European FX news wrap: Dollar steady awaiting jobs data

The December 2024 U.S. jobs report was released at 8:30 AM ET, and showed strong job growth, with non-farm payrolls increasing by 256,000, significantly beating expectations of 160,000. The unemployment rate dropped to 4.1% (unrounded 4.0855%), lower than the expected 4.2%. The labor force participation rate held steady at 62.5%, while the broader U6 underemployment rate declined to 7.5% from 7.8%. Average hourly also rose 0.3% month-over-month (matching expectations) and 3.9% year-over-year, slightly below the forecasted 4.0%. Private payrolls added 223,000 jobs, far exceeding the expected 135,000, while manufacturing payrolls declined by 13,000 against an expected 5,000 gain. Government jobs rose by 33,000. The strong report contrasts with weaker survey data, boosting the U.S. dollar with significant gains in currency markets.

The US yields moved higher with the yield curve flattening a bit. The 2-year yield rose 12.1 basis points to 4.383%. The 10-year yield rose 8.0 basis points to 4.7613%. The 10-year yield is at its highest level since November 2023. The yield has also rose by close to 120 basis points from 3.60% to a high of 4.788% today. During that time the Fed cut rates by 100 basis points.

Later, the University of Michigan sentiment index came in and 73.2 down from 74.0 last. Over the when year and five-year inflation expectations both rose to 3.3% from 2.9% and 3.1% respectively. That added another level of negativity to the US stock market which was already moving lower after its day of mourning for former Pres. Carter.

The major indices will close sharply lower led by the Russell 2000 which fell by -2.22%. The tech-heavy NASDAQ index was also under pressure falling by -317.25 points or -1.63%. The good news is at session lows the index is down -460 points. It could’ve been worse.

The Dow industrial average fell by nearly -700 points or -1.63% and the S&P 500 index fell by -91.21 points or -1.54%.

In the forex market, the dollar was mostly higher (it fell versus the JPY). A snapshot of the major currency chan throughges vs the US shows:

• EUR: +0.52%
• JPY: -0.27%
• GBP: + 0.78%
• CHF: +0.48%
• CAD: +0.25%
• AUD: +0.84%
• NZD: +0.80%

The AUDUSD fell to its lowest level since April 2020. The NZDUSD fell to its lowest level since October 2022.

The USDs gain vs the CAD was moderated (+0.25%) as Canada also released strong employment data with the employment change of 90.9K and the unemployment rate falling to 6.7% from 6.8% last month

Fed’s Goolsbee tried to bring positive to the market reaction.Goolsbee expressed optimism about the stability of the employment market following the latest jobs report, noting strong private-sector retail hiring while questioning if it indicates robust consumer activity or a one-off trend.

Speaking on CNBC, he stated that the labor market is not driving inflation, with the inflation rate at 1.9% annualized over the past six months. Goolsbee attributed the rise in long-term rates to higher-than-expected growth and a slower anticipated pace of Fed rate cuts but projected significantly lower rates in 12-18 months if expectations hold. He emphasized recent progress in curbing inflation despite high annual rates reflecting last year’s spike and stressed the importance of monitoring productivity numbers.

Meanwhile Bank of America says that it no longer expect any more rate cuts in 2025. Goldman Sachs trimmed their forecast to raise 50 basis points in 2025 for -75 basis points.

The probabilities for end-of-the-year are showing a 28% chance of no change a 40% chance of 25 basis points in a 23.5% chance of 50 basis points of cuts.

Next week US CPI data will be scrutinized for a pickup in inflation. Corporate earnings also start to be released by the traditional financials.

This article was written by Greg Michalowski at www.forexlive.com.

The major US stock indices are closing sharply lower on the day. The declines were led by the Russell 2000 which fell -2.22%.

A snapshot of the closing levels shows:

• Dow industrial average -696.75 points or -1.63% at 41938.45
• S&P index -91.21 point to rise 1.54% at 5827.04
• NASDAQ index -317.25 points or -1.63% at 19161.63
• Russell 2000 – 41.73 points or -2.22% at 2189.23.

For the trading week, the major indices are closing lower. The first trading week of the year was also lower.

• Dow industrial average -1.86%
• S&P index -1.94%
• NASDAQ index -2.34%
• Russell 2000 -3.49%

This article was written by Greg Michalowski at www.forexlive.com.

• Monday, January 13th

• China: New Loans: 890B (previous: 580B)

• Tuesday, January 14th

• United States: Core PPI m/m: 0.2% (previous: 0.2%)

• United States: PPI m/m: 0.4% (previous: 0.4%)

• Wednesday, January 15th

• UK: CPI y/y: 2.6% (previous: 2.6%)

• United States: Core CPI m/m: 0.2% (previous: 0.3%)

• United States: CPI m/m: 0.3% (previous: 0.3%)

• United States: CPI y/y: 2.9% (previous: 2.7%)

• United States: Empire State Manufacturing Index: -0.3 (previous: 0.2)

• Thursday, January 16th

• Australia Employment Change: 14.5K (previous: 35.6K)

• Australia: Employment Change: 4.0% (previous: 3.9%)

• UK GDP MoM: 0.2% (previous: -0.1%)

• United States: Core Retail Sales m/m: 0.5% (previous: 0.2%)

• United States: Unemployment Claims: 210K (previous: 201K

• United States: Philly Fed Manufacturing Index: -7.0 (previous: -16.4)

• Friday, January 17th

• China: GDP q/y: 5.0% (previous: 4.6%)

• China: Industrial Production y/y: 5.4% (previous: 5.4%)

• China: Retail Sales y/y: 3.5% (previous: 3.0%)

• UK Retail Sales 0.4% (previous 0.2%)

• United States: Building Permits: 1.46M (previous: 1.49M)

This article was written by Greg Michalowski at www.forexlive.com.

I’ve been writing since the turn of the year that it will be a ‘catch-down’ trade for the pound in 2025 after it mostly kept pace with the US dollar in 2024. It’s been a rough start to the year for GBP as it’s lagged substantially already, including another 100 pip decline today to 1.2211.

Now Deutsche Bank is out with a note saying that it’s time to sell the pound.

Unlike a similar drop in November 2024 after the UK budget, Deutsche Bank believes this decline is not a buying opportunity. They recommend selling the pound against a basket of major currencies (EUR, USD, JPY, and CHF).

Some of the reasons to sell:

• Yield advantage is deteriorating, and vol-adjusted carry is no longer support
• The current account deficit is no longer improving
• Recent currency strength relied heavily on carry trade inflows
• Sterling positioning among leveraged funds is relatively long

Now UK economic data has been weaker than expected and the market pricing for just 47 basis points of easing may be too conservative.

They note that the the trade-weighted sterling index still sitting just over two percent off
its post-Brexit highs but say the most worrisome development is the reversal in correlations with yields.

“The most
concerning portion of the pound’s move came on Wednesday, when sterling went
in the opposite direction of UK yields, as it did in the few days after the UK budget,” DB writes.

This chart makes a compelling case that carry trade inflows have been holding the pound up. Those could reverse quickly if the BOE cuts in February (still at only at 65% chance) and the Bank of England hints at more to come.

DB isn’t publishing FX forecasts just yet but plans to update targets soon. The question is whether they will see a drop below the 2023 lows near 1.2000 and, if so, how close to the 2022 low of 1.0382 it may fall.

This article was written by Adam Button at www.forexlive.com.