Week Ahead: China Is On Holiday, But The BoC, The Fed, And The ECB Will Be Busy With The First 2025 Rate Announcements 

The week commencing the 27th of January should be quite an exciting one from the perspective of economic events. Despite the Chinese market being closed due to their New Year celebration, some major Central Banks will be in full swing as they will be announcing their interest rate decisions. The BoC and the Fed will deliver their first 2025 rate decisions this year. The BoC is expected to cut, but the Fed is believed to stay put with the current rate. Then it will be ECB’s turn to release their rate, where it is believed that the rate will be reduced by 25 bps.

Here are the week’s key events:

Monday, January 27, 2025: German Ifo Business Climate & Current Conditions

Monday will be a quiet day on the economic calendar, as we do not get major events. Germany will deliver its Ifo business climate and current conditions reports for the month of January. At the time of writing, we don’t really see any forecasts, but as we know, both indicators have been on a decline for the past few months. Another low reading might raise more concerns about the state of the German economy. Last week, Germany released its ZEW economic sentiment readings, which failed to beat estimates and the previous figures. All this could apply pressure on the German stock market, once the overall Trump market euphoria fades away and we see tariffs coming through onto the European goods and services imported into the US.

(Source: Trading Central)

US building permits and new home sales figures are on the watch. It would be interesting to see if lower Fed rates are helping the current housing market. If the readings are on the lower side, market participants may take it as one of the signs that current lower interest may not have a strong effect on the housing sector. There might be a slight increase in consumer fear and instability.

Top US company earnings: AT&T, Nucor.

Tuesday, January 28, 2025: US CB Consumer Confidence

On Tuesday, China will start its Chinese New Year celebrations, which will last until the 4th of February. The Chinese market will resume trading on the 5th of February.

Traders and investors will keep a close eye on the US consumer confidence reading, for which we do not have a forecast at the time of writing. One thing that we know for sure is that from July 2024, the tides have changed, and the indicator started moving in the upwards trajectory. This might have been driven by the fact that the market was expecting a Trump win, and consumers were more optimistic about the agenda of the Republican candidate, rather than the Democratic one.

(Source: Trading Central)

Top US company earnings: Boeing, Lockheed Martin, Starbucks, General Motors.

Wednesday, January 29, 2025: BoC & Fed Interest Rate Decisions

We will start the Asian morning with inflation data from Australia. The country will release its Q4 YoY and QoQ readings. The QoQ number is believed to increase slightly however the YoY one is forecasted to have fallen further below the previous +2.8%. Nevertheless, anything in the range between 2% and 3% would be within the RBA’s inflation target. Australia will also deliver its monthly CPI indicator, which showed a curve back up during last month’s release.

The next big event on the economic calendar, which is likely to take the spotlight, will be the Bank of Canada's interest rate decision. The current rate stands at +3.25%. However, it is expected that the BoC will drop it by another 25 bps. Canadian headline inflation has been on a down move for some time, unlike the core figure, which pushed back up slightly during the last report release. The Bank is keen to continue supporting the economy with lower rates; however, it promised to hold off from exercising the option of large cuts this year, like in 2024. The BoC is also experiencing pressure from the new leadership of the neighbouring US. As we know, the newly elected government is planning to impose tariffs on some categories of goods imported from Canada. The Canadian dollar has been on a strong decline against its US counterpart since the end of September 2024. Although some corrections are possible, we believe CAD weakness may stay for a bit longer.

(Source: Trading Central)

But, most likely, the main event on the calendar, which will overshadow all other ones is the Federal Reserve interest rate decision. It will be the first one this year and the first one under new US leadership. During this announcement, the Bank is expected to hold off from any action. In 2024, the Fed dropped the rate from +5.5% to +4.5%. This year the Fed is not expected to be in support of strong easing like last year. At the time of writing, the projection for seeing only one 25 bps cut by the end of this year is higher than seeing two. That said, it’s the beginning of the year, and there might be some changes along the way. That’s why market participants will be carefully monitoring this year’s first Fed meeting in order to understand how they will adjust to the new US government. As we know, Trump is expected to deliver on many of his pre-election campaign promises, hence why there might be an increase in government spending. Such actions might bring inflation back up again, meaning that the Fed will have to intervene by drastically slowing down easing, or even reversing course. Any potential sign of worry, in the words of Jarome Powell, could bring the risk-off environment back into the market. This will be monitored during the Fed’s press conference, half an hour after the rate announcement.

(Source: Trading Central)

Top US company earnings: Microsoft, Meta Platforms, Tesla, IBM, Caterpillar.

Thursday, January 30, 2025: EU & US Preliminary GDP, ECB Rate Decision

On Thursday, we will get the preliminary GDP readings from various major European countries and the whole EU block itself. Later, the US will also deliver on the same metric for Q4.

However, that day's main event will be the ECB rate decision for the first time in 2025. As it is already expected, the Bank will be lowering the rate by 25 bps. This would be the 5th cut since the European Central Bank stopped hiking rates. The rates have fallen drastically from the +4.5% mark, which was seen back in the beginning of 2024. Another cut could apply more pressure on the common currency, possibly increasing its chances of moving towards parity with the US dollar. We may expect more volatility in the euro during the ECB’s press conference 30 minutes after the rate announcement.

(Source: Trading Central)

Top US company earnings: Apple, Amazon, Visa, Mastercard, Intel, United Parcel Service.

Friday, January 31, 2025: Japanese Data-Drop & US PCE Numbers

Friday will kick off with a data-drop from Japan, where the country will deliver on various economic indicators. Japanese MoM and YoY retail sales numbers for December will be on the lookout as the figures are expected to decline. We will also be getting the Tokyo core and headline CPI readings for January. At the time of writing, we do not have the forecasts available. However, the figures have been rising since around October time. Additionally, we will receive the Japanese unemployment rate for December, which is expected to have increased by one-tenth of a percent.

Australian YoY PPI will be on the watch, and the number is expected to drop slightly. If so, we may see some weakness in the AUD against some of its major counterparts.

German January unemployment rate and the preliminary CPIs will be on the lookout as well. At the time of writing, we do not have any forecasts available; however, both indicators have been on the rise lately.

An hour before the US opening bell, we will receive Canada’s MoM GDP for November and the preliminary MoM GDP for December. The November reading is expected to show a decline, but the December one looks slightly more optimistic, with the number possibly staying in positive territory. IF so, we may see some sideways action in the Canadian dollar against some of its major currency rivals.

But the spotlight, most likely, will fall on the Fed’s beloved inflation metric, which is the Personal Consumption Expenditure index. We will be getting both core and headline figures for December. The core reading is forecasted to come out the same as previous, at +2.8%. However, the headline number is believed to have increased by 2-tenths of a per cent. This might be justified by the fact that the headline figure includes food and energy prices, which have been slightly on the higher side during the holiday season. We have seen WTI oil prices picking up upside momentum throughout December. If the actual readings come out higher than the initial expectations, this could potentially force the Fed to re-think further easing. If so, we might see a slight correction in the US stock market, however, given that we are currently in the earning season, the US indices may remain vulnerable to company reports.

(Source: Trading Central)

Top US company earnings: Exxon Mobil, AbbVie, Chevron.