EUROPEAN SESSION
In the European session, the main highlights will be the release of the Flash PMIs for the UK and the major Eurozone economies. We’ve been seeing a re-acceleration in activity to start the year for other advanced countries like Australia, New Zealand and Japan, which could be the case for everyone as business uncertainty eased following a rocky 2025.
Stronger economic conditions will likely result in hawkish repricing for central banks, especially for the Fed and the BoE where traders expect rate cuts. Unless Trump pulls out another “Liberation Day”-like crisis, this year will likely be characterized by improving economic conditions and potentially re-accelerating inflation amid stronger labour markets and easier financial conditions. Time will tell.
AMERICAN SESSION
In the American session, we have the Canadian Retail Sales data and the US Flash PMIs. The Canadian Retail Sales M/M is expected at 1.2% vs -0.2% prior, while the Core reading is seen at 1.2% vs -0.6% prior. The shouldn’t change anything for the BoC, so the market reaction will likely be muted.
The focus will be mostly on the US data. The US Manufacturing PMI is expected at 52.0 vs 51.8 prior, while the Services PMI is seen at 52.9 vs 52.5 prior. The last PMIs showed the growth momentum weakening in December although the commentary was still positive. Much better than expected PMIs will likely trigger a hawkish reaction in the markets potentially boosting the US Dollar
