EUROPEAN SESSION
In the European session, the main highlights will be the Flash PMIs for the major Eurozone economies and the UK. Given the market pricing, we will likely need surprisingly soft data for the Eurozone to trigger a decent market reaction as traders could start betting on rate cuts. Better than expected data is not going to change anything for the ECB at this point as it stays in hard neutral mode.
For the UK, we will likely need strong or very soft data given the dovish market pricing. In fact, the market is already pricing more than an 80% chance of a rate cut at the next meeting, so even if we get soft data, the only thing that could change is the total easing by year-end.
AMERICAN SESSION
In the American session, we will get lots of data with Canadian retail sales, US Q4 GDP, US PCE price index and US PMIs on the agenda. Out of all these releases, the US PMIs are the most important since they are the timeliest.
In fact, the US Q4 GDP is very old news as we are almost at the end of Q1 of 2026. Moreover, we got three rate cuts in the last four months of last year and the Q4 GDP won’t reflect that.
The US PCE price index is for December, again old information. The Fed already knew what the December PCE would highly likely looked like when they deliberated at the last policy decision. So, this data won’t change anything for them.
The US Flash PMIs will show if the pick up in US economic activity is gathering pace or losing steam. The expectations are for the Services PMI to improve to 53.0 vs 52.7 prior, while the Manufacturing PMI is seen matching the prior reading at 52.4. We will likely need better than expected data to see the US dollar extending gains after the recent appreciation. The decisions are usually announced around 10:00 ET/15:00 GMT
