Markets Brace for a Crucial January with Fed and Trump Policy Changes

As the global markets come back from the New Year holiday, trading activity is expected to remain quiet until next week when operations return to normal levels. Focus today is on the final manufacturing PMI data from the Eurozone and the UK, along with US jobless claims. Tomorrow, the US ISM Manufacturing Index is anticipated, which could indicate potential market volatility in the coming days.

This month is particularly noteworthy because it coincides with two significant events. The first is the release of key US non-farm payrolls and inflation data, which will likely influence the Federal Reserve's decision on pausing its policy easing cycle later this month. Following the hawkish rate cuts made by the Fed in December, there is an expectation for a much slower pace of reductions in 2025.

Another major factor affecting the market is Donald Trump's upcoming inauguration on January 20. The new administration is expected to introduce around 25 executive orders right away, aiming to impact immigration policies, energy regulations, and cryptocurrencies. Trump's former announcements about tariffs on imports from nations like China, Mexico, and Canada could put upward pressure on inflation by increasing costs for businesses and consumers. Market participants are closely watching these developments and their potential implications on global trade.

In the cryptocurrency space, market behaviors in the next few days will be a critical indicator of how sentiment is shifting after the holiday period. Bitcoin has seen a pullback from its recent peak but is now slowing down after hitting a major moving average. A rebound from current levels, followed by a break of crucial resistance, could signal a resumption of its upward trend. However, maintaining trade below this average might suggest a deeper correction.

In Asia, markets have shown mixed results with Japan on holiday; the Hong Kong HSI has dropped by 2.40%, while the Shanghai SSE in China is down 3.05%. Conversely, Singapore's Strait Times has risen by 0.14%.

As we look forward, several important economic indicators will be released, including Swiss PMI manufacturing data, Eurozone PMI manufacturing final figures, and UK PMI manufacturing. Later today, data on initial jobless claims in the US, along with construction spending, will also be available.

Chinese Manufacturing PMI Signals Slowdown

In December, China's Caixin Manufacturing PMI fell to 50.5, down from 51.5 and below expectations of 51.6, indicating that growth in the sector is moderating.

While there was some expansion in supply and demand, external pressures remain significant, according to Wang Zhe, Senior Economist at the Caixin Insight Group. Zhe pointed out that external demand is weak, there has been a significant contraction in the job market, and sales prices have not shown strength. This situation has created severe downward pressures due to weak domestic demand and challenging external conditions, leading to squeezed profit margins and reduced confidence.

The report also suggested that previous policy initiatives have not yet shown consistent positive results, indicating that more time may be needed to evaluate their effectiveness.

Looking Ahead

Economic reports set to be published include the Swiss PMI, Eurozone PMI final manufacturing data, M3 money supply, and the UK PMI final manufacturing figures. Following these, jobless claims from the US will provide an insight into the labor market.

USD/CAD Daily Outlook

Current market analysis shows the USD/CAD trading pattern remains neutral as it consolidates below the 1.4466 resistance level. A deeper pullback is possible, but the overall outlook appears bullish as long as support holds. A break and sustained trade above 1.4391 would indicate a path toward retesting the long-term resistance zone.

The larger trend shows an upward movement from a previous low, indicating sustained bullish conditions if certain support levels are maintained.

Economic Indicators Update

Time (GMT)	Currency	Events	Actual	Forecast	Previous	Revision
01:45	CNY	Caixin Manufacturing PMI Dec	50.5	51.6	51.5
08:30	CHF	Manufacturing PMI Dec		48.3	48.5
08:50	EUR	France Manufacturing PMI Dec F		41.9	41.9
08:55	EUR	Germany Manufacturing PMI Dec F		42.5	42.5
09:00	EUR	Eurozone Manufacturing PMI Dec F		45.2	45.2
09:00	EUR	Eurozone M3 Money Supply Y/Y Nov		3.50%	3.40%
09:30	GBP	Manufacturing PMI Dec F		47.3	47.3
13:30	USD	Initial Jobless Claims (Dec 27)		223K	219K
14:30	CAD	Manufacturing PMI Dec		51.9	52
14:45	USD	S&P Global Manufacturing PMI Dec F		48.3	48.3
15:00	USD	Construction Spending M/M Nov		0.30%	0.40%
16:00	USD	Crude Oil Inventories		-2.4M	-4.2M

Markets, January, Fed