Markets Set for High-Stakes January Amid Fed and Trump Policy Changes

As global markets resume trading following the New Year holiday, activity remains quiet, with a noticeable lull expected until the full market operations begin next week. Today, attention will be directed toward the final Eurozone and UK PMI manufacturing data, along with US jobless claims. Looking ahead, tomorrow's US ISM Manufacturing Index may offer a preliminary indication of upcoming market volatility. The outlook for January—and likely much of 2025—will be influenced by a series of significant events and data releases in the forthcoming weeks.

This month is particularly important due to two crucial developments. Firstly, key US economic indicators, including non-farm payrolls and inflation figures, will be monitored closely as they may influence the Federal Reserve's decision on whether to pause its easing cycle later this month. After a hawkish rate cut in December, markets anticipate a markedly slower pace of reductions throughout 2025.

Compounding the market's uncertainty is Donald Trump's upcoming inauguration on January 20, during which his administration is expected to sign at least 25 executive orders aimed at various sectors including immigration, energy policy, and cryptocurrency regulation. Trump's previously indicated plans to impose tariffs on imports from countries such as China, Mexico, and Canada could spur inflationary pressures by increasing costs for businesses and consumers. Consequently, the market will remain vigilant for details of these policies and their potential effects on the global trade landscape.

In the cryptocurrency market, traders' reactions in the next few days may provide insights into the risk sentiment returning after the holiday season. Bitcoin's price correction from a high of 108368 appears to be stabilizing, having approached the 55-day Exponential Moving Average at approximately 92441. If a strong rebound occurs from these levels, followed by a breach of the 99866 resistance, it could suggest that Bitcoin is poised to resume its upward trend. Conversely, sustained trading below the EMA may lead to a deeper correction, potentially to the 38.2% retracement level of 49008 to 108368, around 85962, or even lower.

In Asia, Japan observed the New Year holiday, while the Hong Kong HSI index fell by 2.40%. Similarly, the Shanghai Composite Index in China dropped by 3.05%, whereas the Singapore Strait Times managed a slight increase of 0.14%.

Wishing everyone a prosperous and healthy 2025!

China's Manufacturing Sector Faces Headwinds

China's Caixin Manufacturing PMI fell to 50.5 in December, down from 51.5, and below market expectations of 51.6. This indicates a slowdown in growth within the manufacturing sector.

While supply and demand saw minor growth, external demand posed a significant challenge, according to Wang Zhe, Senior Economist at Caixin Insight Group. He noted several obstacles, such as sluggish external demand and a significant decline in the job market. Additionally, sales prices have remained weak, contributing to waning market optimism.

The survey indicated notable downward pressures stemming from subdued domestic demand and challenging international conditions, which have impacted profit margins and reduced confidence. The results also suggest that previous policy stimulus measures have not yet produced consistent improvements, signaling that more time is needed to evaluate their effectiveness.

Upcoming Economic Indicators

Looking forward, numerous economic indicators will be released, including Swiss PMI manufacturing, Eurozone PMI manufacturing final, M3 money supply, and UK PMI manufacturing final in the European session. Later in the day, the US will unveil jobless claims, PMI manufacturing final, and construction spending.

USD/CAD Market Outlook

Daily Pivots: (S1) 1.4354; (P) 1.4394; (R1) 1.4442.

Currently, the intraday bias for USD/CAD remains neutral as the market continues to consolidate below the 1.4466 mark. While a deeper pullback is a possibility, the outlook will remain bullish as long as the resistance at 1.4177 turns into support. A breakout above 1.4466, sustained trading above 1.4391, will open the door to retest the long-term resistance zone of 1.4667/89.

In the broader perspective, the upward trend observed since 1.2005 in 2021 is still in progress, having already met the 61.8% projection of moving from 1.2401 to 1.3976, with a point at 1.4391. Continued trading above this level will pave the way for movement towards the key resistance zone of 1.4667/89 (previous highs in 2020 and 2015). The medium-term outlook remains bullish as long as the resistance at 1.3976 is maintained, even if a significant pullback occurs.

Economic Data Overview

Time (GMT)	Currency	Event	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, inflation