The major assets traded mixed as traders priced in the ECB’s rate cut, Uncle Sam’s disappointing GDP, and threats of the U.S. imposing tariffs on Canadian and Mexican products.
How did your favorite assets trade in the last trading sessions?
We’re discussing the details below:
Headlines:
- ANZ: New Zealand business confidence fell from 62.3 to 54.4 in January; Pricing and cost indicators lifted
- Australia import prices for Q4 2024: 0.2% q/q (1.5% forecast, -1.4% previous)
- France flash GDP for Q4 2024: -0.1% q/q (0.0% forecast, 0.4% previous)
- Switzerland trade surplus shrank from 6.11B CHF to 3.49B CHF (4.50B CHF forecast) as exports (+5.1%) outpaced imports (1.6%) in December
- Germany preliminary GDP for Q4 2024: -0.2% q/q (-0.1% forecast, 0.1% previous)
- U.K. net individual lending for December: £4.6B (£3.6B forecast, £3.5B previous)
- Euro Area flash GDP for Q4 2024: 0.0% q/q (0.1% forecast, 0.4% previous)
- ECB cut its three key interest rates by 25 bps and signaled more easing in the coming months
- U.S. Advance GDP for Q4 2024: 2.3% q/q (2.7% forecast, 3.1% previous); Price Index for Q4 2024: 2.2% q/q (2.5% forecast, 1.9% previous)
- U.S. initial jobless claims for the week ending January 25: 207K (224K forecast, 223K previous)
- U.S. pending home sales for December: -5.5% m/m (0.0% forecast, 1.6% previous)
- Japan (Tokyo) core CPI for January: 2.5% y/y (2.5% forecast, 2.4% previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The major assets were all over the place after the ECB’s rate cut and Trump’s tariff threat on Canadian and Mexican imports. The ECB cut rates by 25 basis points to 2.75%—its fifth straight reduction—with Lagarde hinting at another cut in March as eurozone growth remains sluggish.
Gold stole the show, edging closer to $2,800 as investors rushed to safe-haven assets amid trade tensions and a weaker dollar. Meanwhile, the S&P 500 held its own, closing in the green despite mixed tech earnings—IBM gained, but Microsoft took a hit on disappointing guidance.
Treasury yields slipped to one-month lows, with the 10-year settling at 4.51% after weaker-than-expected Q4 GDP data. Bitcoin held firm above $104,000, staying relatively steady amid the broader market volatility and Lagarde’s confidence that the OG crypto won’t make it to their reserves.
Oil had a rollercoaster session, with WTI settling at $73.20 after swinging between $72.00 and $73.80. Prices were caught between bearish inventory data and concerns over potential supply disruptions from shifting global trade policies.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar stayed afloat despite increased volatility from Thursday’s events. USD/JPY dropped in Asia, likely as the Japanese markets—one of the few open while other Asian financial centers were closed for holidays—digested the Fed’s steady rate decision and dovish signals from Wednesday.
In Europe, the dollar traded in ranges despite Germany’s weak preliminary GDP and the ECB’s rate cut. It held steady through Lagarde’s press conference as she struck a measured tone on future rate moves, emphasizing data dependency.
The U.S. session brought more volatility after Q4 GDP came in weaker than expected, while jobless claims showed strength. USD pairs saw sharp swings after Trump announced tariffs on Canadian and Mexican imports, but the currency ultimately found stability by late trading. The yen was the day’s top performer, while the euro edged lower, suggesting the ECB’s rate cut was already fully priced in.
Upcoming Potential Catalysts on the Economic Calendar:
- Japan housing starts at 5:00 am GMT
- Germany retail sales at 7:00 am GMT
- U.K. Nationwide house price index at 7:00 am GMT
- Germany preliminary CPI out during the European session
- Switzerland retail sales at 7:30 am GMT
- France preliminary CPI at 7:45 am GMT
- Germany unemployment change at 8:55 am GMT
- Canada GDP at 1:30 pm GMT
- U.S. core PCE price index at 1:30 pm GMT
- U.S. employment cost index at 1:30 pm GMT
- U.S. FOMC member Bowman to give a speech at 1:30 pm GMT
- U.S. personal income and spending at 1:30 pm GMT
- U.S. Chicago PMI at 2:45 pm GMT
European traders will likely focus on German data releases, particularly the preliminary CPI which could validate the ECB’s dovish shift.
Meanwhile, the U.S. session may center on the core PCE price index released alongside Canadian GDP and Fed speaker Bowman – all coming amid heightened sensitivity to trade tensions and recent central bank decisions.
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