Markets absorbed unexpectedly weak December retail sales data on Tuesday alongside softer labor cost pressures, with equities declining modestly and Treasury yields falling as traders weighed consumer spending concerns against potential Federal Reserve policy flexibility.
Check out the forex news and economic updates you may have missed in the latest trading session!
Forex News Headlines & Data:
- Australia Westpac Consumer Confidence Change for February 2026: -2.6% (-2.0% forecast; -1.7% previous)
- U.K. BRC Retail Sales Monitor for January 2026: 2.3% y/y (1.3% y/y forecast; 1.0% y/y previous)
- Australia NAB Business Confidence for January 2026: 3.0 (3.0 forecast; 3.0 previous)
- Australia Building Permits Final for December 2025: -14.9% m/m (-14.9% m/m forecast; 15.2% m/m previous); 0.4% y/y (0.4% y/y forecast; 20.2% y/y previous)
- France Unemployment Rate for December 31, 2025: 7.9% (7.7% forecast; 7.7% previous)
- U.S. NFIB Business Optimism Index for January 2026: 99.3 (99.8 forecast; 99.5 previous)
- U.S. ADP Employment Change Weekly for January 24, 2026: 6.5k (7.75k previous)
- U.S. Employment Cost Index for December 31, 2025: 0.7% q/q (0.8% q/q forecast; 0.8% q/q previous)
- U.S. Export Prices for December 2025: 0.3% m/m (0.1% m/m forecast); 3.1% y/y (2.8% y/y forecast; 3.3% y/y previous)
- U.S. Import Prices for December 2025: 0.1% m/m (0.3% m/m forecast); 0.0% y/y (0.2% y/y forecast; 0.1% y/y previous)
- U.S. Retail Sales for December 2025: -0.1% m/m (0.3% m/m forecast; 0.4% m/m previous); 2.4% y/y (2.9% y/y forecast; 3.3% y/y previous)
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Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay – Chart Faster With TradingView
Tuesday’s session reflected cautious trading as markets absorbed unexpectedly weak December retail sales data alongside softer labor cost pressures, creating a mixed narrative about the economic outlook and Federal Reserve policy trajectory.
The S&P 500 declined 0.26% to close around 6,943, extending recent losses as equity investors weighed consumer spending concerns against potential Fed accommodation. The index traded within a relatively tight range through the Asian and London sessions before bouncing then drifting lower during US trading hours. The weakness appeared to come a few hours after U.S. retail sales data released at 8:30 am ET, which showed a -0.1% monthly decline versus expectations for a 0.3% gain, with the disappointing control-group figure falling 0.1% and suggesting fourth-quarter GDP growth may be revised lower. The selloff remained orderly, with no signs of panic as traders continued to assess the balance between economic softness and monetary policy support.
Gold declined 0.58% to settle around $5,029 per ounce, pulling back from Monday’s rebound despite the softer economic data that would typically support safe-haven assets. The precious metal traded dipped early in the Asian session before bouncing steadily during morning London hours, then dipping again during the U.S. session. With no direct gold-specific catalysts to point to, the decline likely reflected profit-taking after the metal’s positive performance on Monday, possibly as traders reduced positions ahead of clearer economic signals expected later in the week.
Bitcoin fell 1.71% to trade around $68,903, underperforming traditional assets as risk appetite remained subdued. The cryptocurrency declined steadily throughout the session with no apparent direct catalysts, possibly reflecting broader caution in speculative assets amid concerns about consumer spending weakness and its implications for economic growth.
WTI crude oil finished essentially unchanged at -0.02% to close around $64.10 per barrel, showing remarkable stability despite volatile trading in other asset classes. Oil prices oscillated in a narrow range throughout the session, possibly reflecting balanced concerns about demand implications from softer retail data against supply considerations and geopolitical factors.
The US 10-year Treasury yield declined 1.50% to settle around 4.16%, with the bond market move appearing to correlate with the weaker-than-expected retail sales data. Yields had been trading in a tight range through the Asian and early London sessions before falling following the 8:30 am ET data release. The decline likely reflected increased expectations that softer consumer spending, combined with the easing employment cost pressures, could provide the Federal Reserve additional room to cut interest rates if economic momentum continues to slow. The move came despite some analysts noting that the retail figures aren’t adjusted for inflation and may have been impacted by steep holiday discounts.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Majors – Chart Faster With TradingView
The U.S. dollar traded choppy and mixed throughout Tuesday, ultimately closing with a slightly bullish tilt against most major currencies despite weaker-than-expected domestic economic data.
During the Asian session, the dollar traded mostly sideways but arguably net bullish against the major currencies. With no significant US economic releases to drive directional momentum, the dollar’s choppy and mixed behavior likely reflected traders in wait-and-see attitude ahead of the US retail sales data scheduled for release during the New York session.
The morning London session brought mostly sideways trade with an arguably net bearish shift. Again, no significant data or news were released, leaving the dollar’s modest weakness potentially attributable to pre-data positioning ahead of the upcoming US economic releases.
The US session delivered the day’s most significant price action. After markets opened, the dollar fell against the major currencies following the 8:30 am ET release of December retail sales data, which showed an unexpected -0.1% monthly decline versus the 0.3% expected gain. The disappointing control-group figure fell 0.1% after a downwardly revised gain in the prior month, missing expectations for 0.4% growth.
However, the dollar’s weakness proved short-lived. The currency quickly stabilized around the US equities open (9:30 am ET) and then rebounded slowly through the rest of the session. This recovery likely reflected traders weighing the retail sales disappointment against the softer Employment Cost Index data, which showed wages and benefits increasing just 0.7% in the fourth quarter, the smallest advance since 2021. The combination may have suggested to some market participants that while consumer spending is softening, easing labor cost pressures could allow the Fed more flexibility in its policy approach.
At the Tuesday close, the U.S. dollar was mostly mixed against the major currencies but arguably net positive overall. The dollar only saw a strong decline against the Japanese yen and traded slightly flat to negative against the Canadian dollar. A mostly quiet day overall, understandably so as we all await the highly anticipated U.S. Jobs update on Wednesday and U.S. CPI update on Friday.
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Upcoming Potential Catalysts on the Economic Calendar
- Australia Home Loans for December 31, 2025 at 12:30 am GMT
- China Inflation Rate for January 2026 at 1:30 am GMT
- U.S. MBA 30-Year Mortgage Rate & Applications for February 6, 2026 at 12:00 pm GMT
- Canada Building Permits for December 2025 at 1:30 pm GMT
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U.S. Nonfarm Payrolls for January 2026 at 1:30 pm GMT
- U.S. Unemployment Rate for January 2026 at 1:30 pm GMT
- U.S. Average Hourly Earnings for January 2026 at 1:30 pm GMT
- U.S. Fed Bowman Speech at 3:15 pm GMT
- U.S. EIA Crude Oil Stocks Change for February 6, 2026 at 3:30 pm GMT
- Euro area ECB Schnabel Speech at 5:00 pm GMT
- Canada BoC Summary of Deliberations at 6:30 pm GMT
- U.S. Monthly Budget Statement for January 2026 at 7:00 pm GMT
Wednesday’s calendar is dominated by the highly-anticipated January US employment report at 1:30 pm GMT, which represents the single most important data release for markets this week. The nonfarm payrolls figure, unemployment rate, and average hourly earnings will provide crucial evidence of labor market momentum following Tuesday’s softer Employment Cost Index reading that showed wage growth at its slowest pace since 2021. Markets will scrutinize whether the jobs data confirms the easing in labor cost pressures or suggests continued tightness that could keep the Federal Reserve cautious on rate cuts.
China’s January inflation data during Asian hours could provide early insight into global price pressures and demand conditions in the world’s second-largest economy. Federal Reserve Board Governor Michelle Bowman’s speech at 3:15 pm GMT, following the employment data release, will be closely monitored for any commentary on the Fed’s policy outlook given Tuesday’s mixed economic signals showing softer consumer spending but easing wage pressures. ECB Executive Board member Isabel Schnabel’s evening appearance could offer additional perspective on European monetary policy.
Markets remain sensitive to any signals about the balance between growth concerns and inflation dynamics, with Wednesday’s employment report likely to drive significant volatility across asset classes and shape expectations for Federal Reserve policy decisions in the months ahead.
Stay frosty out there, forex friends!
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