Monday - 20th January:
Trump Inauguration: All eyes turn to President Trump’s inauguration, overshadowing the US market holiday, and while initial expectations were for a gradual approach to tariffs, sentiment shifted over the weekend, with increasing talk of immediate tariffs on China and Mexico.
Potential Tariff Effects: Any sudden announcement could disrupt global trade and risk sentiment. The US dollar, which remains near high levels, may need easing of tariff concerns to continue its recent path downward.
Tuesday - 21st January:
Philadelphia Fed Services:Following the eye-catching surge in the Philadelphia Fed’s manufacturing index last week, the upcoming services survey will show whether the non-manufacturing sectors are experiencing similar momentum.
Implications: A strong services print could reinforce the narrative of a US reflationary environment, supporting equity markets and potentially nudging yields higher if inflation expectations follow.
Tuesday - 21st January:
UK Employment Data: The UK will release wage and employment figures, with a consensus of 5.7% YoY wage growth. Recent guidance from the Bank of England notes the volatility of wage data, but the outcome could stir markets.
Gilt Reactions: Should wage inflation surprise to the upside, gilt yields could rebound from their recent lows, and markets will also eye PMIs later in the week to gauge the broader economic trajectory.
Friday - 24th January:
Bank of Japan Meeting: Speculation continues that the BoJ could hike rates in 10bps increments, echoing a pattern observed in previous shifts, and the removal of Yield Curve Control has already been partially priced in.
FX Considerations: While a hike might be incremental, its symbolic importance is high, yet if global risk appetite remains strong and US yields stay subdued, USD/JPY may not see significant downside pressure.
Friday - 24th January:
Flash PMIs for January: A series of key flash PMI releases from the US, Eurozone, UK, Australia, Japan, and India will offer an early look at economic conditions heading into 2025.
US: Still expected to outperform, with growth momentum intact.
Eurozone and UK: Watching for any continued softness amid ongoing concerns about cost pressures and tepid domestic demand.
Japan: Elevated price pressures could reinforce the BoJ’s hawkish tilt.
Commentary and Outlook
Tariff Uncertainty: The market is optimistic that the new US administration may balance protectionist moves with pro-growth policies (such as deregulation). Overly aggressive tariffs, however, could trigger a wave of risk-off sentiment.
Global Business Cycles: Despite pockets of weakness in Europe and the UK, global indicators have generally turned more positive compared to late 2024. If macro data stays supportive, equities could continue to rally, particularly in cyclical sectors.
Rate Divergence: The BoJ’s potential hike underscores a shift in global monetary policies. Investors will watch if the Federal Reserve’s stance evolves once more data clarifies inflationary pressures in the US.
Overall, the coming week’s events have the potential to create significant market moves, particularly if the Trump administration’s early executive orders surprise or if PMI data undercuts the narrative of a global cyclical upswing. Investors should remain agile, as politics and economic indicators combine to set the tone for early 2025.