Errante’s The Week Ahead: 27th – 31st January 2025
Errante’s The Week Ahead: 27th – 31st January 2025
Errante’s The Week Ahead: 27th – 31st January 2025
Highlights of the Week:
Central Bank Decisions Drive Sentiment: Markets await key announcements from the Federal Reserve, European Central Bank (ECB), and Bank of Canada (BOC) as 2025 monetary policy stances evolve.
Gold Approaches All-Time Highs: Gold continues its upward momentum, nearing record highs amid softening USD and heightened geopolitical uncertainty.
US GDP and Inflation Data in Focus: Advance GDP and Core PCE data from the US will provide critical insights into economic resilience and inflationary trends.
What Now?
Global markets are navigating a volatile landscape shaped by central bank policy shifts, geopolitical developments, and renewed optimism about US-China trade relations. The dollar weakened to a one-month low following President Donald Trump’s softer stance on tariffs against China. This dovish tone has lifted risk assets, with the S&P 500 reaching new highs and Asian and European equities rallying.
The dollar index fell 0.4% on Friday, marking its largest weekly decline in 14 months. This weakness has provided breathing room for other currencies, notably the euro and gold. Gold surged to near-record highs, trading around $2,781 per ounce, as investors seek safe-haven assets amid uncertainty over inflation and growth trajectories.
Federal Reserve Outlook:
The Federal Reserve’s policy decision on Wednesday is expected to maintain the federal funds rate at 4.50%. However, with recent labor market strength and cooling inflation data, markets anticipate the Fed to retain a flexible stance. Swaps traders are now pricing in 40 basis points worth of rate cuts by the end of 2025, signaling reduced urgency for additional tightening.
Bank of Canada Perspective:
The BOC’s decision on Wednesday will spotlight its response to cooling inflation and rising wage pressures. Markets expect the overnight rate cut to 3.00%, with Governor Tiff Macklem likely reiterating data-dependence and caution over wage inflation spillovers. The Canadian dollar remains sensitive to these developments, particularly against a backdrop of pressures on crude prices.
European Central Bank Focus:
The ECB’s main refinancing rate decision on Thursday comes amid concerns about slowing economic activity in the Eurozone. Analysts expect a rate cut to 2.90%, with President Christine Lagarde providing clarity on future tightening given persistent inflation above target. The euro’s recovery hinges on Lagarde’s outlook and any signals of continued monetary policy divergence from the US.
In broader markets, optimism surrounding Trump’s tempered rhetoric on tariffs has boosted sentiment. While the president has refrained from imposing tariffs on Europe, his warnings to Canada and Mexico could spur volatility in trade-sensitive currencies. Investors will closely monitor geopolitical developments for potential policy shifts that could disrupt markets.
Upcoming Data and Events:
Monday, January 27, 2025:
3:30 AM – CNY – Manufacturing PMI: Forecast at 50.1, signaling neutral growth in China’s manufacturing sector.
Tuesday, January 28, 2025:
5:00 PM – USD – CB Consumer Confidence: Expected at 105.7, reflecting US consumer sentiment trends.
Wednesday, January 29, 2025:
2:30 AM – AUD – CPI (q/q): Forecast at 0.4%, indicating steady inflationary pressures.
2:30 AM – AUD – CPI (y/y): Anticipated at 2.5%, in line with the RBA’s target.
4:45 PM – CAD – BOC Rate Statement: Expected to cut rates by 25 bps to 3.00%, with insights into economic projections that can weaken the CAD further.
9:00 PM – USD – Federal Funds Rate: Likely unchanged at 4.50%, accompanied by the FOMC statement and press conference.
Thursday, January 30, 2025:
3:15 PM – EUR – Main Refinancing Rate: Expected at 2.90%, providing clarity on ECB policy direction.
3:30 PM – USD – Advance GDP (q/q): Forecast at 2.6%, reflecting US economic growth.
3:30 PM – USD – Unemployment Claims: Predicted at 225K, higher than the previous data, indicating labor market strength.
Friday, January 31, 2025:
All day – EUR- German Prelim CPI (m/m): Expected at 0.0%, gauging inflation in the EU’s largest economy.
3:30 PM – CAD – GDP (m/m): Expected at 0.2%, gauging Canadian economic momentum.
3:30 PM – USD – Core PCE Price Index (m/m): Forecast at 0.2%, a critical measure of US inflation.
Market Insights: Key Charts to Watch
Gold (XAU/USD) – Weekly Chart
Gold continues its two-year uptrend, approaching its all-time high within a rising regression channel. The metal is trading higher, with bullish momentum fueled by a softer dollar and global economic uncertainties.
Main Scenario:
A breakout above $2790.12 can make a new record high for gold with immediate resistance stays at $2,859 (127.20% Fibonacci level). Breaking this level could open the door to $2,946 and $3,043 (161.80% and 200% Fibonacci levels).
Alternative Scenario: A reversal below $2,693 (61.80% Fibonacci level) could signal a pullback toward $2,536.
Key Levels:
Support: $2,693, $2,536
Resistance: $2790.12, $2,859, $2946.70, $3,043
EUR/USD – Daily Chart
The euro has broken a five-month downtrend, buoyed by dollar weakness. The pair is trading above the last top at $1.04365, with bullish momentum eyeing higher targets near the 100-week moving average.
Main Scenario:
Continued momentum above $1.05070 (127.20% Fibonacci level) could target $1.05966 (161.80% Fibonacci level) and $1.06956 (200.0% Fibonacci level).
Alternative Scenario:
A reversal below $1.03370 (61.80% Fibonacci level) may signal renewed bearish pressure towards the last bottom at around $1.01774.
Key Levels:
Support: $1.03375, $1.01774
Resistance: $1.05070, $1.05966, $1.06956
Errante’s Weekly Newsletter brings you critical market insights to keep you ahead in the financial world. Stay informed and make strategic decisions with Errante.
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