Macroeconomics: The Day Ahead for 24 January

  • BoJ rate hike, Japan CPI, Trump China tariff comments, weak UK GfK Consumer Confidence to digest, flash PMIs in focus, Brazil inflation and US Existing Home Sales; smattering of ECB speakers
  • PMIs: very mixed Asia PMIs, weak but improving Eurozone PMIs, UK and US seen little changed
  • Japan: BoJ hikes as expected, signals further gradual hikes, wage settlements key, JPY no longer front and centre for policy 

EVENTS PREVIEW

The BoJ policy meeting and run of G7 & India ‘flash’ PMIs are likely to be the focal points for today’scheduled data and events. There are also Singapore’s MAS not wholly unexpected decision to ease policy very modestly, weak UK GfK Consumer Confidence, Japan National CPI and Taiwan Q4 GDP to digest, while ahead lie Brazil’s IPCA-15 inflation, US Existing Home Sales and some ECB speakers, while American Express, NextEra Energy and Verizon Communications feature in terms of corporate earnings. Eminently the flow of updates from the White House will continue to keep markets on their toes, with the comments on China tariffs giving Asian shares a boost overnight, though tariffs clearly remain on the table, but not immediately. Thus far, there has been little to cheer in economic terms (as was largely expected from Trump, though the execution of immigration measures will determine the extent of the disruption to the US labour market and productivity growth, while details on tariff measures are still needed to determine the extent of their likely impact, but they are effectively ticking time bombs. Moves to propose that increased tariffs could help fund an extension of his first term tax cuts are likely to be roundly rejectt by fiscally conservative Republicans in Congress. The withdrawal from the Global Corporate tax accord, which has never been ratified by Congress, risks sparking a wave of ‘retaliatory’ ‘digital services tax measures elsehwere. The reversal of climate related energy measures and the deregulation of oil and gas sector may have the unintended consequences of making the renewables and EV vehicle sectors more competitive as they are forcefully weaned off subsidies, while extant level of excess supply in the oil and gas sector will likely drive prices lower (once concerns about trade sanctions on Russia have eased), and likely discourage energy majors from investing in new E&P projects due to profitability concerns. The most positive announcement was perhaps the ostensible pressure placed on Russia to come to the negotiating table on the war with Ukraine. Be that as it may, the proof of the pudding is in the eating as they say, per se behoving everyone to be patient and await actual data on the impact of all these measures, before drawing too many conclusions, though markets will inevitably ignore that advice, and remain very choppy and highly sensitive to headlines and the inevitable rumours and hearsay.

 

Next week brings the Chinese/Lunar New Year holidays with much of East Asia closed as from Tuesday. It also has Fed, ECB, Riskbank, Bank of Canada, SARB and Brazil COPOM policy meetings, and a busy run of statistics that includes advance Q4 GDP from the US and major Eurozone economies; US Personal Income & PCE, Consumer Confidence and Durable Goods Orders; and CPI in Australia, Japan (Tokyo), France, Germany and Spain. The pace of Q4 corporate earnings reports picks up, with around 100 S&P 500 companies reporting, and it is also month end.

 

** Japan – BoJ rate decision **

– The BoJ raised rates as expected, and signalled that further hikes are still on the table, though noting that as rates get closer to neutral (unhelpfully the BoJ sees the long-term neutral rate in a range of 1.0-2.5%!), it will become more cautious. Markets have one further hike priced in for 2025, full priced by September, and as Ueda underscored once again much will depend on this year’s wages negotiations, with the largest union Rengo announcing today that it will push for a settlement above last year, and suggesting something around 6.0%. The upward revision to its core CPI forecasts (with GDP forecasts unchanged) were more a justification for today’s rate hike, rather than emphatically pointing to the need for further hikes. Ueda noted:  In terms of the distance to the neutral rate, it’s true it has shortened after raising rates to 0.5%. But there’s still quite some distance.” Perhaps most notable by its absence was any discussion about the JPY, which for much of last year was very much front and centre to the BoJ’s policy deliberations, this probably reflects a tolerance for the USD/JPY trading range since July, and the fact that there has been little impact in Import Price terms. For the time being, Japan is likely to fade somewhat into the background in terms of global economic considerations for markets.

 

** G7/India – Jan ‘flash’ PMIs **

– Japan and India’s PMIs were a very mixed bag, with Japan Manufacturing drifting lower while Services staged a sharp jump, interestingly in contrast to a fall in Economy Watchers Survey, though this follows a period of strength that the Services PMI had not reflected. By contrast India’s Manufacturing posted a solid gain, while Services slid sharply to the lowest level since November 2022, the latter perhaps reflecting the impact of tight monetary policy, and bolstering the case for an initial RBI rate cut at its Febuary 7 policy meeting. Survey data this week in the Eurozone and UK has not been encouraging, perhaps most notably the collapse in the UK CBI Industrial Trends quarterly Business Optimism (-47 vs. prior -24), and the overnight drop in GfK Consumer Confidence. PMIs are anticipated to show a marginal improvement in Manufacturing in the Eurozone (45.5), but no change in the UK (47.0), while Services readings are seen barely changed (Eurozone 51.5, U.K. 50.8) – per se fitting with the current outlook for at best tepid growth in the Eurozone and UK. US PMIs are expected to show a marginal 0.4 pt improvement in Manufacturing to 49.9, and a 0.3 pt dip to a robust 56.5 in Services.

To view the full report and to sign up for daily market commentary please email admisi@admisi.com

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2025 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

Latest News & Market Commentary

Explore the latest edition of The Ghost in the Machine

Explore Now