Daily Broad Market Recap – January 29, 2025


Although investors were biting their nails ahead of the January FOMC decision, that didn’t stop asset classes and major currencies from chalking up notable moves ahead of the top-tier event.

Here’s how markets fared.

Headlines:

  • Australia Q4 2024 CPI: 0.2% q/q (0.3% forecast, 0.2% previous); Headline CPI at 2.5% y/y (2.5% expected, 2.3% previous); Trimmed mean CPI at 0.5% q/q (0.6% forecast, 0.8% previous)
  • Japanese consumer confidence index in January: 35.2 (36.6 forecast, 36.2 previous)
  • In his Senate confirmation hearing, Trump’s Commerce Secretary pick Howard Lutnick said that higher tariffs on Canada and Mexico are not a done deal
  • American Petroleum Institute (API) estimated that crude oil inventories in the United rose by 2.86 million barrels for the week ending January 17
  • German GfK consumer confidence index in January: -22.4 (-20.5 forecast, -21.4 previous)
  • Spanish flash GDP in Q4 2024: 0.8% q/q (0.6% expected, 0.8% previous)
  • U.S. goods trade balance in December: -122.1B USD (-105.6B USD expected, -103.5B USD previous)
  • EIA crude oil inventories rose by 3.5M barrels (2.2M forecast, -1.0M previous)
  • Bank of England Governor Bailey reiterated importance of raising the growth rate of the economy
  • Bank of Canada cut interest rates by 0.25% as expected from 3.25% to 3.00%; no forecast on future rate moves but lowered GDP forecast to 1.8%; sees tariffs as potential fuel for persistent inflation
  • Fed kept interest rates on hold from 4.25% to 4.50% as expected, adjusted official statement to reflect more upbeat view on inflation and employment
  • Fed Chairperson Powell dampened hopes of a March cut during the presser, reiterating that they are not in a hurry to ease
  • New Zealand trade balance in Dec: 219M NZD (-1363M NZD forecast, -435M NZD previous); exports rose 995M NZD while imports climbed 404M NZD

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

The usual risk correlations were out of sync early on, as traders reacted to individual asset catalysts while waiting for the crucial FOMC announcement later in the day.

Crude oil faced significant downside pressure throughout the day, losing ground after Trump’s Commerce Secretary pick Howard Lutnick said that higher tariffs on Mexico and Canada can be avoided if they take action on illegal migration and fentanyl flows, barely finding support from a lower than expected build in API inventories.

Later in the day, the Department of Energy’s official crude oil inventory report showed a larger than expected increase of 3.5 million barrels versus the earlier reduction of 1 million barrels, sending prices further south ahead of the Fed decision.

Treasury yields, on the other hand, had been cruising higher leading up to the FOMC announcement, which then prompted the latter to reverse some gains before the end of the session. Still, the shorter end of the yield curve edged higher on dampened expectations of a March cut, with the 2-year yield up 1.5 basis points to 4.219%.

U.S. equity indices, which had already been cruising lower before the big event, pulled slightly higher before the close. However, this was not enough to pull the S&P back in the black as it closed 0.47% lower for the day while the Dow was 0.31% in the red.

Gold prices showed resilience despite the stronger dollar, while BTC/USD continued its impressive rally, pushing above $103,000 as crypto markets appeared to brush off the Fed’s relatively hawkish stance.

FX Market Behavior: U.S. Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

Overlay of USD vs. Major Currencies Chart by TradingView

The dollar demonstrated significant volatility throughout the session, influenced by both domestic and international factors. Early trading saw the greenback gaining ground against the Australian dollar after the Land Down Under reported a weaker than expected CPI that upped the odds of an RBA cut soon.

Major pairs showed increased activity during the London session, with the dollar broadly strengthening as traders positioned for a potentially hawkish Fed stance. However, the momentum shifted as U.S. markets opened, with the dollar trimming gains as the FOMC meeting approached.

Prior to the Fed event, the Bank of Canada lowered borrowing costs by 0.25%, leading to a bit of Loonie weakness on account of tariffs concerns potentially weighing on growth prospects and keeping the central bank on its easing cycle.

The Federal Reserve’s decision to maintain rates initially triggered a dollar rally, as traders likely zoned in on a couple of hawkish changes in the statement, but these gains were largely reversed during Powell’s subsequent press conference.

By session’s end, the dollar closed marginally higher against majority of its peers, with some weakness against the British pound (-0.08%) and the Japanese yen (-0.19%), logging in the strongest gains versus the Australian dollar (0.29%).

Upcoming Potential Catalysts on the Economic Calendar:

  • French flash GDP at 6:30 am GMT
  • Swiss trade balance at 7:00 am GMT
  • German import prices at 7:00 am GMT
  • Swiss KOF economic barometer at 8:00 am GMT
  • Spanish flash CPI at 8:00 am GMT
  • German preliminary GDP at 9:00 am GMT
  • Eurozone preliminary GDP at 10:00 am GMT
  • European Central Bank monetary policy decision at 1:15 pm GMT
  • U.S. advance GDP at 1:30 pm GMT
  • ECB press conference at 1:45 pm GMT
  • Tokyo core CPI at 11:30 pm GMT
  • Japanese preliminary industrial production at 11:50 pm GMT
  • Japanese retail sales at 11:50 pm GMT

The spotlight shifts to the euro area today, as the region is due to release a handful of preliminary growth and inflation figures just a few hours ahead of the highly-anticipated ECB monetary policy statement.

After that, we’ve got the U.S. advance GDP reading for Q4 2024, which could underscore the Fed’s relatively hawkish statement and likely cause additional volatility in the markets.

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