December retail sales data released yesterday showed no change compared to November, while analysts had expected a 0.3% increase. Households significantly reduced spending on automobiles (–0.2%), home goods (–0.9%), and household appliances (–0.4%). A continuation of this negative trend, which is also anticipated in January, could lead to an overall slowdown in economic growth. Against this backdrop, the Federal Reserve Bank of Atlanta lowered its fourth-quarter US GDP growth estimate from 4.2% to 3.7%.
Cleveland Fed President Beth Hammack recently stated that borrowing costs may remain unchanged for an extended period, supported by the ongoing recovery in business activity. She emphasized the need for patience while assessing the impact of recent monetary adjustments and closely monitoring economic conditions. Although the overall outlook appears more positive, inflation remains too high and could stay near 3.0% throughout the year. Today at 15:30 (GMT+2), forex investors will focus on the January labor market report. The consensus forecast suggests nonfarm payrolls will rise from 50,000 to 70,000, while annual average hourly earnings growth is expected to slow from 3.8% to 3.6%, signaling easing price pressures and reducing the likelihood of faster monetary easing.
Eurozone
The euro is strengthening against the US dollar but weakening against the yen and the pound.
In the absence of major economic releases, price dynamics are driven by external factors. Chinese authorities signaled the possibility of launching an investigation into French wines or imposing reciprocal tariffs on eurozone goods if France moves forward with tariffs on Chinese imports. Paris has reportedly considered a 30.0% tax on Chinese products or a comparable devaluation of the euro against the yuan to curb cheap imports. Implementation of such measures by the European Commission could create significant trade imbalances and weaken the economic positions of both major economies.
United Kingdom
The pound is gaining against the euro and the US dollar but shows mixed performance against the yen.
The upward momentum remains restrained amid a political crisis within the ruling Labour Party. Two key advisers to Prime Minister Keir Starmer resigned within a week following the appointment of Peter Mandelson — whose reputation was tarnished by alleged ties to financier Jeffrey Epstein — as the UK ambassador to the United States. After support for Starmer from figures such as Deputy Prime Minister Angela Rayner and Manchester Mayor Andy Burnham, the situation has stabilized somewhat, potentially holding until May’s local elections. However, further leadership challenges may emerge afterward, increasing uncertainty and weighing on the pound. On Thursday at 09:00 (GMT+2), investors will monitor preliminary Q4 GDP data, with quarterly growth expected at 0.2% versus 0.1% previously, while annual growth may slow from 1.3% to 1.2%.
Japan
The yen is strengthening against the euro and the US dollar but shows mixed performance versus the pound.
On Thursday at 01:50 (GMT+2), Japan will release its January Corporate Goods Price Index. Monthly growth is projected to rise from 0.1% to 0.2%, while the annual rate may ease from 2.4% to 2.3%, still above the Bank of Japan’s 2.0% target. If forecasts materialize, the likelihood of a medium-term rate hike could increase.
Australia
The Australian dollar is advancing against the euro and the US dollar but shows mixed dynamics against the yen and the pound.
Investors are focusing on remarks by Reserve Bank of Australia Deputy Governor Andrew Hauser, who stated that most sectors of the economy continue to deliver positive results despite capacity constraints. He stressed that inflation remains too high and that policymakers are prepared to take necessary measures to contain it. Hauser also noted that strong credit growth suggests current interest rates are not yet restrictive. The probability of a rate hike in May is currently estimated at 70.0%.
Oil
Oil prices continue to rise amid developments related to the Middle East crisis.
US President Donald Trump announced readiness to deploy a second carrier strike group near Iranian territorial waters to increase pressure on Tehran regarding a renewed nuclear agreement. Earlier consultations reportedly signaled Washington’s seriousness and opened the door for continued diplomatic dialogue. However, price gains slowed after the American Petroleum Institute (API) reported a sharp weekly inventory increase of 13.4 million barrels. Today at 17:30 (GMT+2), the Energy Information Administration (EIA) will release official inventory data, with a projected decline of 0.2 million barrels, which could provide support for energy prices.
