Australia January PMI: Signs of Economic Recovery Emerge as Private Sector Activity Gains Momentum

Data Interpretation

Summary:

Australia’s January PMI data indicate a slight economic recovery, with improvements in both the services and manufacturing sectors. However, inflationary pressures and supply chain issues persist. Strong employment figures and increased consumer spending suggest potential rate cuts by the Reserve Bank of Australia as inflation eases.

January 24 S&P PMI Data Highlights:

Manufacturing PMI (preliminary): 49.8, a 12-month high (previous: 47.8).

Services PMI (preliminary): 50.4, a 6-month low (previous: 50.8).

Composite PMI (preliminary): 50.3, a 5-month high (previous: 50.2).

The latest PMI report shows the Composite Output Index at 50.3, marking a fourth consecutive month of marginal growth in private sector output. Signs of gradual economic recovery align with a robust labor market, where unemployment remains at a low 4.0% with strong employment growth. End-of-year promotions and tax cuts have also boosted consumer spending.

Services Sector:

The Services PMI fell to 50.4 in January from 50.8 in December, reaching a 6-month low but remaining in expansion territory. Growth was supported by increased overseas sales and rising demand. However, employment declined for a second consecutive month, easing capacity pressures. Rising material, transportation, and wage costs drove input prices to their highest levels since September 2024, pushing output price inflation to a 6-month high. Despite uncertainty around interest rates and inflation, optimism in the services sector remains intact.

Manufacturing Sector:

The Manufacturing PMI rose to 49.8 in January from 47.8 in December, its highest level in over a year, approaching expansion territory. After 13 months of contraction, manufacturing activity is stabilizing. Renewed business confidence has led some firms to resume hiring and return to profitability, with production recovering gradually. However, export orders continued to decline, and new business volumes fell slightly. The sector still faces challenges with layoffs and inventory reductions, though downward pressure has eased overall. Rising input costs pushed sales prices higher, while persistent supply chain issues weighed on operations.

Inflationary and Operational Challenges:

Economic activity in January showed recovery signals, but inflationary pressures intensified. Average input costs rose at a faster pace, pushing output prices to a 6-month high. Supply chain bottlenecks, higher transportation costs, and increased raw material prices further squeezed profit margins. Employment in both manufacturing and services sectors declined, reflecting cautious hiring amid fluctuating demand.

Outlook:

While performance in the services and manufacturing sectors has improved, overall business confidence in the private sector has dipped compared to December. High interest rates and persistent inflation remain key concerns, along with weak overseas demand and ongoing supply chain disruptions. Nevertheless, with inflation easing and potential rate cuts on the horizon, economic recovery is expected to gain further momentum.

Australia January PMI

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Owen Li

Economic

In focus today

He is expected to issue several executive orders building on his current momentum, leading to US news continuing to dominate the headlines as markets and world leaders alike are left navigating the implications.

In the euro area, we receive consumer confidence data for January, which will be very interesting. Following a continuous upward trend over the past two years, consumer confidence declined in both November and December. Since private consumption is anticipated to be the primary growth driver this year, consumer sentiment will be crucial for the economic outlook.

Norges Bank (NB) is highly expected to stay on hold at 4.5% today and signal that the first rate cut will most likely be delivered in March. December’s core inflation likely relieves NB after November’s spike, indicating continued disinflation. However, global rates, NOK, and oil prices suggest upside risk to December’s rate path. NB is expected to remain vague on the outlook beyond March.

Overnight in Japan, we will receive both CPI and PMI data for December ahead of the Bank of Japan meeting early morning. Tokyo inflation data indicates price pressures have eased a bit in December. The economic recovery has been on track for a while and inflation close to target. We expect the BoJ will hike its policy rate by 25bp, which is also largely priced in by investors now.

Economic and market news

What happened yesterday

In the US, President Trump told Russian President Putin to reach a deal in Ukraine or be faced by increased sanctions from the US. This marks the first comment by the president on the war in Ukraine. Overnight Trump halted more than USD 300bn in US green infrastructure funding, while paving the way for a USD 500bn private-sector investment in AI infrastructure. He also disclosed that his administration was currently discussing a 10% tariff on China, as well as saying the EU will get tariffs due to a “troubling” trade surplus with the US.

Equities: Global equities rose yesterday, marking the seventh consecutive day of gains, with the MSCI World Index reaching a new all-time high. This is noteworthy given the widespread caution and predictions of volatility surrounding the inauguration of the US president, which have not materialised. Instead, there has been a steady increase, and those who reduced risk beforehand would have missed out on a 4% equity return, equivalent to half a year’s average return in just seven days. This could serve as a reminder of not being too cautious about underweighting risk during periods when macroeconomic, microeconomic, and monetary policies are highly supportive, even when political issues dominate 90% of the media coverage.

In the US yesterday, the Dow was up by 0.3%, the S&P 500 by 0.6%, the Nasdaq by 1.3%, and the Russell 2000 was down by 0.6%. This morning presents a mixed picture in Asia. Earlier, Chinese stocks performed better following comments about increased public support for the equity markets, but this effect has since faded. US and European futures are slightly lower this morning.

FI: There was modest movement in global bond yields yesterday as 2Y and 10Y US Treasuries rose a few bp. In the European market there was also modest movement in bond yields. 2Y and 10Y German government bonds also just moved a few bp. Furthermore, the spread between the semi-core vs. Germany as well as periphery vs. Germany continue to tighten. Hence, the 10Y Italy vs. Germany spread is close to breaking through 100bp, while the 10Y French vs. German 10Y yield spread has stabilised and is slowly moving towards the 70bp-level. Finally, the Bund ASW-spread has also been rangebound at 0bp to -2bp.

FX: NOK rose and JPY lost ground yesterday ahead of monetary policy decisions from Norges Bank and Bank of Japan with the latter set to hike interest rates tomorrow. EUR/USD was steady yesterday just above 1.04.

Source:action forex

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Glendon

Forex

Economic

The EUR/USD pair attracts some buyers to 1.0450 during the early Asian session on Friday, bolstered by the weakening of the US Dollar (USD). The preliminary reading of the HCOB Purchasing Managers Index (PMI) for January from the Eurozone and Germany will be released later on Friday. On the US docket, flash S&P PMI for January will take center stage.

US President Donald Trump’s remarks at the World Economic Forum in Davos drag the USD lower against a basket of major currencies. Trump said late Thursday that he wants to see interest rates drop immediately, and likewise, they should be dropping all over the world.

"It seems like the markets are more concerned about rate cuts and any kind of greater indicator that there'll be more rate cuts,” said David Eng, Investment Adviser at Sonora Wealth Group in Vancouver.

Across the pond, recent comments from the European Central Bank (ECB) policymakers indicated that a rate cut was likely. ECB Croatian central bank chief Boris Vujcic said earlier this week that market expectations for ECB interest rate cuts are reasonable and risks around the inflation outlook are broadly balanced.

Meanwhile, ECB President Christine Lagarde emphasized on Wednesday that the central bank is “not overly concerned” about the risk of inflation from abroad and will continue to reduce interest rates at a gradual pace. Markets have priced in nearly 96% odds the ECB will reduce the rates at the upcoming meeting.

Source: FXSTREET

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Cohen

Political

Choi made the remarks during a meeting on external economic issues with government officials, including the foreign and industry ministers, instructing them to review Korea's countermeasures against issues that could significantly impact the economy.

The acting president also emphasized the importance of maintaining close communication with businesses as the government responds to the new U.S. policies.

At Friday's meeting, participants evaluated both the direct and indirect impacts of the Trump administration's economic policies on the Korean economy, including U.S.-centered trade policies and the expanded use of traditional fossil fuels, his office said.

Shortly after taking office, Trump signed a memorandum on an "America First" trade policy, calling for a review of existing U.S. trade agreements to seek "reciprocal and mutually advantageous" concessions with free trade partners.

Source: Koreatimes

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Owen Li

Economic

Most currency pairs remain within their previous sideways corridors, awaiting new directives from the newly inaugurated president.

USD/JPY

The USD/JPY currency pair has once again tested the important range of 155.00–154.80. The inability of sellers to hold the price below 155.00 for two weeks could lead to another test of recent highs in the 157.00–157.80 zone.

Technical analysis of USD/JPY indicates a sideways movement of the pair. At present, the price is at the upper boundary of a five-day corridor. If it rebounds from the 156.70 level, a decline towards the 155.20–155.00 marks is possible.

A consolidation above 157.00 could result in an update of the year’s maximum at 158.90.

Key events influencing USD/JPY movements:

Today at 16:30 (GMT+2): Initial Jobless Claims in the United States.Today at 19:00 (GMT+2): Speech by US President Donald Trump.Tomorrow at 05:30 (GMT+2): Bank of Japan’s Monetary Policy Report.Tomorrow at 06:00 (GMT+2): Bank of Japan Interest Rate Decision.

USD/CAD

Range trading with false boundary breakouts is also observed in the USD/CAD pair. On Monday, the price updated its January low at 1.4280 but failed to develop a full-fledged downward correction and consolidate below this level. In the upcoming trading sessions, another approach to the 1.4420–1.4450 range is possible.

The nature of the price exit from the four-week range of 1.4300–1.4500 could provide more clues about the medium-term movement of USD/CAD.

Key events influencing USD/CAD pricing today:

Today at 16:30 (GMT+2): Retail Sales Volume in Canada.Today at 16:30 (GMT+2): US Crude Oil Inventories.

Dollar Range Trading Awaits Trump’s Directives_1

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Source:action forex

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Justin

Economic

The order sets the stage for new policies to advance innovation while removing what the administration views as unnecessary barriers.

According to the order, published on the White House website, the U.S. must build AI systems free from "ideological bias or engineered social agendas." The goal is to maintain America’s dominance in AI while fostering economic competitiveness, enhancing national security, and promoting human flourishing.

The order tasks top officials, including the President’s advisors on science, technology, and national security, to draft a detailed action plan within 180 days. This plan will outline steps to develop AI systems aligned with the administration's goals. The administration emphasized the importance of clear, streamlined government policies in achieving these objectives.

The new directive revokes the previous Executive Order 14110, signed in October 2023, which focused on “safe, secure, and trustworthy” AI. It mandates a review of existing AI policies to identify and eliminate rules that may hinder innovation or conflict with the new approach. Agencies are instructed to suspend, revise, or rescind such policies wherever necessary.

In addition, the order tasks the Office of Management and Budget (OMB) with updating related directives to align with the new AI-focused strategy within 60 days.

The order reflects the administration’s emphasis on bolstering the U.S.'s competitive edge in emerging technologies. Trump framed the move as critical to ensuring the nation remains a leader in AI innovation in the global landscape.

Trump had unveiled a $500 billion joint venture, named Stargate on Tuesday, to develop a new artificial intelligence infrastructure in the U.S. The investment will be used to build extensive AI data centers and electricity generation facilities in Texas over the next four years, significantly bolstering the nation's AI capabilities.

The project involves OpenAI, Oracle Corporation (NYSE:ORCL), SoftBank Group Corp. (TYO:9984), Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), and other tech leaders as investors.

Source：lnvesting.com

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Owen Li

Data Interpretation

Data released by Japan's Ministry of Internal Affairs and Communications on Friday showed:

December's overall Consumer Price Index (CPI) rose 3.6% year-on-year, accelerating from November's 2.9%. This increase was primarily driven by the expiration of government subsidies and a 10.1% rise in energy prices.

Core inflation, excluding volatile fresh food and energy, remained above 2%, increasing by 2.4% year-on-year in December, unchanged from November and still exceeding the BOJ's target level.

Robust inflation data has strengthened market expectations for the BOJ to raise its policy rate to 0.5%. Slower-than-expected inflation deceleration highlights the resilience of price pressures, complicating the BOJ's decision on the timing of a rate hike. Global economic uncertainties, such as potential impacts from U.S. tariff policies, further add complexity to the BOJ's decisions.

Maintaining the current rate could weaken the yen, further driving up import prices and inflation, thereby eroding household and corporate purchasing power. Consumer inflation has exceeded the BOJ's 2% target for two consecutive years, and policymakers' growing confidence in wage growth trends supports sustained inflation.

Service prices, a key indicator of the wage-price virtuous cycle, rose by 1.6% year-on-year in December, up from 1.5% in November, in line with market expectations. As annual wage negotiations may lead to larger pay increases, service inflation is likely to rise further. The BOJ now faces the dilemma of striking a balance between controlling inflation and supporting economic growth.

Japan December CPI

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Australia January PMI: Signs of Economic Recovery Emerge as Private Sector Activity Gains Momentum

January 24 S&P PMI Data Highlights:

Services Sector:

Manufacturing Sector:

Inflationary and Operational Challenges:

Outlook:

Markets Eye Tariffs on the Horizon

In focus today

Economic and market news

What happened yesterday

Source:action forex

EUR/USD Attracts Some Buyers to Near 1.0450 Ahead of Eurozone, US PMI Data

Source: FXSTREET

Acting President Discusses Ways to Address Trump Trade Policies

Source: Koreatimes

Dollar Range Trading Awaits Trump’s Directives

Source:action forex

Trump Signs Executive Order to Boost US Leadership in AI

Source：lnvesting.com

Japan December CPI: Inflation Data Supports BOJ Rate Hike Expectations

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