31stJanuary 2024
Wednesday
On January31st, global financial markets are set to experience significant volatility dueto a series of key economic announcements from major economies. Australia willrelease its Consumer Price Index (CPI), followed by China's ManufacturingPurchasing Managers' Index (PMI). Germany will announce its Preliminary CPI,and the United States is scheduled to publish both the ADP Non-Farm EmploymentChange and the Employment Cost Index. Additionally, Canada will disclose its monthlyGDP figures. The day's events will culminate with the US Federal Reserve'sdecision on the Federal Funds Rate and a closely-watched press conference bythe Federal Open Market Committee (FOMC), making it a critical day forinvestors and market analysts worldwide.
AUD - CPI q/q
The majority of overall inflation isreflected in consumer prices. Inflation plays a crucial role in the valuationof currency, as it prompts central banks to increase interest rates. Thisaction is typically taken to adhere to their mandate of containing inflation,ensuring economic stability.
In the thirdquarter of 2023, Australia's consumer prices exhibited a notable acceleration,rising by 1.2% quarter-on-quarter. This exceeded market projections, which hadanticipated a more modest 1.1% increase, and marked a substantial uptick fromthe 0.8% gain observed in the preceding period.
The projected CPIq/q basis shows an expectation of 0.8%, which is lower than theprevious figure of 1.2%.
The last time,the Australian CPI q/q was announced on the 25th of October,2023. You may find the market reaction chart (AUDUSD M5) below:
AUD - Australia Monthly CPI Indicator
Consumer pricesmake up a significant portion of total inflation. Inflation plays a crucialrole in the valuation of currency, as increasing prices compel the central bankto hike interest rates, adhering to their mandate to control inflation.
In Australia,the Consumer Price Index (CPI) for the month ending in November 2023 had seenan annual increase of 4.3%, a decrease from the 4.9% rise in October andslightly below the anticipated 4.4%. This marked the second consecutive monthof a declining yearly inflation rate, reaching its lowest since January 2022.This slowdown was influenced by a reduction in the growth rate of food prices,which had increased by 4.6% compared to 5.3% in October, and transport costs,especially fuel prices, rising by 3.6% versus 5.9%. Additionally, there was adeceleration in the cost increase for health services (5.2% compared to 6.3%),and recreation and culture activities (1.2% compared to 2.7%). There were alsoprice decreases in furnishings, household equipment & services (-0.3%versus 0.4%), and clothing and footwear (-0.9% versus -1.5%). On the otherhand, housing costs had seen a faster increase of 6.6% compared to 6.1%, drivenby higher rents, costs of new dwellings for owner-occupiers, and electricityprices. The monthly CPI, excluding volatile items and travel, had gone up by4.8% in November, down from the 5.1% increase in October. Inflation continuedto remain above the Reserve Bank of Australia's target range of 2-3%.
TL;DR
Category
November 2023 Increase
October 2023 Increase
1 Overall Annual CPI Increase
4.3%
4.9%
2 Food Prices
4.6%
5.3%
3 Transport Costs (especially fuel)
3.6%
5.9%
4 Health Services
5.2%
6.3%
5 Recreation and Culture Activities
1.2%
2.7%
6 Furnishings, Household Equipment & Services
-0.3%
0.4%
7 Clothing and Footwear
-0.9%
-1.5%
8 Housing Costs
6.6%
6.1%
9 Monthly CPI Excluding Volatile Items & Travel
4.8%
5.1%
The forecast forAustralia's Monthly Consumer Price Index (CPI) indicates a drop to 3.6%from the earlier figure of 4.3%.
AUD - Trimmed Mean CPI q/q
The majority ofoverall inflation is attributed to consumer prices. Inflation significantlyimpacts the value of currency, as increased prices prompt the central bank toelevate interest rates in adherence to their mandate of containing inflation.
In the thirdquarter of 2023, the Reserve Bank of Australia's trimmed-mean Consumer PriceIndex (CPI) had shown an uptick, increasing by 1.2% quarter-on-quarter. Thishad exceeded market projections of a 1.1% rise and had marked an accelerationfrom the previously revised 1.0% increase in the preceding period.
The forecast suggests a decline to 0.9%from the previous outcome of 1.2%.
The forthcoming release of Australia'sCPI is scheduled for January 31st at 00:30 AM GMT.
The last time,the Australian Trimmed Mean CPI q/q was announced on the 25thof October, 2023. You may find the market reaction chart (AUDUSD M5) below:
CNY - Manufacturing PMI
It serves as apivotal gauge for the economic well-being, as businesses are swift inresponding to market dynamics. Among those who possess the most up-to-date andpertinent insights into a company's economic outlook are its purchasingmanagers. This indicator is derived through a survey conducted among 3,000purchasing managers, in which respondents evaluate the current status ofvarious business aspects such as employment, production, new orders, pricing,supplier deliveries, and inventory levels.
In December2023, China's official NBS Manufacturing PMI took an unexpected dip to 49.0,down from the previous month's 49.4 and falling short of the market's predicted49.5. This marked the third consecutive month of factory activity contractionand the most significant decline in six months. The downturn was attributed toa faltering recovery, influenced by weaknesses in the property sector,deflationary risks, and mounting global challenges. New orders experiencedtheir fastest rate of reduction since June, declining from 48.7 to 49.4 inNovember. Foreign sales continued to decline for the ninth straight month,dropping from 45.8 to 46.3, while purchasing activity remained subdued,shifting from 49.0 to 49.6. Furthermore, employment in the sector declined forthe tenth month in a row, with the most significant drop in the period, goingfrom 47.1 to 48.1. Output growth hit a five-month low, although delivery timesstayed stable at 50.3. Regarding prices, input cost inflation increased,reversing a trend that had seen it at its lowest level in five months (risingfrom 51.5 to 50.7), while output prices continued to fall (from 47.7 to 48.2).Finally, business sentiment in the manufacturing sector improved, reaching itshighest point since February, moving from 55.9 to 55.8.
TL;DR
Indicator
December 2023
November 2023
Change
1 Overall NBS Manufacturing PMI
49.0
49.4
Decrease
2 New Orders
49.4
48.7
Decrease
3 Foreign Sales
46.3
45.8
Decrease
4 Purchasing Activity
49.6
49.0
Decrease
5 Employment
48.1
47.1
Decrease
6 Output Growth
5-month low
-
Decrease
7 Delivery Times
50.3
50.3
Stable
8 Input Cost Inflation
50.7
51.5
Increase
9 Output Prices
48.2
47.7
Decrease
10 Business Sentiment
55.8
55.9
Increase
The projected Manufacturing PMIshows a modest uptick to 49.2 from the earlier figure of 49.0.
The upcoming release of the ManufacturingPMI is scheduled for January 31st at 1:30 AM GMT.
The last time, Chinese Manufacturing PMIwas announced on the 31st of December, 2023. You may find the marketreaction chart (USDCNY M5) below:
EUR - German Prelim CPI m/m
Consumer pricespredominantly drive overall inflation. In the context of currency valuation,inflation holds significant importance, as rising prices often lead the centralbank to raise interest rates in line with their responsibility to manage andcontrol inflation.
In a recentupdate on Germany's economic indicators, the Consumer Price Index saw a slightuptick of 0.10% in December 2023 when compared to the previous month. Historicaldata indicates that since 1950, Germany's average monthly inflation rate hasstood at 0.21%. The highest monthly increase on record occurred in October 1951at 3.10%, while the lowest recorded was a decline of -2.73% in January 1950.
The latestforecast reveals an anticipated increase of 0.4%, up from the previousfigure of 0.1%.
The upcomingrelease of the German Preliminary CPI m/m is scheduled for January31st at 1:00 PM GMT.
The last time, GermanPreliminary CPI m/m was announced on the 4th of January, 2024.You may find the market reaction chart (EURJPY M5) below:
USD - ADP Non-Farm Employment Change
The generationof new jobs serves as a vital leading indicator for consumer spending, asignificant driver of overall economic activity. These job creation estimatesare obtained through the analysis of payroll data encompassing over 25 millionworkers by ADP.
In December2023, private businesses in the United States added 164,000 workers to theirpayrolls, surpassing both the downwardly revised figure of 101,000 in Novemberand the forecasted 115,000. The leisure and hospitality sector led the jobcreation with the addition of 59,000 positions, followed by education/healthservices (42,000), construction (24,000), financial activities (18,000), andtrade/transportation/utilities (15,000). However, job losses were observed inmanufacturing (-13,000), information services (-2,000), and natural resourcesand mining (-2,000). Meanwhile, the pace of wage growth continued todecelerate, with job-stayers experiencing a 5.4% increase in earnings, whilethose changing jobs saw an 8% rise. Nela Richardson, the chief economist atADP, remarked, "We are witnessing a return to a labor market reminiscentof pre-pandemic hiring. Although wage growth did not drive the recentinflationary pressures, the retreat in pay growth has substantially reduced therisk of a wage-price spiral."
TL;DR
Sector
Job Change (December 2023)
Notable Details
1 Total Private Sector
+164,000
Surpassed November's 101,000 and forecast of 115,000
2 Leisure and Hospitality
+59,000
Leading sector in job creation
3 Education/Health Services
+42,000
-
4 Construction
+24,000
-
5 Financial Activities
+18,000
-
6 Trade/Transportation/Utilities
+15,000
-
7 Manufacturing
-13,000
Job losses observed
8 Information Services
-2,000
Job losses observed
9 Natural Resources and Mining
-2,000
Job losses observed
10 Wage Growth
-
Job-stayers: +5.4%, Job-changers: +8%
The ADPNon-Farm Employment Change forecast is showing a decrease to 125,000, downfrom the previous figure of 164,000.
The forthcoming ADPNon-Farm Employment Change report is scheduled for January 31st at 1:15PM GMT.
The last time,the USADP Non-Farm Employment Change report was announced on the4th of January, 2024. You may find the market reaction chart (GBPUSDM5) below:
CAD - GDP m/m
GDPmonth-to-month is the most comprehensive indicator of economic activity andserves as the primary indicator of the economy's overall well-being.
In November 2023,Canada's economy is anticipated to have experienced a modest growth of 0.1%,according to preliminary data. This growth was driven by advancements in themanufacturing, transportation, warehousing, agriculture, forestry, fishing, andhunting sectors, which helped to balance the declines observed in retail trade.October's economic performance showcased stability for the third consecutivemonth, characterized by a 0.1% rise in services-producing industries, whilegoods-producing industries remained largely unchanged. Notably, retail tradewitnessed a significant 1.2% increase, the highest since January. The mining,quarrying, and oil and gas extraction sector also saw a 1% increase, recoveringfrom two months of decline. In contrast, the manufacturing sector experienced adownturn for the fourth time in five months, with a 0.6% decrease in October,predominantly in durable goods manufacturing, which fell by 1.3%. However,non-durable goods manufacturing slightly improved by 0.2%, marking its secondconsecutive month of growth. Moreover, the wholesale trade sector experienced adecline of 0.7%
TL;DR
Sector
November 2023 Growth (Preliminary)
October 2023 Growth
1 Overall Economic Growth
+0.1%
-
2 Manufacturing
Growth
-0.6% Decrease
3 Transportation and Warehousing
Growth
-
4 Agriculture, Forestry, Fishing, and Hunting
Growth
-
5 Retail Trade
Decline
+1.2% Increase
6 Services-Producing Industries
-
+0.1% Increase
7 Goods-Producing Industries
Largely Unchanged
Largely Unchanged
8 Mining, Quarrying, and Oil and Gas Extraction
-
+1% Increase
9 Durable Goods Manufacturing
-
-1.3% Decrease
10 Non-Durable Goods Manufacturing
-
+0.2% Increase
11 Wholesale Trade
-
-0.7% Decrease
The GDP m/mforecast is showing a slight increase at 0.1%, compared to the previousreading of 0.0%.
The upcoming GDPm/m report is set to be published on January 31st at 1:30 PM GMT.
The last time, CanadianGDP m/m was announced on the 22nd of December, 2023. You mayfind the market reaction chart (CADJPY M5) below:
USD - Employment Cost Index q/q
The EmploymentCost Index quarter-to-quarter is a leading indicator of consumer inflationbecause when businesses experience increased labor expenses, they typicallytransfer those higher costs to consumers.
In the thirdquarter of 2023, compensation costs for U.S. civilian workers rose by 1.1%,slightly above expectations. This increase was driven by a 1.2% growth in wagesand salaries, while benefit costs increased by 0.9%. Private industry workerssaw a 1.0% rise in compensation costs, and state and local government workersexperienced a more substantial 1.5% increase. On a year-on-year basis,employment costs grew by 4.3%, a slight decrease from the 4.5% rise in theprevious quarter.
The projected EmploymentCost Index quarter-to-quarter stands at 1.0%, which is marginallybelow the previous reading of 1.1%.
The forthcoming EmploymentCost Index q/q is scheduled for publication on January 31st at 1:30 PMGMT.
The last time,the US Employment Cost Index q/q was announced on the 31st ofOctober, 2023. You may find the market reaction chart (AUDUSD M5) below:
USD - Federal Funds Rate
Traders maintaina vigilant eye on the Federal Funds rate because short-term interest rates holda pivotal role in determining currency value. In the world of currency trading,these rates take center stage, with most other indicators serving primarily astools to anticipate how these rates might evolve in the coming periods. Thisemphasis on short-term interest rates underscores their significance in shapingthe currency market's dynamics and outcomes.
In December2023, the Federal Reserve maintained its federal funds rate at a range of 5.25%to 5.5% for the third consecutive meeting, aligning with expectations. However,it signaled potential reductions of 75 basis points in 2024. The Fed noted thateconomic growth appears to be decelerating and job growth, while still robust,has slowed down. The unemployment rate continues to be low. Although inflationhas decreased over the past year, it remains high.
The Fed alsoreleased updated forecasts. The projection for GDP growth in 2023 has beenraised to 2.6%, up from the 2.1% forecast in September, but the outlook for2024 has been slightly reduced to 1.4% from 1.5%. Inflation expectations, asmeasured by the Personal Consumption Expenditures (PCE) index, have beenrevised downwards for both 2023 (from 3.3% to 2.8%) and 2024 (from 2.5% to2.4%). Similarly, the core PCE inflation forecast has been lowered to 3.2% for2023 (previously 3.7%) and 2.4% for 2024 (previously 2.6%). Unemployment rateprojections are unchanged at 3.8% for 2023 and 4.1% for 2024. Additionally, theupdated dot plot indicates that the median projection for the federal fundsrate at the end of 2024 has decreased to 4.6%, down from 5.1% in the Septemberestimate.
TL;DR
Indicator
December 2023
Previous Forecast
Changes Noted
1 Federal Funds Rate
5.25% to 5.5%
5.25% to 5.5%
Maintained; potential 75 basis points reduction in 2024
2 GDP Growth 2023
2.6%
2.1% (September)
Increased forecast
3 GDP Growth 2024
1.4%
1.5% (September)
Slightly reduced forecast
4 PCE Inflation 2023
2.8%
3.3% (September)
Decreased forecast
5 PCE Inflation 2024
2.4%
2.5% (September)
Decreased forecast
6 Core PCE Inflation 2023
3.2%
3.7% (September)
Decreased forecast
7 Core PCE Inflation 2024
2.4%
2.6% (September)
Decreased forecast
8 Unemployment Rate 2023
3.8%
3.8%
Unchanged
9 Unemployment Rate 2024
4.1%
4.1%
Unchanged
10 End of 2024 Federal Funds Rate Projection
4.6%
5.1% (September)
Decreased projection
The anticipated FederalFunds Rate is projected to stay steady at 5.50%, consistent with itsprevious rate.
The FederalFunds Rate for the upcoming month is set to be announced on January 31stat 7:00 PM GMT.
The last time,the US Federal Funds Rate was announced on the 13th of December,2023. You may find the market reaction chart (XAUUSD M5) below:
USD – FOMC Press Conference
This is a keytool for the Federal Reserve to engage with investors about its monetarypolicy. It thoroughly explains the reasons behind the latest decisions oninterest rates and other policies, and includes insights on economic situationslike the outlook for future growth and inflation. Crucially, it offers hintsabout upcoming monetary policy moves.
The FederalOpen Market Committee (FOMC) press conference is scheduled for January31st at 7:30 PM GMT.
