The dollar put in an uneven performance against the majors after the post-NFP jump. JPY, AUD, and NZD outperformed while CAD, GBP, and CHF underperformed. We believe the U.S. exceptionalism story continues to hold and should power the dollar higher. Meanwhile, softer growth and falling inflation data should keep most other central banks in easing mode, putting further pressure on the foreign currencies.

AMERICAS

The Fed media blackout is in place until Chair Powell’s post-decision press conference January 29. Despite some mixed signals from officials last week, the market sees the next and only rate cut coming in July. Of course, it will all depend on the data but given the strong momentum in the economy, we agree with the market see steady rates in H1.

Growth remains robust. The New York Fed's Nowcast model is now tracking Q4 growth at 2.6% SAAR vs. 2.4% last week and Q1 growth at 3.0% SAAR vs. 2.7% last week and will be updated Friday. Elsewhere, the Atlanta Fed GDPNow model is still tracking Q4 growth at 3.0% SAAR after today's update and will next be updated next Tuesday January 28.

Preliminary January S&P Global PMIs Friday will be the highlight. Manufacturing is expected at 49.9 vs. 49.4 in December, services is expected at 56.5 vs. 56.8 in December. If so, the composite index is likely to remain relatively stable vs. 55.4 in December. With other global PMIs likely to remain subdued, the readings should underscore U.S. economic exceptionalism yet again.

Weekly jobless claims Thursday will be of interest. That‘s because initial claims are for the BLS survey week containing the 12th of the month, and are expected at 220k vs. 217k previously. Continuing claims are reported with a one-week lag and are expected at 1.868 mln vs. 1.859 mln previously. Most indicators point to a robust labor market. There is no Bloomberg consensus yet for January NFP but its whisper number stands at 181k vs. 256k actual in December.

Regional Fed surveys for January will continue to roll out. Philly Fed non-manufacturing will be reported Tuesday. Kansas City Fed manufacturing will be reported Thursday. Kansas City Fed services will be reported Friday.

Canada highlight will be December CPI data Tuesday. Headline is expected to fall tick to 1.8% y/y, while core trim is expected to fall two ticks to 2.4% y/y and core median is expected to fall two ticks to 2.5 y/y. The Bank of Canada projects headline and core CPI inflation to average 2.1% and 2.3% over Q4, respectively. The bank has room to ease further, though at a more gradual pace because inflation is stabilizing around 2%. Indeed, Governor Macklem effectively ruled out additional jumbo cuts, pointing out that officials will consider further rate cuts but likely at a slower pace. The market sees nearly 80% odds of a 25 bp cut at the January 29 meeting.

November retail sales data Thursday will also be important. Consensus sees headline at 0.3% m/m vs. 0.6% in October and ex-autos steady at 0.1% m/m. Statistics Canada’s advanced retail indicator suggests sales were relatively unchanged in November.

Bank of Canada Q4 business outlook survey will be reported Monday. Business conditions remained subdued in Q3 consistent with a sluggish economic activity. However, demand indicators have improved slightly supported by BOC policy easing.

EUROPE/MIDDLE EAST/AFRICA

Eurozone highlight will be preliminary January PMIs. Headline manufacturing is expected at 45.4 vs. 45.1 in December, services is expected at 51.5 vs. 51.6 in December, and the composite index is expected at 49.7 vs. 49.6 in December. Looking at the country breakdown, the German composite PMI is expected at 48.3 vs. 48.0 in December while the French composite PMI is expected at 47.7 vs. 47.5 in December. Despite the small improvements, both would remain firmly in contractionary territory.

German ZEW survey for January will be reported Tuesday. Expectations are expected to fall half a point to 15.2, while expectations are expected to remain steady at -93.1. Germany remains the weak link in the eurozone.

The Eurozone’s soggy growth outlook leaves plenty of room for the ECB to cut rates. It is widely expected to bring down the policy rate towards the lower-end of its neutral range, estimated at around 1.50% to 3.00%. This will be an ongoing drag for EUR. Markets are pricing in 100 bp of total ECB easing over next 12 months that should see the policy rate bottom around 2.00%. Vujcic and Holzmann speak Monday. Centeno speaks Tuesday. Villeroy, Knot, Lagarde, and Nagel speak Wednesday. Escriva speaks Thursday. Lagarde and Cipollone speak Friday.

U.K. highlight will be labor market data Tuesday. The labor market has continued to ease but appears relatively tight by historical standards. Average weekly earnings ex-bonuses are expected to rise three ticks to 5.5% y/y and the unemployment rate is forecast to remain steady at 4.3% for the three months ending in November. The Bank of England projects average weekly earnings private sector regular pay of 5.1% y/y and an unemployment rate of 4.2% over Q4.

Preliminary January PMIs Friday will also be important. Manufacturing is expected to remain steady at 47.0, services is expected at 50.8 vs. 51.1 in December, and the composite index is expected at 50.0 vs. 50.4 in December. If so, the composite would be the lowest sine October 2023. As the economy continues to lose momentum, a sub-50 reading is getting more and more likely.

U.K. CBI surveys for January will be reported. Industrial trends will be reported Thursday. Total orders are expected at -35 vs. -40 in December, while selling prices are expected at 20 vs. 23 in December. In October, this quarterly measure of business optimism dropped to a two-year low of -24 and was indicative of a subdued business investment backdrop. Distributive trades will be reported Friday. Retailing reported sales are expected at -10 vs. -15 in December.

The Bank of England will likely have to step-up the pace of easing. The market has virtually fully priced in a 25 bp cut in February and almost 75 bp of cuts over the next 12 months (up from 50 bp earlier this month). BOE/Fed policy trend remains a drag on GBP/USD.

Norges Bank meets Thursday and is expected to keep rates steady at 4.5%. At the last meeting December 19, the bank kept rates on hold at 4.5% and indicated that “the policy rate will most likely be reduced in March 2025.” Markets have virtually fully priced in the start of an easing cycle in March as inflation is tracking below the Norges Bank projection. Over the next 12 months, the market is pricing in the policy rate to fall to between 3.75-4.0% and followed by one last 25 bp cut over the subsequent 12 months that would see the policy rate bottom near 3.5%. Such a shallow Norges bank easing cycle should offer NOK support on the crosses vs. SEK and EUR.

ASIA

Two-day Bank of Japan meetings ends Friday with an expected 25 bp hike to 0.5%. Markets have firmed up the odds of a hike over the past week to around 85% after BOJ officials expressed more confidence on wage growth gathering momentum. The BOJ is also set to publish its updated Outlook Report and is expected to raise its inflation projections as both core (less fresh food) and core (less fresh food and energy) are tracking higher than it anticipated back in October. In our view, the bar for a hawkish surprise is high because the BOJ will want to avoid unsettling the markets as it did back in July. As such, the yen is likely to remain under downside pressure as the markets continue to price in the policy rate to peak around 1% over the next two years.

Just before the decision, Japan reports December national CPI data. Headline CPI is expected at 3.4% y/y vs. 2.9% in November and core (ex-fresh food) is expected at 3.0% y/y vs. 2.7% on higher energy prices. Core (ex-fresh food & energy) is expected to remain steady at 2.4% y/y but risks are skewed to the upside as the government scaled down its energy subsidies over that period.

Preliminary January PMIs Friday will be important. The composite PMI has been above the 50 level for two straight months, but just barely. Given downside risks to regional growth, we see risks that this falls back below 50 in the coming months.

Japan reports December trade data Thursday. Exports are expected at 2.5% y/y vs 3.8% in November, while imports are expected at 3.2% y/y vs. -3.8% in November. Export growth has been flattered recently by low base effects but those drop out in favor of high base effects in H1.

Australia highlight will be preliminary January PMIs Friday. The composite PMI has been above the 50 level for three straight months, but just barely. Given downside risks to mainland China growth, we see risks that this falls back below 50 in the coming months. Markets continue to price in roughly 70% odds of a 25 bp rate cut in February. Australia’s Q4 CPI, due January 29, will either lock in a February RBA rate cut or give the RBA space to delay the start of easing a bit longer.

New Zealand highlight will be Q4 CPI data Wednesday. Headline is expected at 2.1% y/y vs. 2.2% in Q3. Inflation is converging towards the 2% target mid-point and measures of core inflation have declined to within the 1-3% target range. Moreover, firms’ inflation expectations are now close to 2% across all time horizons. The RBNZ has penciled in another 50 bp rate cut to 3.75% in February but warned of slower pace of easing after that, adding it does not forecast cutting the policy rate below neutral (around 3%) through 2027. Markets agree and price in the rate to bottom at 3.25% over the next 12 months.