Week Ahead for FX, Bonds : U.S. Jobs Data, Fed Minutes in Focus

Below are the most important global events likely to affect FX and bond markets in the coming week starting Jan. 6.

A raft of U.S. economic data, including key monthly jobs data, and Federal Reserve meeting minutes will be watched closely as 2025 gets into full swing. Investors will be gauging the health of the U.S. economy and the consequent outlook for interest rates ahead of Donald Trump’s inauguration on Jan. 20.

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Eurozone inflation data could add to expectations for interest-rate cuts as the region’s economy stutters, in contrast to a much brighter outlook in the U.S. A string of inflation prints are also due in Asia.

U.S.

Focus in the coming week is on Friday’s key monthly nonfarm payrolls data for December, which will give an up-to-date reading of employment levels and wages, as well as Federal Reserve minutes due Wednesday.

Increasing evidence of a strong U.S. economy has led investors to scale back expectations for U.S. interest-rate cuts in 2025. U.S. money markets price in just over 40 basis points of rate cuts by December, a huge difference from the start of last year when markets were pricing as much as 150 basis points of rate cuts.

Further strong U.S. data could cause rate-cut expectations to be trimmed even further, especially as President-elect Trump is expected to announce policies including trade tariffs and tax cuts, which could boost the economy and stoke inflation after his inauguration on Jan. 20.

U.S. monetary policy has entered a new phase where interest-rate cuts are contingent on lower inflation or a weaker labor market, Nordea credit and rates strategist Lars Mouland said. There is a risk that U.S. interest rates could end up higher than markets expect, he said in a note.

The dollar recently hit a two-year high against a basket of currencies and strong economic data would likely lift it further while U.S. Treasury yields could also rise.

The Fed reduced interest rates in December but also lowered its forecasts for future rate cuts. It now forecasts just two rate cuts in 2025.

Wednesday’s minutes to that meeting could provide details on how different policymakers perceive Trump’s planned policies will impact the economy and how that could feed through into the interest-rate outlook, Investec economists said.

Ahead of Friday’s nonfarm payrolls data, further clues on the health of the jobs market will be provided with Tuesday’s JOLTS November job openings figures, Wednesday’s ADP private payrolls data for December plus the latest weekly jobless claims numbers Thursday.

The ISM nonmanufacturing index for December due Tuesday is another key indicator that investors will watch to gauge how well the U.S. economy is performing, as well as the University of Michigan’s preliminary consumer confidence survey for January due Friday. Trade data for November are due Tuesday.

The U.S. Treasury will auction $58 billion in three-year notes on Monday, $39 billion in 10-year notes on Tuesday and $22 billion in 30-year bonds on Wednesday.

CANADA

Canadian jobs data for December on Friday will be the highlight of the week as investors continue to gauge the extent to which previous Canadian interest-rate cuts are spurring a recovery in the economy.

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The Bank of Canada cut interest rates by a large half-percentage point for the second meeting in a row in December. However, the central bank suggested that rate reductions from here are likely to be gradual and limited.

Canadian trade data for November are due Tuesday amid concerns about what tariffs U.S. President-elect Trump could announce on Canadian exports into the U.S. after his inauguration later this month.

LATIN AMERICA

Inflation data for Mexico are released Thursday, followed by inflation figures from Brazil Friday.

The figures come as both the Mexican peso and Brazilian real dropped sharply toward the end of 2024. Both are more than 20% weaker against the U.S. dollar than they were a year ago, according to FactSet data.

EUROZONE

Flash estimate inflation data for December on Tuesday will be the highlight of the week’s eurozone data.

Investors continue to expect that a faltering economy and slowing inflation will prompt further interest-rate cuts by the European Central Bank. Eurozone money markets currently price in just over 100 basis points of further rate reductions in 2025, LSEG data show.

Provisional inflation data for December are also due from individual countries, including from Germany on Monday and from France and Italy on Tuesday.

The final reading of purchasing managers’ surveys for the eurozone’s services sector in December are released Monday, alongside individual data from Germany, France, Italy and Spain. Eurozone unemployment figures for November are due Tuesday.

Investors are particularly concerned about weakness in the eurozone’s largest economies of Germany and France and data from these countries could attract more attention than usual.

German November manufacturing orders data are due Wednesday, followed by industrial production and trade data for November on Thursday.

“German industry is likely to report weak figures again next week,” Commerzbank Research’s chief economist Joerg Kraemer and senior economist Bernd Weidensteiner said in a note.

They expect a significant decrease of 2.5% in new orders for November from the previous month.

“The figure for October benefited from a number of bulk orders, and the details of the Ifo business climate point to a further weakening of demand for German industrial products,” they said.

They expect manufacturing output to have fallen by 1% in November, continuing its downward trend.

France’s consumer confidence survey for December is due Wednesday, followed by industrial production and consumer spending data for November on Friday.

Eurozone business and consumer surveys for December are released Wednesday, alongside producer prices data for November.

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Government bond issuance will begin the year in earnest in the eurozone, where January is typically the busiest month of the year.

Scheduled auctions will come from Austria on Tuesday, and from Spain and France on Thursday. Germany will offer 4.5 billion euros in December 2026 Schatz on Tuesday and will launch the new February 2035 Bund for 5 billion euros on Wednesday. The first syndicated transactions in the eurozone are also expected.

U.K.

A quiet week beckons in the U.K. The final reading of the purchasing managers’ survey on the services sector is due Monday. The British Retail Consortium’s retail sales monitor for December is published Tuesday, alongside the latest house price data for December from Halifax.

The U.K. is due to sell a July 2054 gilt Tuesday and March 2030 gilt on Wednesday.

SCANDINAVIA

Norwegian inflation data for December are due Friday. The Norges Bank, Norway’s central bank, has flagged that it is likely to start cutting interest rates in March.

Denmark and Norway will hold bond auctions on Wednesday.

SWITZERLAND

Swiss inflation figures for December are due Tuesday.

A monthly bond auction will be held Wednesday.

JAPAN

On Thursday, focus will be on a Bank of Japan branch managers’ meeting. Officials at the central bank will release a regional economic report that day, which will likely shed light on wage trends in their respective regions. Any comments showing stronger, sustained pay increases would help boost expectations that the wage-led economic growth that the BOJ wants to see is taking shape and may bolster the case for a rate hike later in January.

Japan also reports household spending figures for November on Friday. A solid reading could provide evidence that consumers are starting to open their wallets more, in a potential sign of growing confidence in the economy. Weaker spending on the other hand could temper recovery hopes.

The Ministry of Finance is scheduled to auction 2.6 trillion yen of 10-year sovereign notes on Tuesday and 900 billion yen of 30-year government bonds on Thursday. Given the start of a new year, the two auctions of longer-dated debt could attract more interest than usual from investors such as insurance companies and pension funds. These investors typically favor government bonds with long tenors owing to their higher yields.

Japan’s December services PMI reading is also due on Monday.

AUSTRALIA & NEW ZEALAND

In Australia, November monthly CPI data due Wednesday will be watched for signs that stubborn price pressures are beginning to ebb.

An upside surprise in the figures would pour more cold water on hopes that Reserve Bank of Australia rate cuts are on the horizon. October’s print showed a lack of progress in tamping down underlying inflation, backing expectations among some economists that easing may not come until the second quarter of the year.

Policymakers at the central bank have signaled that they want to see inflation decline over more than one quarter before pulling the rate-cut trigger. But minutes from its December meeting showed that if the future flow of data evolves in line with, or weaker than, the policy board’s expectations, it would further increase confidence that inflation is declining sustainably toward target. The comments were the first acknowledgement by the RBA that the official cash rate might need to fall in coming months after more than a year with interest rates on hold.

Retail sales and international trade figures for November are also due on Thursday.

CHINA

The key releases for China watchers will be consumer and producer price inflation figures for December on Thursday.

A private gauge of services activity in the final month of the year is also due on Monday, with data on foreign exchange reserves and money supply also scheduled during the week.

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01-05-25 1914ET