After 3 sessions without much relief, and even characterized by very low volatility, Friday's session was a turning point, with the Dollar Index breaking through the 108.00 horizontal support and rapidly falling back to 107.25 (validating a "head and shoulders" configuration below 109.2).

Many commentators attribute this to Donald Trump's desire not to engage in tariff hostilities with China (no tariff hikes in the foreseeable future) and to content himself with threatening Mexico and Canada with a 25% tax on their exports (but there's still a week to negotiate before the February 1 deadline).

While the dollar fell back -0.8% against the euro (to 1.0500) and -1% against sterling (to 1.2480), it lost virtually nothing against the yen (-0.1% to 156.00) after the Bank of Japan's unsurprising decision to raise its key rate from 0.25% to 0.50%, even though inflation in Japan reached +3% in December.

The greenback may have been affected by some disappointing figures published on Friday, while Europe's "global" PMIs were a little less bad than expected (admittedly not good, but reassuring somewhat about the risks of a severe recessionary episode).

Growth slowed markedly in the US private sector in January (-3Pts), according to S&P Global, whose composite PMI index came in at 52.4 in "flash" estimates, compared with 55.4 in final data for December.
The slowdown was concentrated in the services sector, where output grew at the slowest pace since last April, while manufacturing output returned marginally to growth after five months of decline.
The second disappointment was the fall in US consumer confidence to 71.1 in its final version, compared with 74 in December, after a first estimate of 73.2, which economists were expecting to be 73.

Joanne Hsu, the report's author, explains this first drop in the index in the space of six months by the deterioration in households' propensity to purchase durable goods and the prospect of rising unemployment.

At the same time, one-year inflation expectations have risen from 2.8% to 3.3%, back above the 2.3% to 3% range in which they were found in the two years prior to the pandemic.
According to UMich, around 47% of survey participants say they expect the unemployment rate to rise over the coming year, a figure at its highest since the Covid epidemic-related recession.

It wasn't all doom and gloom in the US as existing home sales rose 2.2% in December 2024, to a seasonally adjusted annual rate of 4.24 million, according to the National Federation of Realtors (NAR).

The median sales price of existing homes rose 6% from December 2023 to $404,400, and the inventory of unsold existing homes stood at 1.15 million, representing 3.3 months of inventory at the current clearance rate.

There were also figures in Europe, and they were deemed positive: the preliminary PMI HOCB index measuring private sector activity in France came out slightly up above 48.3, but remained well below 50.
And activity remains languid in the Eurozone: the flash PMI HCOB composite index of overall activity in the Eurozone recovered slightly to 50.2 in January, signalling the region's first rise in economic activity since August 2024.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, points out: "The improvement in economic activity throughout the zone was largely due to the performance of Germany, which saw its overall activity pick up again.
The British private sector also picked up slightly in January, despite the recent reawakening of inflation: the UK composite PMI index rose to 50.9 this month, compared with 50.4 the previous month (Gilts added +5pts to 4.683%, i.e. +3pts weekly).




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