News

• Trump: I may want to keep Hassett where he is
• Canada strikes tariff deal with China on agriculture and electric vehicles
• Powell will be tempted to stay as a Governor beyond May, former Fed vice chair says
• Fed's Bowman: Should be ready to cut rates again amid job market risks
• US industrial production rises more than expected in December
• Trump says he 'greatly respects' that Iran have been cancelled
• Lithium prices go parabolic, but Scotiabank warns it's 'Too Fast, Too Furious'
• US NAHB January home builder sentiment index 37 vs 40 expected
• Is Rick Rieder the darkhorse for the Fed job?
• Jefferson says he doesn't want to pre-judge Jan decision

Markets:

• Gold down $32 to $4582, silver down 3%
• WTI crude oil down 32-cents to $59.51
• US 10-year yields up 6.7 bps to 4.23%
• JPY leads, AUD lags
• S&P 500 down 0.1%

It's a holiday on Monday and markets on Friday mostly traded like an extra-long weekend. Newsflow was steady with some Fed talk ahead of the midnight blackout but ultimately, the moves in the FX market were minimal to finish the day.

Below the surface it was a bit more lively. The big moves on the day came after Trump said to Hassett at an event:

“I actually want to keep you where you are, if you want to know the truth."

That led the betting market to drop the odds on Hassett down to 17%. However broader market reactions may cause Trump to pivot back to Hassett. Treasury yields rose 5-6 bps across the curve on the possibility of a less-dovish Fed chair. That long-dated yields would also rise is something of a surprise as Hassett could stoke the inflationary fires.

In the same vein, the US dollar strengthened on the headlines and that runs counter to what Trump generally wants. Stock markets also dipped slightly, though not materially.

The NAHB numbers highlighted a major weak spot in the US: housing. There is talk that the Trump admin will let Americans draw down 401K retirement plans to buy homes as it faces poor polling on affordability. Today's rise in long-term yields also won't help.

The week ahead is a short one but will include some major economic date and we could get the Supreme Court decision on tariffs (Tuesday was announced as a decision day). Have a great weekend.

more to come

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Earlier, repeating ICYMI:

Japan’s Producer Price Index (PPI), officially known as the Corporate Goods Price Index (CGPI), measures changes over time in the prices that domestic producers receive for the goods they sell. The index is compiled and published by the Bank of Japan, and is designed to capture price movements earlier in the supply chain than consumer-facing inflation gauges.

Unlike the Consumer Price Index (CPI), which tracks the prices households pay for a basket of goods and services, the CGPI focuses solely on prices charged by companies. As such, it provides insight into cost pressures facing producers rather than consumers. Movements in the index can therefore act as an early signal of inflationary forces building within the economy, particularly if firms attempt to pass rising costs on to end users.

The CGPI is constructed using a broad basket of domestically produced goods that reflects the structure of Japan’s industrial economy. This includes raw materials such as metals and chemicals, semi-finished goods, and a range of finished products. Each category is assigned a weight based on its relative importance to overall economic activity, allowing the index to capture shifts across different stages of production.

However, the CGPI has several limitations worth noting. It does not adjust for quality improvements over time, which means price increases may sometimes overstate underlying inflation. In addition, the index only covers domestically produced goods and excludes imported items, limiting its usefulness in assessing external price shocks such as exchange-rate moves or global commodity swings.

From a market perspective, the CGPI is closely watched for its implications for both consumer inflation and currency dynamics. A firmer-than-expected reading could support the view that pipeline inflation remains alive, potentially lending the yen short-term support. However, given the broader backdrop of expected fiscal stimulus, political uncertainty, and speculation over an early election, any yen strength following the release may struggle to persist once the initial reaction fades.

Summary:

• Consumer sentiment slips further into pessimistic territory

• Rate expectations jump, weighing on confidence

• Near-term economic outlook deteriorates most sharply

• Job confidence softens, housing sentiment steadier

• Mixed backdrop for upcoming RBA decision

Australian consumer confidence slipped further into pessimistic territory at the start of 2026, with the latest Westpac–Melbourne Institute survey showing households growing more cautious about the year ahead as interest-rate expectations shift higher.

The headline Consumer Sentiment Index fell 1.7% to 92.9 in January, following a sharp 9% decline in December. While confidence remains well above the extreme lows seen during the 2022–2024 cost-of-living crisis, the reading below 100 indicates pessimists continue to outnumber optimists.

Westpac economist Matthew Hassan said households are becoming increasingly concerned about what 2026 may bring for family finances and the broader economy. A key driver remains a sharp turnaround in interest-rate expectations, with nearly two-thirds of consumers now expecting mortgage rates to rise over the next year, more than double the proportion recorded in September.

The deterioration in January was concentrated in near-term expectations. Sub-indexes tracking family finances over the next year and the economic outlook over the coming 12 months fell 4.5% and 6.5% respectively. Consumers also became less confident about job prospects, reinforcing signs that labour-market optimism is cooling after a period of resilience.

These declines were partially offset by modest improvements elsewhere. Assessments of family finances compared with a year ago rose 2.3%, while longer-term economic expectations and views on whether now is a good time to buy major household items edged higher. Housing-related sentiment was comparatively resilient, with younger consumers remaining positive on buying conditions despite a slight cooling in house price expectations.

For policymakers, the survey presents a mixed backdrop ahead of the Reserve Bank of Australia’s next meeting, February 2 and 3. Softer consumer confidence and easing demand indicators support the case for patience, even as households increasingly brace for higher borrowing costs. With CPI data set to be a key focus in coming weeks, the RBA is likely to weigh signs of moderating demand against still-elevated inflation risks before adjusting its policy stance.

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RBA dates this year:

Daily Pivots: (S1) 1.1666; (P) 1.1684; (R1) 1.1696; More…. Immediate focus is now on 1.1658 temporary low in EUR/USD. Firm break there will resume the decline from 1.1807. More important, that would indicate that corrective pattern from 1.1917 is already in the third leg. Deeper fall should then be seen to 1.1467 support. On the […]

The post EUR/USD Mid-Day Outlook appeared first on ActionForex.

The Canadian Dollar (CAD) flatlined on Tuesday, holding in a near-term range against the US Dollar (USD) as markets grind their way through the end-of-year slowdown. Market momentum remains absent with most market participants sidelined through the final trading week of 2025.