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Week Ahead: FOMC, ECB & BoC rate decisions, plus tech earnings
Updated Updated Sun, 2025 January 26 12:27
It’s a jam-packed week full of major risk events including global central bank meetings, growth and inflation data, plus earnings from some of the “Mag 7”. Of course, looming over everything will be Donald Trump and any fresh policies regarding trade policy. That said, the fears of massive tariffs on his first day in office did not materialise, and markets cheered. With the previous week’s US inflation data also still providing comfort, equity markets gained with the S&P 500 making its first new record-high of the year, while the dollar sunk.
The Fed convenes for their first meeting of 2025 with an extended policy pause seen as likely by consensus for at least the first half of the year. Improving economic conditions through the final quarter of 2024 see markets only pricing in around 40bps of rate cuts over the next twelve months, with a first full cut not predicted until July. Data has been strong with Q4 GDP figures potentially confirming growth close to 3% for three quarters in a row.
This begs the question as to whether the economy actually needs a mix of fiscal policy and easier regulations at this point? Tariffs in this kind of environment with less slack mean higher prices for the US consumer. That implies higher for longer rates and less Fed easing, not something Trump said he wanted last week. Chair Powell will likely have to navigate this during his press conference. As we said, a prolonged pause seems very possible with little forward guidance, until Trump 2.0 policies are clearer.
The ECB and Bank of Canada are set to cut rates with the former leaning more dovish in December. Even normally hawkish central bankers have recently signalled more ECB policy easing is coming. As President Lagarde spelt out, the process of lower inflation is now secure. That means guidance will be key for markets and the euro, as well as any responses to the tariff question. EUR/USD recently broke higher out of the long-term bear channel. The key level remains 1.0448, with next upside markers sitting at 1.0575 and around 1.06.
Megacap tech earnings will be a focus for stock markets with Tesla, Microsoft and Meta reporting after the Wednesday close and Apple at the same time the following day. These are high impact names which comprise roughly a third of the S&P 500 market cap. Notably, tech performance has lagged cyclicals in 2025. So far, the Q4 season has gone well although this has largely centred on financials. Two of Europe’s biggest companies also report this week, with luxury bellwether LVMH on Tuesday and Dutch chip maker ASML on Wednesday.
In Brief: major data releases of the week
Wednesday, 29 January 2025
– Australia CPI: Q4 inflation is forecast to remain at 0.3% q/q and 2.5% from 2.8% y/y. Cost-of-living assistance has brought headline CPI back to target. This means a first rate cut of the cycle by the RBA at its next meeting in mid-February.
– Bank of Canada Meeting: The BoC is widely expected to cut rates by 25bps to 3%. Inflation is within the 1-3% target range, unemployment is trending higher amid tepid growth. The meeting may play a secondary role for CAD to US tariffs which have been threatened by Trump on February 1st. If he scales back, USD/CAD could break down through 1.43.
– FOMC Meeting: Expectations are for Fed to hold rates at 4.25%-4.50%. Policymakers signalled a pause in the easing cycle in December. Core inflation has recently softened but remains above target, while employment is resilient. Upcoming trade and fiscal policies are key. The dollar has lost close to 2% of its value this year as Trump’s bark has proved bigger than his bite. So far.
Thursday, 30 January 2025
– ECB Meeting: A 25bps rate cut is nailed on, which takes the deposit rate to 2.75%. Soft indicators paint a weak outlook although the recent composite PMI printed above 50. Inflation ticked higher but wage growth is expected to ease. The terminal rate is seen at around 2%.
– US GDP: Growth is predicted to hold at a modestly above-trend pace of 2.6% from the prior 3.1%. The exceptional US economy continues further into excess demand.
– Tokyo CPI: Core inflation is expected to tick one-tenth higher to 2.5% in January. The headline could ease. This is the forerunner to the nationwide release due in late February. The BoJ forecast underlying inflation to remain at or above its 2% target over the medium term. That is seen as a strong signal of more rate hikes ahead.
Friday, 31 January 2025
– US Core PCE: The Fed’s favoured inflation gauge is seen printing at 0.2% m/m, consistent with the 2% annual target, and 2.8% y/y. Headline PCE comes in at 0.3% m/m due to a rise in fuel prices. that lifts the y/y rate to 2.5%.
