US economic data was surprisingly strong today. Both the services and manufacturing PMIs significantly exceeded expectations, reinforcing the message that the economy is in good shape and getting even better.
Of course, these are just surveys and can be volatile, but the fact that both are up as much as before and both are now in growth territory is very promising for the economy, but could be slightly worrying for the Fed, if she is worried about the strength demand.
BoC cautious on rate cut talks amid stubborn inflation
The Bank of Canada left interest rates unchanged at its January meeting and signaled it was not yet ready to consider rate cuts. That's very consistent with the message we're getting from other central banks, but also with what to expect until policymakers are absolutely convinced that it's not going to backfire, and then they'll probably go along with it quite quickly interest rate cuts begin.
The stability of core inflation is clearly the main issue here, as it and the overall numbers are only slightly above target. The difference is that progress appears to have stalled, which will of course make policymakers nervous. Markets now expect a rate cut later in the second quarter to allow time for another decline, totaling just 100 basis points this year.
A weak economy could support the ECB's decision to start cutting interest rates
Eurozone data is not improving heading into the new year, with the latest PMI surveys all remaining firmly in decline territory.
While we continue to see improvements in the manufacturing survey, it is from a very low base and is still far from the 50 mark that separates growth from contraction. And it doesn't appear to be on track to cross that threshold any time soon.
The services sector is arguably more problematic as it is a far more important sector of the economy and shows little sign of recovery. This could contribute to the ECB considering a rate cut in the coming months if demand remains weak and the economy is either in or on the verge of recession, but we will need to see more evidence of this in the next six weeks of March, a live outlook . Assuming, of course, that inflation alone doesn't make this possible.
Oil consolidation continues, but upward pressure increases?
Oil prices continue to consolidate, with Brent currently trading not too far from $80 a barrel, but not looking like it will rise further any time soon. Geopolitical risk and the risk of delays and disruptions are a concern, but this is not particularly reflected in the price at this point. The fact that the market has been retreating less and less in recent weeks could indicate that traders have become more concerned. However, it is not clear whether this will be reflected in higher prices and, if so, to what extent.
Gold inventory over $2,000
Gold prices have been quite choppy over the last four sessions but ultimately haven't moved very far. It continues to trade above $2,000, perhaps a sign that traders remain confident that central banks will be forced to cut interest rates soon and several times throughout the year. But that is far from certain at this point and its resilience could be tested in the coming weeks if the data doesn't deliver like it did in the final months of last year.
A potential bearish reinforcement in Bitcoin
Bitcoin is trading just below $40,000 today, testing it as a potential new resistance area after breaking below that level just a few days later. This was a serious psychological blow and a direct bounce back could help repair the damage. Failure, on the other hand, could strengthen the initial bearish signal.
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