'First Five Days' Rule Points to a Challenging Year

US equity indices declined in the first five trading sessions of January. This dynamic promises a challenging year for the stock market, according to the old “first five days” rule.

UK Wage Growth Cools Which Could Enable Earlier BoE Rate Cuts

The pound did fall in the aftermath of the release but perhaps not quite as much as you'd expect from such an undershoot. That said, market positioning on rate cuts from the BoE was already far more aggressive than what many, especially at the central bank, have indicated is likely. Markets still see 125 basis points of cuts this year but there's a growing chance of 150 which is more in line with the US and euro area.

British Pound Slips as Wage Growth Slides

The British pound is sharply lower on Tuesday after a solid UK employment report. In the European session, GBP/USD is trading at 1.2641, down 0.68%.

Pound Enters Correction Phase

The British Pound has lost around 0.5% against the Dollar since the start of the day on Tuesday, falling to 1.2660. Markets have eased expectations for aggressive US interest rate cuts. In addition, UK employment data was released that provided new evidence of a slowdown.

Canadian Dollar Lower Ahead of CPI Data

Canada releases December CPI later today, which is expected to rise to 3.4% y/y, up from 3.1% in November. Interestingly, the US inflation report for December rose to 3.4%, up from 3.1% a month earlier. The upward spike in US inflation was driven by gasoline prices, which fell at a slower pace in December than in November. This could repeat itself in the Canadian release.

Canada: Little Progress on Inflation in December

If you are looking for data to signal a rate cut is imminent, this isn't it. December's inflation report underscores that the last mile of getting inflation all the way back to 2% is the hardest. It took about a year for inflation to drop from its peak of 8% to around 3%, but over the past six months further headway has been halting. This leaves the Bank of Canada cautious as it considers when it will be appropriate to cut interest rates.

Sunset Market Commentary

With US investors returning from the Martin Luther King Holiday, question was whether US markets would join yesterday’s rebound in German yields. Or would they maintain their soft bias as was the case after last week’s CPI and even more US PPI data? Early in Asian and European dealings, US yields indeed copied the move from Germany yesterday. The 2-y tried to regain the 4.2% mark.

UK Inflation Unexpectedly Rebounds

Cable rebounded following an unexpected rebound in British inflation numbers this morning. Headline inflation unexpectedly rebounded to 4%, while core inflation remained steady at 5.1% versus the expectation of a decline below the 5% mark.

Any Speculation on Time of BoE Rate Cuts Very Premature

This morning, the UK inflation brought a material upward surprise, suggesting that there is still a lot of work to do for the BoE. Headline inflation rose 0.4% M/M and 4.0% Y/Y (from 3.9%). Core inflation was unchanged at 5.1% (VS 4.9% expected). Services inflation also remains stubbornly high at 6.4% (from 6.3%). The report clearly shows that any speculation on the time of BoE rate cuts is very premature. Sterling rebounds after the data. EUR/GBP drops from 0.8615 back to the 0.86 big figure.

A Bearish Lull in Crypto?

The crypto market has been going around in circles since 13 January, staying near levels 24 hours ago, although Bitcoin’s intraday range exceeded 3.5%. Reaching the highs of the recent trading range triggered a methodical sell-off early on Wednesday and quickly spread to the major altcoins.