Explore the world.

Assess underlying market conditions and fundamentals in the world's major economies.

World

Stay ahead.

Follow the biggest stories in markets and economics in real time.

Subscribe

Get insight into the latest trends and developments in global currency markets with breaking news updates and research reports delivered right to your inbox.

After signing up, you will receive regular newsletters from Corpay, and may unsubscribe at any time. View Corpay’s Privacy Policy

Volatility Falls Ahead of Central Bank-Packed Trading Week

Trading activity in global financial markets remains muted ahead of the last US inflation print to land before next week’s central bank meetings. With equity futures inching down and Treasury yields holding flat, the dollar is effectively unchanged against its significant counterparts, with the inflation-propelled Australian dollar looking like the only major to eke out serious gains over the week.

The US economy grew substantially faster than forecast in the final quarter of 2022, but odds on a smaller rate increase at next week’s Federal Reserve meeting remained unchanged, and markets continued to brace for a recession later this year. Data released by the Bureau of Economic Analysis showed gross domestic product increasing at a 2.9-percent annualized rate between October and December after a 3.2-percent gain in the third quarter. Accounting identities played a big role, with inventories adding 1.5 percent and net exports contributing 0.6 percent to the headline, while final sales to private domestic purchasers climbed just 0.2 percent on an annualized basis. Treasury yields and the dollar were effectively unmoved in response.

Today’s inflation, income, and spending data might have similarly-weak effects. Markets think the Fed’s preferred inflation indicator—the core personal consumption expenditures index—will climb 0.3 percent month-over-month, up 4.4 percent relative to the prior year, and down from 4.7 percent in November. Personal income gains should continue, with stronger wages and ongoing tax refunds helping to bolster the flow of cash into the household sector. Spending is expected to shrink slightly as both the tangible and services categories post year-end declines.

The University of Michigan’s second consumer sentiment index estimate for January is expected to hold at 64.6, unchanged from the initial reading. Year-ahead inflation expectations, which fell from December’s 4.4 percent to 4 percent should hold steady, suggesting that households—more sensibly than some economists—remain on Team Transitory, seeing the post-pandemic surge in prices as originating in coronavirus-related supply disruptions and excess government stimulus, not a structural shift in the economy’s underpinnings.

In next week’s central bank meetings, the Federal Reserve is almost universally expected to raise rates by a quarter percentage point, while the Bank of England and European Central Bank are likely to deliver a half percentage point each. Surprises, if there are any, could come in the forward guidance provided by policymakers, with the Bank of Canada’s surprising strong commitment to a “conditional pause” paving the way for more explicit acknowledgement that monetary tightening cycles are nearing completion. US and European policymakers are likely to make half-hearted attempts at tilting against easier financial conditions, but dissent among members of the UK’s Monetary Policy Committee could make for a more confusing—and potentially dovish—set of communications.

Non-farm payrolls, due for release next Friday, are seen climbing by 175,000 positions in January, with widespread hiring continuing to offset high-profile layoffs from the likes of Amazon and Meta. The unemployment rate may tick up slightly, but should remain near historic lows. In the absence of a major surprise, these numbers are unlikely to force a reappraisal of the Fed’s monetary tightening trajectory.

Currency markets grapple with Hassett's rise as Fed chair candidate, along with UK budget chaos
RBNZ & AU CPI in focus
Optimism returns as 'Fed put' comes back into play
Risk appetite turns fragile, markets reverse some gains
Market swings continue
Shaky ground

Latest Analysis

Latest Analysis

Data and information on this website is provided “as is” and for informational purposes only. Information on the website does not bind Corpay in any way; nor is it not intended as advice, a recommendation or an offer or solicitation for the purchase or sale of any financial products. Data and other information are not warranted as to completeness or accuracy and are subject to change without notice. All charts or graphs are from publicly available sources, or our proprietary data. Nothing in this material should be construed as investment, financial, tax, legal, accounting, regulatory or other advice or as creating a fiduciary relationship. Corpay disclaims any responsibility or liability to the fullest extent permitted by applicable law, for any loss or damage arising from any reliance on our use of the data in any way. You should contact your Corpay sales representative for clarification on the range of financial instruments available in your jurisdiction. Copyright Cambridge Mercantile Corp. 2022.