BoJ Rate Decision & U.S. Economic Data: What to Expect

January 20, 2025

During the week of January 20 to January 24, 2025, several key economic indicators and events are anticipated to influence financial markets.

KEY ECONOMIC INDICATORS

BoJ interest rate decision:

The Bank of Japan is likely to raise its short-term policy rate from 0.25% to 0.5%, the highest level since 2008. This move reflects Japan’s steady economic growth and inflation, consistently exceeding the 2% target. However, uncertainties tied to U.S. policy changes under the new administration could influence this decision.

U.S. Treasury yields and economic data:

Investors are closely watching U.S. Treasury yields, which have fluctuated due to strong job growth and persistent inflation. The 10-year yield has surpassed 4.7%, driven by expectations of potential policy changes under the new U.S. administration. Upcoming economic data on growth, employment, and inflation are likely to impact yields further and shape Federal Reserve policy outlooks.

Global economic outlook:

S&P Global Market Intelligence forecasts global real GDP growth to slow to 2.5% in 2025, down from 2.7% in 2024. This slowdown is driven by expected U.S. tariff hikes and their impact on global trade, creating a more challenging and uncertain environment. The U.S. GDP growth forecast for 2025 has been revised to 2.0%, while China’s growth is projected at 4.2%.

U.S. crude oil inventories

The U.S. Energy Information Administration (EIA) will release its Weekly Petroleum Status Report on Thursday, January 23, 2025, due to the government closure on January 20. Crude oil inventories dropped by 1.96 million barrels for the week ending January 10, 2025, marking the eighth consecutive decline. For the week ending January 17, analysts expect a further drawdown of 1.5 to 2.0 million barrels, continuing the trend of declining inventories at a two-year low.

MARKET MOVER

XAU/USD

Selling pressure emerged near the previous high of 2726.0.
The level of 2721.3 has proven to be a key pivot point.
Current conditions offer a favorable risk/reward setup for market sell orders.
Bearish divergence is anticipated to limit further upside potential.
Initial optimism may drive gains, but extended upward moves are likely to encounter resistance and fail.

Trade Opportunity: Target 1: 2668.5 // Target 2: 2658.5 // Expires: 18 January 2025

GBP/JPY

While bears remain in control, the slowing negative momentum suggests a potential reversal.
The selloff has reached an exhaustion point on the daily chart.
The favoured strategy is to buy on pullbacks.
Custom support is identified at 189.40.
The RSI continues to trend downward.

Trade Opportunity: Target 1: 192.2 // Target 2: 193 // Expires: 18 January 2025

EUR/USD

Prices are pushing higher, breaking out from a bullish flag/pennant pattern.
The projected target based on the measured move is 1.0341.
Most of the early daily gains have been reversed.
A Fibonacci confluence zone is identified at 1.0196.
The recommended strategy is to sell into rallies.

Trade Opportunity: Target 1: 1.0214 // Target 2: 1.0196 // Expires: 18 January 2025

MARKET NEWS

Foreign Exchange

The U.S. Dollar Index extended its decline for a fourth consecutive session, slipping below the 109.00 level.
EUR/USD edged higher by 10 pips to 1.0299.
USD/JPY fell sharply, losing 130 pips to 155.17, as the yen strengthened further following hawkish remarks on interest rates from the Bank of Japan’s governor and deputy governor.
GBP/USD eased by 12 pips to 1.2228. U.K. economic data showed GDP grew by 0.1% month-on-month in November (in line with expectations, compared to -0.1% in October), while industrial production declined by 0.4% (vs. +0.2% expected, following a -0.6% drop in October).
AUD/USD slipped 17 pips to 0.6209.
USD/CHF dipped 17 pips to 0.9109, whereas USD/CAD rose 53 pips to 1.4393.

Commodities and Stocks

On Thursday, U.S. stocks gave back some of the prior session’s gains:

The Dow Jones Industrial Average fell 68 points (-0.16%) to 43,153.
The S&P 500 dropped 12 points (-0.21%) to 5,937.
The Nasdaq 100 declined 146 points (-0.69%) to 21,091.

Federal Reserve Governor Christopher Waller suggested that if economic data weakens further, there could be three or four interest-rate cuts this year.

The U.S. 10-Year Treasury yield dropped 5 basis points to 4.606%.

Major tech stocks closed lower:

Apple (AAPL) fell 4.04%.
Tesla (TSLA) declined 3.36%.
Nvidia (NVDA) slipped 1.96%.

U.S. economic data highlights:

Retail sales rose 0.4% month-on-month in December (vs. +0.5% expected, +0.8% in November).
The Philadelphia Fed manufacturing index surged to 44.3 in January (vs. -10 expected, -16.4 in December).
Initial jobless claims increased to 217,000 (vs. 209,000 expected).

European stocks advanced:

Germany’s DAX 40 gained 0.39%.
France’s CAC 40 rose 2.14%.
The U.K.’s FTSE 100 added 1.09%.

Commodities:

WTI crude oil retreated from a six-month high, falling $1.36 (-1.7%) to $78.68 a barrel. Reports suggest Yemen’s Houthi militia may announce a halt to attacks on ships in the Red Sea following a Gaza cease-fire deal.
Gold gained $18 to $2,714 an ounce, marking a three-session rally.

Asian Session Updates