Traders are on edge as they await the US Nonfarm Payrolls report, expected to reveal a slight slowdown in job creation for January. This anticipation comes against a backdrop of renewed fears of a US-China trade war, which have driven safe-haven flows to gold. The precious metal continues to sparkle amid market uncertainty, reflecting concerns over global economic stability.
Amidst these tensions, the India HSBC Composite Purchasing Managers’ Index (PMI) has drawn significant attention. Released monthly by S&P Global and HSBC Bank, the PMI serves as a vital indicator of business activity in India by averaging the manufacturing and services indices. The latest reading for January fell to 57.7, marking a 14-month low and falling short of the consensus estimate of 57.9. This decline from the previous reading of 57.9 indicates slowing activity, which could weigh on the Indian Rupee (INR) if it persists.
Gold prices have benefited from this uncertain environment, as traders seek refuge in safe-haven assets. The RSI on the daily chart suggests that gold is slightly overbought, a signal that may caution bullish traders moving forward. Despite this technical indicator, market optimism remains buoyed by expectations surrounding the FY2026 Budget, which has introduced hopes of economic revitalization.
In the context of global trade, the US President, Donald Trump, has shown a willingness to negotiate. He recently agreed to delay imposing 25% tariffs on Canada and Mexico for one month, indicating a potential opening for discussions.
“If we can't reach a deal with China, the tariffs will be very, very substantial.” – US President Donald Trump
As the PMI data reflects weakening momentum in India's economic sectors, a reading below 50 would signal declining activity—a bearish outlook for the INR. Although the Composite PMI remains above this threshold, its decline raises concerns about sustaining economic growth. The Services PMI registered at 56.5 in January, still indicative of strong growth but slipping from December's 59.3 to its lowest level since November 2022.
Traders are hopeful for a resolution to the US-China trade dispute, which has been a significant source of market volatility. The ongoing negotiations and delays in tariff implementation suggest that both nations recognize the importance of reaching a consensus.
The US Nonfarm Payrolls report, due Friday, is set to be a crucial data point for investors worldwide. Any indication of a slowdown in job creation could further influence market sentiment and impact asset prices globally. As traders navigate these developments, they remain vigilant and poised to adjust their strategies in response to new data and geopolitical shifts.