Global markets exhibited caution on Tuesday as various economic indicators and political developments influenced trading activities. The upcoming Canadian and New Zealand Consumer Price Index (CPI) data are poised to shape investor expectations regarding future monetary policies by the Bank of Canada (BoC) and the Reserve Bank of New Zealand (RBNZ). Meanwhile, the Bank of Japan (BoJ) is anticipated to raise interest rates at its first meeting of 2025. This decision is contributing to the current market sentiment.
In Europe, traders focused on Purchasing Managers' Indices (PMIs) for the euro and pound, as these figures are crucial for understanding economic health. Concurrently, tax cuts and deliberations about the Federal Reserve's future strategies remain key background considerations for investors.
The AUD/USD currency pair saw a weakening to approximately 0.6190, reversing a two-day losing trend. Analysts attribute this movement partly to rising expectations that the BoJ will increase rates, which has put a cap on the pair’s performance. On the other hand, the USD/JPY pair attracted intraday sellers following positive Machinery Orders data from Japan, which temporarily stalled its recovery from sub-155.00 levels, bringing it to nearly a four-week low last Friday.
Trading activities were further influenced by the closure of US markets on Monday in observance of Martin Luther King Day. Investors remained cautious as they awaited the inauguration of President-elect Donald Trump, a political event anticipated to significantly impact market dynamics. Trump's potential return to the White House is already affecting the trading environment globally.
Amid these economic and political variables, the World Economic Forum in Davos is garnering attention. The discussions and outcomes from this international forum are expected to provide further insights into global economic trends.