2025 Market Outlook: Key January Events to Watch 
Markets React as Tensions Rise Between White House and Federal Reserve Over Interest Rate Pressure 
Japan Declines Comment on BOJ’s Absence From Global Support Statement for Fed Chair Powell. Source: Asturio Cantabrio, CC BY-SA 4.0, via Wikimedia Commons 
Bank of England Expected to Hold Interest Rates at 3.75% as Inflation Remains Elevated 
ECB’s Cipollone Backs Digital Euro as Europe Pushes for Payment System Independence 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
MAS Holds Monetary Policy Steady as Strong Growth Raises Inflation Risks 
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
RBA Deputy Governor Says November Inflation Slowdown Helpful but Still Above Target 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
BoC (Bank of Canada) monetary policy is scheduled for today, the policy expectations have firmed up in the past week or more and the LFS data added some incremental conviction for a hike on Jul 11th.
The breakdown (full time/part time) looked a little mixed but a breakdown of the breakdown (by sector) shows encouraging signs – a rebound in construction jobs and the first growth in manufacturing employment this year. Market pricing reflects around 87% of a 25bps hike priced in now.
This is an MPR meeting and there will be a press conference afterward; messaging around the rate outlook will therefore count.
The Governor recently noted clearly that given where the economy is, higher rates will be warranted so markets will want to assess where the policy risks lie over the balance of the year.
We anticipate a 25bps tightening next week and another later this year (to get to 1.75% for end 2018). Our end 2019 target is 2.50%.
Ahead of today’s Canadian bank’s monetary policy, let’s just glance through the risk reversals of USDCAD across all tenors that are showing no changes, while IV skews of 1m expiries still signal bullish hedging bids. The positively skewed IVs imply that the bullish risks remain intact despite the above stated fundamental factors.
The future volatility determines option pricing, yet it is impossible for any veteran in FX markets to anticipate accurate future volatility. Nevertheless, it is quite possible to ascertain the marketplace’s expected future volatility using the option’s price itself. This is known as implied volatility (IV) and, due to the nature of its calculation, it is theoretical. If IV is high, it means the market thinks the price has potential for large movement in either direction. Low IV implies the market reckons the price would not move much.
While 1m forward rates show negligible changes and bearish targets in the longer tenors.
Currency Strength Index: FxWirePro's hourly CAD spot index is displaying shy above 26 levels (mildly bullish), while hourly USD spot index was at 154 (highly bullish) while articulating (at 10:44 GMT). For more details on the index, please refer below weblink:
