ICMarket

General Market Analysis – 31/01/25

US Stocks Push Higher on Earnings – S&P Up 0.5%

US stock markets pushed higher again yesterday as investors continued to assess a mixed bag of earnings data from mega-cap firms. The Dow gained 0.38%, the S&P rose 0.53%, and the Nasdaq closed 0.25% in the black. The dollar surged towards the end of the day as President Trump reiterated plans to implement tariffs on Canada and Mexico this weekend. The DXY finished the day up 0.28% at 108.16, with notable losses for both the CAD and MXN.

Treasury markets were less impressed, finishing the day close to flat, with the 2-year yield losing just 0.6 basis points to move down to 4.207% and the 10-year dropping 1.4 basis points to 4.514%. Oil prices edged higher on the back of the tariff impact, with Brent up 0.73% to $77.23 and WTI rising 0.70% to $73.13 per barrel. Gold surged to a new all-time high of $2,798.24 and remained at elevated levels, closing at $2,794.11.

Currency Traders Prepare for More Tariff Volatility

Once again, sharp moves were seen in currency markets overnight following tariff updates from President Trump. While the dollar appreciated as expected, the real impact was felt in local currencies, with USDCAD soaring to fresh multi-year highs within seconds and USDMXN rallying close to last year’s peak.

Traders are now seeking ways to capitalise on ‘tariff trades’, with both pairs likely to break technical levels that could propel them into fresh higher ranges. Volatility is expected to remain high in these pairs, as well as the CNH, and there could be a particularly turbulent open in Asian markets on Monday if tariffs are implemented over the weekend when markets are closed. Options interest is likely to increase, with topside protection being favoured due to the potential for significant slippage in spot positions should key technical levels break.

Busy Day to End a Busy Week

It looks set to be a busy trading day to conclude an already eventful week for financial markets, as attention shifts away from central banks and towards geopolitical updates and economic data.

Geopolitical developments have already impacted the Asian open this morning as fresh tariff discussions hit the market, and traders anticipate continued volatility throughout the day. The economic calendar is packed, starting early with Japan’s latest Tokyo CPI data release. During the European session, the focus will be on German CPI data, with each individual state publishing its figures over the course of the day.

However, the US session is expected to dominate sentiment once again, with a series of major data releases due at the same time. Canadian GDP, the US Employment Index, and the Core PCE Price Index will all be published early in the New York session. Most traders anticipate that the Core PCE number will be the key market driver, as it is the Federal Reserve’s preferred inflation measure—especially if it deviates significantly from the expected 0.2% month-on-month increase. Nevertheless, traders should keep an eye on all data sets and remain prepared for market moves right up until the close.