Inflation in Focus: Key Data Ahead

Hello traders,

2025 is off to an engaging start, with significant developments across markets and industries. US stock markets remain near historic highs, reflecting resilience in equities, while Bitcoin continues its attempts to consolidate around the psychologically significant $100,000 mark. As the year unfolds, the interplay of economic data and corporate strategies is already providing plenty of material for analysis.

Here’s a detailed look at last week’s highlights and what’s ahead in the coming days.

Strong Economic Data Signals Stability

The latest Non-Farm Payrolls (NFP) report surprised markets with a robust 256K jobs added in December, far exceeding expectations of 164K. This suggests continued strength in the US labor market, a key pillar of economic stability. Supporting this optimism, the JOLTS job openings and ISM Purchasing Managers’ Index (PMI) also delivered better-than-expected results, signaling resilience in hiring and industrial activity.

However, the focus now shifts to inflation. The Consumer Price Index (CPI) reports from the US, EU, and Germany this week will provide critical insights into price pressures and set the stage for the Federal Open Market Committee (FOMC) meeting on January 26–27.

With the CME FedWatch tool currently assigning a 97.54% probability that rates will remain unchanged, it’s clear the market anticipates a steady hand from policymakers. Having implemented significant rate cuts in 2024, the Fed may opt to observe inflationary trends before making further adjustments.

Key Economic Events to Watch

• Monday: Public holiday in Japan (markets to see lighter activity).
• Tuesday: Germany’s Producer Price Index (PPI) data.
• Wednesday: US Consumer Price Index (CPI) – likely the week’s most influential release.
• Thursday: German CPI, giving insight into Europe’s largest economy.
• Friday: EU-wide CPI figures.

These inflation reports will shape market expectations on future monetary policy decisions. For traders, they may provide clarity on whether central banks in the US and EU are nearing the end of their tightening cycles or if additional adjustments are on the horizon.

Meta’s Shift in Content Moderation

Meta has begun the year by introducing a significant shift in its content moderation practices. The company is transitioning from traditional fact-checkers to a community notes system, drawing inspiration from the approach implemented by Elon Musk on X.

Meta’s leadership cited inefficiencies and public dissatisfaction with fact-checking mechanisms as a driver for the change. Under the new model, moderation will focus on curbing illegal activities, with less emphasis on contentious topics like immigration and gender identity.

This decision arrives amidst a politically sensitive backdrop, with Donald Trump’s return to the White House on the horizon. Observers speculate that this pivot may reflect a strategic alignment with more conservative viewpoints.

CEO Mark Zuckerberg has acknowledged that this move could lead to increased harmful content but argues it is a necessary trade-off to reduce the perception of overreach and censorship. Reactions have been mixed: some view the change as a progressive step toward greater transparency and user empowerment, while others worry about the potential for misinformation.

Outlook and Strategy

Inflation remains the dominant theme this week, with CPI data offering crucial insights into the trajectory of monetary policy. Traders should remain alert to shifts in sentiment, particularly in equities, currencies, and commodities, as these releases unfold.

Whether you’re a short-term trader navigating market volatility or a long-term investor planning for broader trends, use this period to reassess your strategies and stay informed. As always, careful analysis and disciplined execution will be key in managing risks and capturing opportunities.

Chart of the Week: NaturalGas (XNGUSD)

Natural gas is highly influenced by seasonal trends and has recently pulled back slightly from its seasonal peak. Will the upward momentum continue, or is a more significant correction on the horizon? Remember, past performance is not an indicator of future results.

Stay sharp,
The TRADE.com Team