Trading Week Ahead: NFP, Rate Cuts, and Tech Earnings in Focus

Weekly Market Watch: February 3rd – 9th February 2025

The week ahead is packed with major market-moving events, with traders keeping a close eye on key economic data and central bank decisions. From interest rate moves to crucial jobs reports, there’s plenty on the radar that could shake up global markets. Here’s what to watch:

U.S. Economy: Nonfarm Payrolls in Focus

The U.S. dollar’s recent movements have been largely driven by shifting expectations around Federal Reserve policy and the latest trade tariff headlines. Last week’s Federal Reserve decision to hold interest rates steady was accompanied by a cautious stance from Chair Powell, who highlighted progress on inflation but refrained from signaling imminent rate cuts.

This makes the upcoming Nonfarm Payrolls report for January particularly crucial. December’s data showed robust job growth of 256K, with wages remaining elevated around 4% year-over-year.

A similarly strong reading this time could dampen expectations for Fed rate cuts, bolstering the dollar. Conversely, weaker employment figures may reinforce market expectations of rate reductions later this year.
Alongside NFP, investors will also track the ISM Manufacturing and Non-Manufacturing PMIs, as well as the ADP private employment report, for further insight into U.S. economic activity.

United Kingdom: BoE Decision – A ‘Hawkish Cut’?

The Bank of England is expected to cut interest rates by 25 basis points this week, as concerns over sluggish growth and easing inflation pressures mount. Market pricing suggests nearly a 90% probability of a rate reduction. However, the BoE could take a cautious approach by signaling that future cuts will be data-dependent rather than pre-committing to a full easing cycle.

Despite inflation cooling, core price pressures remain above the BoE’s 2% target, particularly in services and rental inflation. If the central bank delivers a rate cut but revises up its inflation outlook, this could lead to a short-term rebound in the British pound as markets reassess the pace of future easing.

Canada: Jobs Data to Shape BoC Policy

The Bank of Canada recently cut rates by 25 basis points while acknowledging the risks posed by U.S. tariffs. Policymakers now face a balance while slower growth may justify further cuts, persistently high inflation could limit room for additional easing.

Friday’s employment report will be key in determining the BoC’s next steps. Strong job creation could lead to a pause in rate cuts, supporting the Canadian dollar, whereas a weak report may fuel speculation of another cut in March.

Eurozone: Inflation and Retail Sales Data

The European Central Bank cut rates last week while maintaining a cautious stance on the path ahead. Monday’s flash CPI data will provide further insight into inflation trends. A softer-than-expected reading could reinforce expectations for another ECB cut in March, pressuring the euro. Additionally, Eurozone retail sales data will help gauge consumer demand and overall economic health.

Asia-Pacific: RBNZ and BoJ on Watch

New Zealand’s Q4 employment report will be crucial in shaping expectations for the Reserve Bank of New Zealand’s next move. A weak labor market print could push the RBNZ toward a larger 50bps rate cut. Meanwhile, Japan’s wage data could influence speculation about the Bank of Japan’s next policy shift, particularly if wage growth accelerates.

U.S. Trade Policy: Tariffs Back in Focus

Trade tensions remain a dominant theme, with President Trump reiterating his commitment to imposing higher tariffs on imports. While initial reports suggested a more gradual approach, Trump dismissed these claims, stating that tariffs will be “much bigger” than expected.

Markets are closely watching the impact of the first round of 25% tariffs on Canadian and Mexican imports, implemented on February 1st. If trade tensions escalate further, risk-sensitive assets could come under pressure, while the U.S. dollar may continue to strengthen as a safe-haven asset.

Stock Market – Earnings Season Continues

Major tech companies will report earnings this week, with Alphabet and AMD releasing results on Tuesday, followed by Amazon on Thursday. Strong corporate earnings could support equity markets, while any disappointments may trigger broader risk aversion.

Market Sentiment and Trading Opportunities

• US. Dollar: If job data beats expectations, USD strength could continue, limiting downside for pairs like EUR/USD and GBP/USD.
• British Pound: A ‘hawkish’ BoE rate cut could provide a short-term boost, but further downside risks remain if economic data weakens.
• Canadian Dollar: The employment report will be key—strong data could support CAD, while weakness may drive further depreciation.
• Euro: Inflation and retail data could drive volatility, with softer numbers reinforcing expectations for more ECB easing.
• Risk Assets: Equities and commodity currencies remain vulnerable to trade developments and central bank policy shifts.

Technical Analysis of the Week: Nasdaq US100

Elliott Wave pattern on the Nasdaq. Please remember: past performance is not an indicator of future results

The NASDAQ chart shows a developing Elliott Wave pattern called a contracting triangle, which consists of five waves (A, B, C, D, and E) within converging trendlines. ​ This pattern usually indicates a continuation of the main trend after completion. ​

Currently, the market is in wave D, nearing the apex, with wave E expected to complete near the 21,000 level. ​ This could signal either a reversal or continuation of the trend. ​ A break below 21,000 suggests bearish momentum, while a breakout above the triangle’s upper boundary indicates a bullish continuation. ​

External factors like tariffs could increase market volatility and impact the NASDAQ, reinforcing potential downside risks. ​

Stock of the Week: Microsoft (MSFT)

Please remember: past performance is not an indicator of future results

Microsoft’s recent earnings report highlighted both the opportunities and challenges facing the tech giant as it is big on AI.

Key Takeaways: 

• Revenue and earnings beat expectations, driven by strong growth in AI-related cloud services, which now contribute $13 billion annually.
• However, demand for Microsoft’s AI-powered Azure services is outpacing its ability to build data centers, creating a bottleneck that could weigh on near-term growth.
• Shares fell nearly 5% post-earnings as investors questioned whether Microsoft can scale quickly enough to justify its massive AI investments.

What’s Next:

Microsoft plans to invest $80 billion in AI infrastructure this fiscal year to address capacity constraints. However, competition from Chinese AI startups like DeepSeek could intensify pricing pressures, making execution critical for Microsoft’s long-term success.