Australian inflation data takes centre stage as ASX 200 prepares for impact

Forex traders should note that Australia is set to release its monthly Consumer Price Index (CPI) tomorrow, a key event likely to influence AUD pairs and broader market sentiment. This data will provide fresh insights into inflationary pressures and may impact Reserve Bank of Australia (RBA) policy expectations.

Mixed Eurozone and UK data set the tone

Recent final Purchasing Managers’ Index (PMI) readings for December across major European economies and the UK have been mixed but generally slightly softer than preliminary estimates. Notable releases include:

– UK Services PMI fell to 51.4 from a preliminary 52.1.
– Eurozone Services PMI came in at 52.4 versus 52.6 prelim.
– Germany’s Services PMI was marginally higher than expected at 52.7.
– France saw a slight dip to 50.1 in Services PMI compared to 50.2 prelim.
– Italy’s Services PMI declined significantly to 51.5 against an expected 54.0.
– Spain’s Services PMI exceeded expectations at 57.1.

Additionally, French preliminary CPI inflation rose by 0.8% year-on-year, below the 0.9% forecast. German states reported softer headline inflation readings for December. These figures are unlikely to alter the European Central Bank’s (ECB) stance, with markets widely predicting no monetary policy changes throughout 2026.

US dollar and Treasury movements ahead of major US releases

The US dollar regained some ground following yesterday’s weak ISM Manufacturing PMI, although overall market sentiment remains cautious. Traders are closely watching upcoming US reports, including Friday’s Non-Farm Payrolls (NFP) and next week’s CPI data. Market expectations for central banks remain fairly steady as key data approaches.

US Treasuries have traded within a stable range since September, with long-term yields showing more upward pressure than short-term ones. This dynamic reflects ongoing uncertainty amid recent soft US economic data and the Federal Reserve’s dovish approach.

Commodities and equities update

Major stock indices have largely moved higher, maintaining a positive market mood. Precious metals continue to find support, with gold climbing 0.35% and silver gaining more than 2%. This reflects market preference for safe-haven assets amid economic caution.

Other events and outlook

The Japanese bond sell-off has persisted into the new year, highlighting shifting dynamics in fixed income markets. Forex traders should also be aware of FX option expiries scheduled for 10am New York time on 6 January, which might add volatility.

Looking ahead, the Australian CPI release tomorrow will set the tone for the week. Following this, traders can expect a series of important economic reports that could influence global forex markets and investor positioning.

Original Source: Giuseppe Dellamotta of investinglive.com