💰 Calm Before The Storm: Economic Data to Rock Markets this Week?

Good Morning!

Euro bears might need to check their optimism – fresh inflation data just dropped some cold water on hopes for aggressive ECB rate cuts. December's Eurozone HICP is expected to hit 2.4%, up from November's 2.2%. Spain and Germany have already reported hotter-than-expected numbers, while natural gas prices reaching 14-month highs add another layer of complexity. This last batch of data before the ECB's January 30 meeting could reshape the market's ambitious expectations for nearly 100 basis points in cuts during H1 2025.

In today’s email:

• FedWatch: All eyes on economic data this week 

• Bitcoin: Edging closer to ATH

• Nvidia: Back at ATH as it launches new products 

• Gold: Central Banks continue buying

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THE BIG IDEA

Markets brace for potential pullback as Fed's hawkish stance meets cooling economic indicators, setting up a crucial week of FOMC minutes and jobs data

The opening act of 2025's market drama is all about the Fed's next move, and we're seeing some fascinating plot twists. Despite the Fed's hawkish pivot in December (slashing projected 2025 rate cuts from 100 to 50 basis points), Citigroup's analytics reveal U.S. economic data has been consistently underperforming forecasts since mid-November. This disconnect could spark some serious market recalibration.

This week's spotlight falls on three key performances: First up, the ISM services PMI, where any weakness in our economy's heavyweight champion (the services sector) could suggest markets have overdone their hawkish bet. Then comes the December FOMC minutes – think of it as the Fed's director's cut, where we'll see just how committed they are to this hawkish stance. Finally, December's jobs report takes center stage, with forecasts calling for 160,000 new jobs while unemployment holds at 4.2%.

Markets have been relatively subdued in 2025's opening week, with stocks and bonds taking a slight dip during the holiday-shortened trading period

While most assets played it safe, crude oil and Bitcoin decided to crash the party, surging 4.8% and 4.1% respectively. But the real drama could unfold if upcoming economic data confirms the cooling trend Citigroup's been tracking.

A softer-than-expected showing across these indicators could trigger a significant market pivot – picture Treasury yields retreating, bonds staging a rally, and both stocks and the dollar taking a step back. The key question isn't just about the numbers themselves, but whether the Fed's recent hawkish repositioning might have overshot the mark, potentially setting us up for a market correction as reality catches up with expectations.

MARKETS AT A GLANCE

TOP NEWS

Beijing's latest currency defense tactic sends Hong Kong's yuan funding costs soaring, putting the squeeze on short sellers

China's playing hardball in the currency markets – overnight yuan funding costs in Hong Kong just hit 8.1%, levels not seen since 2021. The PBOC's move appears aimed at deterring bearish bets by making it costlier to short the yuan, which hit two-year lows in December. They're likely trying to prevent the currency from sliding past 7.40 per dollar while managing U.S. tariff threats.

China unveils ambitious plan to break down regional trade barriers and create a unified national market, as domestic consumption becomes crucial amid Trump-era trade tensions

Beijing's dropping new guidelines to tear down the walls between regional markets – a strategy gaining fresh urgency as Trump's return looms. The NDRC's blueprint targets local protectionism, aiming to streamline everything from transport networks to product standards. It's a bold move to boost domestic demand while China grapples with deflation and property market blues.

Nvidia flexes its AI muscles at CES 2025, unveiling game-changing robot training tech, next-gen gaming chips, and its first desktop computer

Jensen Huang just dropped Nvidia's latest tech arsenal at CES – headlined by Cosmos, an AI system generating synthetic training data for robots and autonomous vehicles. The open-license platform promises to slash development costs dramatically. Meanwhile, gaming enthusiasts get the RTX 50 series with Blackwell AI tech, while developers score a $3,000 Linux-powered desktop. Toyota's also hopping aboard with Nvidia's Orin chips.

CRYPTO

Bitcoin edges closer to its all-time high as institutional money floods back, with ETFs pulling in nearly $1B amid Trump-era optimism

Bitcoin's bouncing back with swagger, surging 10% to reclaim $102,000 after December's dip to $92,000. U.S. spot ETFs are fueling the fire, raking in a massive $987M on Monday alone – Fidelity's FBTC led the charge with $370M in inflows. Traders are eyeing $109,000 as the next key level, with Trump's upcoming inauguration adding extra juice to market sentiment.

Canada’s PM Frontrunner Pledges to Make Country a “Crypto Capital”

Pierre Poilievre, Canada’s Conservative Party leader and frontrunner for prime minister, has a pro-crypto history, famously buying a shawarma with Bitcoin in 2022 while pledging to make Canada a blockchain hub. Poilievre’s criticism of central banks and support for banning CBDCs position him as a potential game-changer for Canada’s crypto landscape.

Solayer Unveils InfiniSVM: A Hardware-Accelerated Blockchain Revolution

Solayer is pushing boundaries with InfiniSVM, a lightning-fast, hardware-accelerated Solana Virtual Machine blockchain claiming 1-millisecond transaction confirmations. This protocol, scaling Solana’s network infrastructure, introduces a hybrid proof-of-assigned-stake consensus and integrates yield-bearing assets. Positioned as a game-changer, InfiniSVM signifies Solayer’s evolution from restaking to blockchain innovation, rivaling efforts like Eclipse in the SVM ecosystem.

Nasdaq Seeks Massive IBIT Options Limit Increase Amid Growing Demand

Nasdaq has proposed increasing the options contract limit for BlackRock’s iShares Bitcoin Trust (IBIT) ETF from 25,000 to 250,000, citing growing trading volumes. Analysts highlight the move could boost market liquidity and attract sophisticated traders, though current limits still treat crypto differently than traditional assets. Approval could spark significant market shifts.

GOLD

Central Banks Continue Gold Buying Spree in November, Led by Emerging Markets

November saw global central banks add a net 53 tons of gold to reserves, continuing 2024's strong buying trend. Key players like Poland, Uzbekistan, and India drove demand amid economic uncertainties, with Poland leading year-to-date purchases at 90 tons. As central banks prioritize stability, gold’s appeal remains robust, marking 15 consecutive years of net purchases.

DAILY ECONOMIC CALENDAR (ET)

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