Strong US surveys, cautious BoC, Eurozone economy struggling

US economic data was surprisingly strong today, with both the services and manufacturing PMIs comfortably exceeding expectations and reinforcing the message that the economy is in good shape, even getting better.

Of course, these are just surveys and can be volatile but the fact both jumped as much as they did and both are now in growth territory is very promising for the economy but may be slightly concerning for the Fed if it is concerned about the strength of demand.

BoC cautious on rate cut talk amid sticky inflation

The Bank of Canada left interest rates unchanged at the January meeting and signalled it isn't yet ready to consider rate cuts. That's very aligned with the message we're getting from other central banks but also what is to be expected until policymakers are absolutely convinced it won't backfire, at which point they'll probably start cutting quite quickly.

The stickiness of core inflation is clearly the key issue here as it and the headline figures are only a little above target. The difference is progress appears to have stalled which will naturally make policymakers nervous. Markets now expect a rate cut later in the second quarter to allow time for it to fall further and only 100 basis points in total this year.

A weak economy could aid ECB decision to start cutting rates

The data from the eurozone isn't improving early in the new year, with the latest PMI surveys all remaining firmly in contraction territory.

While we're continuing to see improvements in the manufacturing survey, that comes from a very low base and still some way from the 50 threshold that separates growth from contraction. And it doesn't appear on course to breach that threshold any time soon.

The services sector is arguably more problematic as it's a far more important segment of the economy and it's showing little sign of recovering. This may aid the case for the ECB to consider cutting rates in the coming months if demand remains soft and the economy is either in or on the brink of recession but we'll need to see more evidence of that over the next six weeks to make March a live prospect. Assuming, of course, inflation doesn't enable that all on its own.

Oil consolidation continuing but upside pressures building?

Oil prices are continuing to consolidate, with Brent now not trading too far from $80 a barrel but also not looking like imminently bursting higher. Geopolitical risk and the threat of delays and disruption are causing some alarm but that's not being particularly reflected in the price at this stage. That the market is pulling back less and less in recent weeks could be indicative of traders becoming more apprehensive but it's not clear whether that will translate to higher prices and if so, to what extent.

Gold holding above $2,000

Gold has been quite choppy over the last four sessions but ultimately hasn't moved very far. It continues to trade above $2,000, perhaps a sign that traders remain confident that central banks will be forced to cut rates soon and on multiple occasions throughout the year. But that is far from certain at this point and its resilience above here may be tested over the coming weeks if the data doesn't deliver as it did in the final couple of months of last year.

A potential bearish reinforcement in Bitcoin

Bitcoin is trading just below $40,000 today and testing it as a potential new area of resistance having broken below here only a couple of days below. That was a big psychological blow and a move straight back above could go some way to repairing the damage. A failure on the other hand could reinforce the initial bearish signal.