In terms of financial data releases, the first full week of the year started with a surge in the eurozone’s inflation as a Eurostat report showed yesterday while economists are already focused on the US Nonfarm Payrolls report for the month of December, due to be released on Friday.

The euro lost ground against the US dollar on Wednesday morning after a series of disappointing data related to the German retail sales and factory orders. However, European stock markets traded higher, brushing off the effect.

In other news, a Washington Post report suggested that the new US president Donald Trump is considering a more targeted approach regarding imposing tariffs while the president elect expressed his will to extent the country’s debt ceiling in order to avoid a potential default.
 

US Nonfarm Payrolls December 2024 Report On Friday

On Friday afternoon, market participants will have the opportunity to scrutinize December’s Nonfarm Payrolls (NFP) report, kickstarting the year with one of the most important data sets related to the US economy. Economists expect the NFP figure to come in at 150,000, much lower than the 227,000-figure recorded in November. November’s numbers reflected a stronger than expected US economy and surpassed analysts’ expectations.

A report by the Dutch ING bank suggested US NFPs to have risen by 153,000 in December while the unemployment rate is expected to hold at 4.2%. The bank’s economists note that the numbers would be “consistent with the general cooling of the jobs market, but after 100bp of Fed rate cuts in 2024, the widely held view is that we will see a much slower and less aggressive series of moves in 2025.”
 

Eurozone Inflation Rises In December

The eurozone’s CPI inflation rose for the third month in a row in December, coming in at 2.4% on an annualised basis. The figure was in line with analysts’ expectations and 0.2% higher when compared with November’s number. Core CPI inflation remained stable in the last month of 2024, coming in at 2.7%.

Analysts suggest that the ECB might proceed with reducing borrowing costs further after this month’s meeting. However, the possibility for a rate cut larger than 25 basis points seems to be quite low after the inflation data release. The euro bloc’s central bank has relaxed its monetary policy by reducing rates four times since June 2024.

Economists at ING wrote that “services inflation remains a concern, accelerating to 4% from 3.9% in November. Both the PMI survey and the European Commission’s sentiment indicator suggest that upward price pressure in services remains significant due to still-strong wage increases and higher price setting by services companies. A further increase in the first quarter looks likely. This will keep the European Central Bank on a cautious easing path, diminishing the validity of the ‘behind the curve’ statements.”
 

Germany’s Economy Continued To Struggle In November

A report released by Destatis earlier in the morning showed that the German industrial orders fell by 5.4% in November, on a month-to-month basis. The recorded drop surprised economists who had expected no change in the monthly figure.

Retail sales fell 0.6% on a monthly basis in November after sliding by 1.5% in October. Some analysts stressed that the weak figures showed the weakness of the German economy in November and mentioned that political instability “combined with re-accelerating inflation make any substantial rebound in consumption unlikely."

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