Financial policy, economic indicators, many earnings releases and events

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Forecast for 2026 as of January 14

Fed policy rate
March rate cut ★★★☆☆
Personally, I don’t think the probability of a March rate cut is high. Depending on CPI, inflation may become evident as supply tightness eases gradually.

Bank of Japan policy rate

One hike this year is the baseline. Unchanged. Consider expecting a rate hike around July.

2026 overall outlook

Midterm election years tend to underperform in stock markets rather than stay flat, and monetary policy tends not to move, so in 2026 a range-trading stance is necessary.Additionally, geopolitical risks have been rising since the start of the year, making it a year to endure while hedging risks.

◆ Reflections and Outlook

▼ This week’s schedule

Day of the week Importance Event

Monday

Tuesday　★★★☆☆　RBA policy rate
★★★★☆　ISM Manufacturing PMI
★★★☆☆　JOLTS

Wednesday　★★★★☆　ADP Employment Report
★★★★☆　ISM Services PMI
★★★★☆　Alphabet earnings

Thursday　★★★☆☆　BOE policy rate
★★★☆☆　ECB policy rate
★★★☆☆　Initial jobless claims
★★★★☆　Amazon earnings

The week is packed with economic indicators. Policy rate decisions are expected to hold for all central banks except the RBA. Recent CPI at 3.6% surpassed expectations, rising 1.5 percentage points over the last six months, suggesting a possible shift to higher rates by the RBA. However, the market has largely priced in some dovishness and is buying AUD; whether future tightening continues will be a key driver of volatility. European central banks are expected to hold and be on standby. ECB’s earlier remarks on euro strength will be watched to see if they adjust to reflect this. Employment indicators, looking at recent jobless data, show reduced employment mobility and a tendency toward stable data as hiring remains cautious. Earnings season suggests MAG7’s revival is awaited. Google’s earnings expectations are comparatively high relative to Microsoft’s OpenAI involvement.

▼ Reversal of basement trades

Last weekend, precious metals experienced an unusually steep drop. Reasons include profit-taking before Chinese New Year, improved prospects of avoiding a US government shutdown, and Nomination of Wau as future FRB chair. U.S. events caused a reassessment of the dollar and government shutdown concerns; the moves pushback led to a partial recovery in the dollar and related assets. In broader terms, a flow from fiat currency to safe assets and equities reversed to some extent, restoring some fiat currency value.

Arguably, this could be viewed as “stock market risk-off” which may be odd. Once positions are rebalanced, stocks are likely to be the first to be chosen. Geopolitical risks remain but have improved politically.

Silver’s 4-hour chart has broken below the trendline. However, such bubble-burst movements tend to rebound to higher levels, so be cautious on both sides. With the Spring Festival liquidity thinning as Chinese traders are away, risky moves are likely this week. The same applies to gold, so proper risk management is essential.

▼ Iran situation update

There was no attack this weekend, but the crisis is not over. Reports suggest the US is planning to deploy additional forces, leaked by multiple outlets including Israel.

Probably limited attacks were planned, but Iran has hinted it would escalate to a full-scale regional war. U.S. bases in the Middle East and surrounding areas may need air defense upgrades, accelerating deployment of missiles like Patriot and THAAD.

Essentially, preparations are not yet complete, hence no action yet.

""The military already has air defense across the region and has destroyers capable of shooting down aerial threats. However, the Defense Department plans to add THAAD launchers and Patriot systems to U.S. bases in Jordan, Kuwait, Bahrain, Saudi Arabia, Qatar, and other Middle Eastern locations, according to officials and tracking data.”"" - WSJ

Ayatollah Khamenei has warned the United States that if they start a war, it will become a regional war across the Middle East.Additionally, the EU has designated a terrorist group in retaliation, and EU forces may be described as terrorists themselves.

Amid various information, Western countries have already evacuated or advised evacuation from the region, so actions will follow once U.S. forces are ready.

Iran denies conducting military exercises, saying there has been no official announcement.

On the other hand, negotiations over the nuclear deal are progressing; whether a deal is reached or broken will determine if war ensues. While arming up, diplomacy continues, and no definitive conclusion is drawn. Iran has expressed confidence in reaching an agreement, and Trump has stated that Iran is serious about negotiations.

Confronting a country fully prepared for attack and potentially possessing nuclear weapons is very difficult, and the Middle East has historically resisted U.S. plans, so the U.S. would likely prefer to resolve this through negotiations if possible.

If it turns into a quagmire like Afghanistan, costs will weigh heavily on Trump’s support.

◆ Market

EUR/USD retraced after entering at 1.201 as discussed in the delivery, dropping safely. The chart suggests a further move downward, so hold. While EUR/USD experiences fluctuations, the return to the dollar remains the main trend. If euro gains continue, the ECB may move to cut rates, anchoring some upside. Additionally, reduced U.S. uncertainty is positive for the market.

Carry positions and a pair like EUR/GBP, which are less influenced by the dollar and yen, are worth considering. If it falls below 0.86, a decisive move is possible with lower volatility and limited risk. A deeper view would target 0.875, but 0.87 could also be a strong resistance.

◆ Summary

Until the precious metals market stabilizes, currencies and equities will remain unsettled. The weekend’s risk movements suggest a need for caution at the start of the week. In that context, EUR/GBP is less affected and should be added to watchlist.

※This article does not provide buy or sell timing or recommendations.

Please make your own investment decisions.