Here's a breakdown of today's key events, with a focus on the European and American sessions:
European Session
The spotlight is on the UK employment report, which is expected to show a positive outcome. The consensus forecast predicts a 94,000 job increase in the three months leading up to December 2025, compared to 82,000 in the previous month. The unemployment rate is projected to remain steady at 5.1%. However, there's a twist: Average earnings, including bonuses, are predicted to dip slightly to 4.6%, down from 4.7% previously, while the ex-bonus figure is expected to fall to 4.2% from 4.5%.
The Bank of England (BoE) surprised analysts with a dovish hold at its last meeting, with four members dissenting for a rate cut, more than the expected two. They also adjusted their guidance, stating that the bank rate is likely to be reduced further, indicating a potential shift towards looser monetary policy.
Inflation forecasts have been revised downward across the board. Interestingly, the Agents' Pay Survey revealed that wage growth averaged 3.4% in 2026, slightly lower than the anticipated 3.5%. Traders are now pricing in a 68% chance of a rate cut at the next meeting and a total of 48 basis points of easing by year's end.
The BoE projects the unemployment rate to peak at 5.3%, suggesting that the labor market may face further challenges before stabilizing. This means that today's data will need to significantly outperform expectations to trigger a more dovish adjustment and lead to a decline in the pound. Conversely, if the data surprises on the upside, we might see a slight hawkish adjustment and some pound strength. However, the UK Consumer Price Index (CPI) tomorrow will likely have a more significant impact on expectations.
Additionally, we'll receive the Final January German CPI and the German ZEW survey, but these releases are unlikely to have a substantial market impact, as they won't alter the European Central Bank's (ECB) stance.
American Session
The Canadian Consumer Price Index (CPI) report for January takes center stage in the American session. The year-over-year (Y/Y) measure is expected to remain at 2.4%, while the month-over-month (M/M) figure is projected to rise to 0.2%, up from -0.2% previously. The focus will be on the underlying inflation measures, particularly the Trimmed Mean CPI Y/Y and Median CPI Y/Y, both of which are anticipated to be at 2.6%, down from 2.7% previously.
The Bank of Canada (BoC) maintains a neutral stance, and the market doesn't anticipate any changes until the end of the year. Economic data has supported this stance, with the labor market stabilizing and core inflation hovering just above the BoC's target range of 2-3%.
The BoC's decision is unlikely to be influenced significantly by the data unless there's a substantial deviation from the estimates. Governor Macklem has warned against misdiagnosing economic weakness amid structural changes. The BoC's primary focus is likely on the USMCA review, as a negative outcome could negatively impact the Canadian economy and necessitate further rate cuts.
We'll also receive the weekly US ADP jobs data, the NY Empire Manufacturing Index, and the US NAHB Housing Market Index. These reports are unlikely to trigger a significant market reaction, as they won't alter the Federal Reserve's (Fed) stance. However, there might be a marginal response if the ADP data surprises significantly in either direction.
Central Bank Speakers
- 17:45 GMT/12:45 ET - Fed's Barr (neutral - voter)
- 19:30 GMT/14:30 ET - Fed's Daly (dovish - non voter)
