EUROPEAN SESSION
In the European session, the main highlight will be the UK employment report. The consensus is for 94K jobs added in the three months to December 2025 vs 82K in the prior month, with the Unemployment Rate expected to remain unchanged at 5.1%. The Average Earnings incl. Bonus is expected at at 4.6% vs 4.7% prior, while the ex-Bonus figure is seen at 4.2% vs 4.5% prior.
As a reminder, the BoE surprised with a dovish hold at the last meeting as 4 members dissented for a rate cut versus 2 expected. Moreover, they changed the guidance in the statement from “the bank rate is likely to continue on a gradual downward path” to “the bank rate is likely to be reduced further”.
Inflation forecasts were also revised much lower across the board. Lastly, the Agents’ Pay Survey showed wage growth to average 3.4% in 2026 vs 3.5% expected. Traders are now pricing a 68% chance of a rate cut at the next meeting already and a total of 48 bps of easing by year-end.
The BoE projected the unemployment rate to peak at 5.3%, so they still expect more labour market weakness ahead before some stabilisation. In light of this, the data today will likely need to surprised to the downside by a big margin to trigger a more dovish repricing and lead to serious pound weakness. In case the data surprises to the upside, we could see some slightly hawkish repricing and strength in the pound but the UK CPI tomorrow will likely have more sway on expectations.
We will also get the Final January German CPI and the German ZEW survey. These releases should have no market impact though as they won’t change anything for the ECB.
AMERICAN SESSION
In the American session, the focus will turn to the January Canadian CPI report. The CPI Y/Y is expected at 2.4% vs 2.4% prior, while the M/M measure is seen at 0.2% vs -0.2% prior. As always the focus will be on the underlying inflation measures. The Trimmed Mean CPI Y/Y is expected at 2.6% vs 2.7% prior, while the Median CPI Y/Y is seen at 2.6% vs 2.7% prior.
As a reminder, the BoC remains in a neutral stance with the market not pricing any move through year-end. The economic data has been supportive of such stance with the labour market stabilising and core inflation hovering a bit above the 2.5% mid-point of the BoC 2-3% target range.
The data is unlikely to change much for the BoC unless we get some big deviation from the estimates. In fact, Governor Macklem warned that the central bank must be careful not to misdiagnose economic weakness amid the structural economic change. The BoC is likely focused mainly on the USMCA review now as a negative outcome could weigh significantly on the Canadian economy and require more rate cuts.
We will also get the weekly US ADP jobs data, the NY Empire Manufacturing Index and the US NAHB Housing Market Index. These reports won’t change anything for the Fed though, so the market reaction will likely be muted. At the margin, we could see some reaction in case the ADP data surprises significantly to either side.
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)
This article was written by Giuseppe Dellamotta at investinglive.com.