US Private Sector Holds, but Data Raises Quiet Alarm Bells

Business activity in the United States showed modest improvement at the start of the year, with the preliminary S&P Composite Purchasing Managers’ Index (PMI) inching up to 52.8 in January from 52.7 in December. The manufacturing sector saw a slight increase, rising to 51.9, while the services sector held steady at 52.5, signaling continued expansion but at a slightly moderated pace.


Tariffs Drive Inflation Concerns


Officials highlighted that higher costs, largely attributed to ongoing tariffs, remain a key driver of inflation across goods and services. These pressures continue to influence business sentiment, raising concerns about affordability and margins in both manufacturing and service industries.


Markets React Cautiously

Despite the PMI data, the US Dollar Index remained stable above 98.00, showing little immediate market reaction. Investors are closely monitoring the combination of inflationary pressures, interest rate expectations, and geopolitical factors, including recent US trade policies and global economic developments.


Gold and Currencies Respond

Gold prices surged near $4,950 per ounce earlier in the week, supported by cautious risk sentiment and a slight pullback in Treasury yields. Meanwhile, the euro and pound responded to mixed economic signals, with GBP/USD pushing toward two-week highs following strong UK retail sales and preliminary PMI results.


Central Banks in Focus

Looking ahead, central banks are under scrutiny. The Federal Reserve may pause after a series of rate cuts, while the Bank of Canada is also expected to stand pat. Investors are also awaiting potential appointments and policy announcements, including the US Fed chair nomination under President Trump’s administration.


Cryptocurrency Volatility

Cryptocurrency markets remain volatile, with Bitcoin struggling below $90,000 amid swings in risk sentiment triggered by trade policy statements and ETF outflows.

Overall, January data points to steady but cautious growth in the US private sector, with inflationary pressures and global uncertainties continuing to shape the economic outlook. Policymakers and markets alike navigate a complex landscape of trade, monetary policy, and geopolitical risk.