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Market News Posted by John Doherty February 2, 2025

Expect Volatility In The Currency Markets This Week!

Foreign Currency


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Top things to watch this week

The Economic Calendar:

MONDAY: S&P Global Manufacturing PMI (8:45a CT), Construction Spending (9:00a CT), ISM Manufacturing PMI (9:00a CT), Fed Bostic Speech (11:30a CT), Loan Officer Survey (1:00p CT), Treasury Refunding Financing Estimates (2:00p CT), Fed Musalem Speech (5:30p CT)

TUESDAY: LMI Logistics Managers Index (5:00a CT), Redbook (7:55a CT), Factory Orders (9:00a CT), JOLTs (9:00a CT), Fed Bostic Speech (10:00a CT), Fed Daly Speech (1:00p CT), Fed Jefferson Speech (6:30p CT)

WEDNESDAY:  MBA Mortgage Applications (6:00a CT), ADP Employment Change (7:15a CT), Balance of Trade (7:30a CT), Import/Export Prices (7:30a CT), Treasury Refunding Announcement (7:30a CT), Fed Barkin Speech (8:00a CT), S&P Global Composite PMI Final (8:45a CT), ISM Services Index (9:00a CT), Total Vehicle Sales (9:00a CT), EIA Petroleum Status Report (9:30a CT), Fed Goolsbee Speech (12:00p CT), Fed Bowman Speech (2:00p CT), Fed Jefferson Speech (6:30p CT)

THURSDAY: Challenger Job Cuts (6:30a CT), Jobless Claims (7:30a CT), EIA Natural Gas Report (9:30a CT), Fed Waller Speech (11:30a CT), Fed Daly Speech (2:30p CT), Fed Balance Sheet (3:30p CT)

FRIDAY: January Jobs Report (7:30a CT), Used Car Prices (8:00a CT), Fed Bowman Speech (8:25a CT), University of Michigan Consumer Sentiment (9:00a CT), Wholesale Inventories (9:00a CT), Fed Kugler Speech (11:00a CT), Baker Hughes Rig Count (12:00p CT), Consumer Credit Change (2:00p CT)


Key Events:

  • Traders will be watching the Jobs and Payroll reports on Friday.
  • Market reaction to tariffs.
  • Economic reports on ISM Manufacturing & Services, Jolts Jobs, Unemployment, Payrolls, and U of Michigan Consumer Sentiment.
  • Bank of England rates decision on Thursday.
  • China markets closed on Monday and Tuesday for Chinese New Year.
  • FOMC speakers – Musalem, Bostic, Jefferson, Goolsbee, Bowman, and Daly.
  • Earnings reports from Alphabet, AMD, Eli Lilly, Palantir Technologies, Novo Nordisk, Walt Disney, and Qualcomm.

JOBS REPORT

The January Jobs report is expected to show 170,000 new jobs added. The December data surprised the upside with 256k.

Eco Calendar for Friday 02-07-2025


STOCK INDEX FUTURES

Goodbye, January. The S&P 500’s +2.31 % performance in the first month of the year was positive, as was the Nasdaq 100’s +1.3 % performance.

Sector Worst Performers YTD:

  • Technology (XLK): Down -1.56% – The weakest sector YTD.

Best Performers YTD:

  • Health Care (XLV): Up 7.02% – The strongest sector YTD by a significant margin.
  • Financial (XLF): Up 6.61% – A strong second-place performer, showing considerable growth.

Earnings season is underway, and the results have been generally positive, leading to positive market reactions. This week saw reports from tech giants Meta, Tesla, and Microsoft, with artificial intelligence taking center stage.

Meta exceeded revenue expectations for the fourth quarter but offered disappointing guidance for the first quarter. CEO Mark Zuckerberg is heavily invested in AI and aims to reach a billion users.

While missing profit expectations for Q4, Tesla announced plans for a robotaxi service launch in Austin by June, with Elon Musk touting an “epic” future.
Microsoft reported solid revenue growth, but data center capacity limitations hamper its Azure cloud platform’s expansion. While AI demand is strong across the board, effectively monetizing these AI initiatives remains a challenge.

Stock Sector Performance Summary 02-02-2025


TARIFFS

The implementation of steep tariffs on Mexico and Canada by President Trump, 25% for Canada and Mexico and 10% for China, reflects a strategic use of economic policy to address non-economic issues like illegal migration and drug trafficking. Here’s a breakdown of the complexities involved:

Economic Impact:

  • Trade Disruption: Tariffs of this magnitude could disrupt the deeply integrated supply chains between the U.S., Canada, and Mexico, particularly under the United States-Mexico-Canada Agreement (USMCA). Increased costs could lead to higher consumer prices in all three countries, potentially straining economic relationships that have been beneficial for decades.
  • Retaliation: Canada and Mexico intend to retaliate with their own tariffs, potentially escalating into a broader trade war that could affect various sectors, from agriculture to manufacturing.

FX FUTURES

Expect a volatile FX market this week.

As a hectic January ends, world markets continue to brace for the impact of U.S. import tariffs.

U.S. President Donald Trump stole the show over the weekend, announcing the promised 25% import tariffs on Canada and Mexico on Saturday.

Aiming to push the two largest U.S. trading partners to take action to halt illegal migrants and shipments of fentanyl, Trump said the level of North American duties “may or may not rise with time.”


GOLD FUTURES

Gold prices have continued their upward trajectory, reaching new all-time highs.

However, this surge has pushed Commodity Trading Advisors (CTAs) to their maximum long position, meaning they have likely invested as much as their strategy allows. This limits the potential for further price increases driven by CTA buying. While macro funds still have some capacity to increase their long positions, they are significantly less than before, suggesting that the upward momentum may be waning.

Looking ahead, while the downside risk for gold prices appears limited, the strength of the current rally is diminishing. Gold bulls may need a new catalyst to sustain the upward trend. Interestingly, the setup for price movements in silver is currently considered more favorable than gold, suggesting potential opportunities in the silver market.


INTEREST RATE FUTURES

With the Federal Reserve likely holding its policy steady until at least mid-year, market expectations for rate cuts have shifted.

The probability of a March rate cut is relatively low, while the odds of cuts in May and June have increased significantly.

The Fed’s recent decision to maintain the current interest rate range was widely anticipated, and their accompanying statement echoed their December message of a pause in the easing cycle, projecting only two rate cuts in 2025.

Chairman Powell emphasized the Fed’s intention to maintain its current stance, even amidst public criticism.

Meanwhile, the European Central Bank continued its easing cycle, lowering rates again as the Eurozone economy experienced stagnation and approached its inflation target. The ECB has hinted at further rate cuts in 2025, a move that financial markets have largely priced in.

CME Fedwatch Tool 02-02-2025


CRYPTO FUTURES

It’s officially not going to zero. Adopting BTC has become a much less far-out idea than when El Salvador first announced the move. The adoption of Bitcoin for various economic purposes is gaining traction globally, with recent developments indicating a shift in perception towards cryptocurrencies.

  • Central Bank Interest: Several central banks are exploring the potential of Bitcoin as a reserve asset. The Governor of the Czech National Bank has expressed intentions to propose diversifying the bank’s reserves into Bitcoin, while the Swiss National Bank is also reportedly considering a similar move.
  • Government Initiatives: Illinois has advanced a bill to establish a strategic Bitcoin reserve in the US, reflecting a growing interest in Bitcoin as a financial savings asset. Arizona is also considering similar legislation.
  • Shifting Perceptions: These developments highlight a broader trend of Bitcoin becoming more accepted in mainstream finance. Discussions around national Bitcoin adoption are becoming less taboo, suggesting that the pioneering move by El Salvador to adopt Bitcoin as legal tender has paved the way for other countries to explore similar initiatives.

The increasing interest in Bitcoin from central banks and governments underscores the growing recognition of its potential role in the global financial system.


asset class performance summary

These performance charts track the daily, weekly, monthly, and yearly changes of various asset classes, including some of the most popular and liquid markets available to traders.

Asset Class Performance Summary 02-02-2025


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