Things to watch out for on Tuesday, January 31:

The US dollar posted a modest advance at the start of the week, supported by a bleak environment in the markets. The USD maintains its positive bias ahead of the Asian open, although caution dominates as the macroeconomic calendar offers multiple blue-chip events this week.

Early on Tuesday, Australia will release Retail Sales for December, which is expected to decline 0.3% on the month. In addition, China will release the NBS manufacturing and non-manufacturing PMIs. The former is expected to improve from 47 in November to 49.7, while service output is forecast to jump from 41.6 to 51.

Between Wednesday and Thursday, the US Federal Reserve, the European Central Bank and the Bank of England will announce their monetary policy decisions. For now, the markets are betting on a 25 basis point (bp) rate hike. In the case of the ECB, the 50 basis point rate hike is fully discounted, while the Bank of England is expected to raise its benchmark rate by 50 basis points.

Earlier in the day, the focus was on the Bank of Japan, as a group of academics and businessmen urged the BoJ to turn its 2% inflation target into a long-term target. The proposal also appeared to include the need for interest rates to rise more in line with economic fundamentals and to normalize the functioning of the Japanese bond market. BOJ Governor Haruhiko Kuroda stated that his biggest responsibility was price stability and reiterated that 2% inflation is possible with wage growth and current easy politics. The USD/JPY pair fell as low as 129.19 but ended the day around 130.50 amid ample demand for US dollars.

EUR/USD traded modestly above 1.0900 but stabilized around 1.0840. The European data did not impress, as the german economy it grew at an annualized rate of 1.1% in the last quarter of 2022, below expectations of 1.3%. Furthermore, as reported by the Harmonized Index of Consumer Prices (IPCA), Spanish inflation unexpectedly rose by 5.8% year-on-year in January, a red flag ahead of this week’s ECB monetary policy meeting.

GBP/USD fell to 1.2340, while AUD/USD hovered around 0.7050. The USD/CAD pair advanced towards the current 1.3390 price zone.

Spot gold has eased slightly and is currently trading around $1,922 a troy ounce. Crude Oil prices fell sharply, with WTI currently hovering around $77.70 a barrel.