Many Purchasing Manager Surveys, Euroland CPI and PPI Reports and a Trio of Interest Rate Decisions – Currency Thoughts

Many Purchasing Manager Surveys, Euroland CPI and PPI Reports and a Trio of Interest Rate Decisions

February 4, 2026

Gold and silver prices remain strongly bid this Wednesday following sharp rebounds yesterday.

Ahead of this weekend’s snap lower house elections,the yen traded 0.2% lower overnight, bringing is relapse since Friday to 2.4% against the dollar. Prime Minister Takaichi’s Liberal Democratic Party appears likely to increase its parliamentary seat total, which would facilitate the pursuit of a more stimulative fiscal policy. Japan among developed economies has comparatively high debt and ongoing government net borrowing needs, which along with above-target inflation and a normalizing monetary policy has weighed on the yen and lifted long-term interest rates.

Compared to Tuesday closing levels, the dollar has strengthened 0.4% against the kiwi and South Korean won but is otherwise very narrowly mixed. Ten-year sovereign debt yields have slipped three basis points in Spain and Italy, two bps in France and Germany and a basis pint in Japan while also holding steady in the United States and Great Britain.

Stock markets overseas rose today by 1.6% in South Korea, 0.9% in both China and 0.8% in Australia. French and Italian share prices so far show gains of 0.9%. Japan’s Nikkei fell 0.8%, and the British FTSE, German Dax and Nasdaq futures are marginally softer.

Monetary policy reviews in Iceland and Poland resulted in key interest rates being left unchanged at 7.25% and 4.0%, respectively. The Central Bank of Azerbaijan‘s refinancing rate was sliced by another 25 basis points, bringing its cumulative reduction since November 2023 to 250 basis points and resulting in a 6.5% rate level that is its lowest in almost 4.5 years. Azerbaijani consumer price inflation of 5.2% in December was within the 2-6% target range and down from 6.5% last spring and a peak of 15.6% in October 2022.

Consumer price inflation in the euro area fell 0.3 percentage points to a 16-month low of 1.7% in January that matched the low touched briefly in September 2024. Two years before that, inflation had crested at 10.6%. Core CPI inflation, which excludes food and energy, edged 0.1 percentage point lower to a 51-month low of 2.2%, but the service sector component remained above 3% at 3.2%.

Producer price figures also reported today brought further good tidings to the euro area.  There was a 0.3% month-on-month decline in December that extended the deflationary year-on-year pace to a greatest extent (-2.1%) in fourteen months. ECB officials are not expected to cut interest rates, however, after their scheduled review later this week. Part of the disinflationary trend stems from energy, which has cheapened but still faces potential upside risks from geopolitical strains. Also, todays’ reported Euroland composite and service sector purchasing manager surveys for January highlight higher input and output price pressures.

A rundown of purchasing manager news today includes

• Four-month lows in Euroland’s composite and services indices of 51.3 and 51.6. Each of those figures, moreover, were revised downward from preliminary estimates and paint a picture of a still fragile and vulnerable recovery.
• France has become Euroland’s laggard, with a 3-month low composite PMI of 49.1 that points to renewed, albeit modest, contraction.
• Britain’s composite PMI of 53.7 depicts the fastest expansion in 17 months and includes a 5-month high services index of 54.0.
• Although above the 50 neutral threshold, Sweden’s composite and services PMI readings of 54.8 and 54.3 constitute 5-month lows.
• Japan’s January composite PMI was revised higher to a 32-month high of 53,1, and the 11-month high services index of 53.7 also indicated stronger growth than first estimated.
• The same is true in Australia’s case, where the revised and services readings of 55.7 and 56.3 represent 45-month highs.
• China’s composite and service sector PMIs rebounded from respective 4 and 6-month lows in December, but January’s composite score of 51.6 still paints a more sluggish picture than hoped.
• After 11-month lows in December, India’s composite and service sector readings of 58.4 and 58.5 reflected the best growth in 3 and 2 months, respectively.
• Russian composite and service sector PMI readings  in January of 52.1 and 54.8 were the best results in a year.
• But Brazil’s composite PMI slid under the 50 threshold to a 2-month low of 49.9, and the services index of 51.3 was also lower than in December.
• South Africa’s S&P Global PMI rose 2.3 points to a 4-month but, at 50, conveyed stagnation rather than a return to expansion.
• The non-oil PMI for the United Arab Emirates rose 0.7 points in January to an 11-month high of 54.9, while Lebanon’s private purchasing managers index fell 1.1 points to a half-year low of 50.1.

Icelandic inflation recently backed up from 3.7% in November to a 10-month high of 5.2% last month. That’s still some ways above the medium-term target of 2.5%. The rate has been carefully lowered since October 2024 from 9.25%, the most recent instance coming in November. In leaving their policy interest rate unchanged this time at 7.25%, officials at the Central Bank of Iceland explained,

The outlook is for GDP growth to be relatively weak and for inflation to taper off as the year advances. Despite a temporary inflation spike at the start of this year, the long-term inflation outlook is broadly unchanged. There is considerable uncertainty, however, as pay rises are still sizable and inflation expectations remain above target.

In the other aforementioned instance, officials at the National Bank of Poland had cut their interest rate by 125 bps in the second half of 2025 including a 25-bp move in December, but policy now seems to have entered a pause mode pending clarifying future information pertaining to growth and inflation. “Fiscal policy, expected recovery of demand in the economy, further developments in wage growth as well as macroeconomic situation abroad, including changes in global commodity prices and inflation, remain risk factors for inflation outlook.

Dutch consumer price inflation in January fell 0.4 percentage points to a 25-month low of 2.4%. Austrian CPI inflation of 2.0% was its lowest since the final month of 2024, while in Croatia consumer price inflation edged 0.1 percentage point above December’s 8-month low of 3.3%.

After climbing 47% in the three weeks through mid-January, U.S. mortgage applications fell 16.6% over the last two weeks.

Copyright 2025, Larry Greenberg. All rights reserved.

Tags: Central Bank of Azerbaijan, Central Bank of Iceland, composite and service sector PMIs in January 2026, National Bank of Poland

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on Wednesday, February 4th, 2026 at 8:27 am and is filed under New Overnight Developments Abroad – Daily Update.
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