FXTRADING Economic Data Summary (Asia-Pacific | 02/12)

US labor market outperforms expectations

US nonfarm payrolls increased by 130K in January, well above the market expectation of 66K and significantly stronger than earlier forecasts that job growth would slow sharply this year. At the same time, the unemployment rate edged down from 4.4% to 4.3%, while the labor force participation rate rose slightly to 62.5%, indicating marginal improvements in both labor supply and hiring demand.

Wage data also remained firm. Average hourly earnings rose 0.4% month-on-month, exceeding expectations, while the annual growth rate held at 3.7%, suggesting that businesses are still facing some pressure from labor costs. The combination of stable job creation and resilient wage growth indicates that the labor market has not cooled materially, making it difficult for the Federal Reserve to shift quickly toward policy easing. FXTRADING analysis suggests that continued strength in employment and wages will limit the pace of rate cuts in the near term, with market expectations likely shifting toward a longer period of elevated interest rates.

Inflation pressures ease in Australia

Australias latest business survey points to structural changes within the economy. The business conditions index fell from 9 to 7 in January, indicating a modest cooling in operating conditions, while business confidence edged up to 3, suggesting that firms are becoming more optimistic about the outlook and that overall sentiment remains in a moderate range.

More importantly, cost pressures have eased. Labor costs and input prices both declined noticeably, and quarterly retail price growth slowed to 0.3%, the lowest level since the pandemic. Although capacity utilization has softened somewhat, overall business activity remains close to the growth levels seen over the past year, and the economy has not shown signs of a sharp slowdown. FXTRADING analysis suggests that easing cost pressures will continue to drive inflation lower, while stable demand points to a scenario of moderate economic cooling rather than a sharp downturn.

ECB warns trade tensions may have deflationary effects

Recent ECB research suggests that the demand contraction caused by trade frictions may outweigh supply-chain disruptions, ultimately putting downward pressure on prices. Weaker exports would reduce corporate orders and investment, thereby suppressing overall price levels.

Model estimates show that if Eurozone exports to the US fall by 1%, consumer prices could eventually decline by around 0.1%, with the impact peaking after roughly 18 months. Trade data already shows signs of weakening, with exports to the US down about 6.5% year-on-year over the past three months. At the same time, the manufacturing sector—one of the most affected industries—is highly sensitive to interest rates, meaning that lower financing costs could support a relatively quick recovery in output. FXTRADING analysis suggests that the core impact of trade shocks on the Eurozone lies in weaker demand, reinforcing the medium-term disinflation trend and leaving room for policy easing.

US growth returns to a more normal pace

US retail sales were flat month-on-month in December, clearly below previous expectations for continued growth. Sales excluding autos and gasoline also showed no increase, indicating that consumption momentum weakened toward year-end and that the slowdown was broad-based.

However, from a longer-term perspective, consumption remains in expansion territory. Retail sales in the fourth quarter of 2025 rose 3.0% year-on-year, suggesting that the current trend reflects a moderation in growth rather than a contraction in demand. Household spending is becoming more measured, but income and employment remain supportive, keeping downside risks contained for now. FXTRADING analysis suggests that consumption is normalizing from previously elevated levels, which may weigh slightly on growth in the short term, but as long as the labor market remains stable, the US economy is likely to maintain a moderate growth trajectory.