January's jobs report delivered a pleasant surprise at first glance. Job creations were robust, the unemployment rate fell to 4.3%, participation rose and real wages continued to increase. The average workweek also improved. In the near term, the picture is reassuring. However, the massive revisions to data for 2025 are a reminder that last year's momentum was significantly overstated. Job gains were sharply revised down, muddying the read on the cycle.
At the same time, December retail sales figures disappointed, prompting a revision to Q4 GDP. However, the broadest indicator of demand, real PCE, is still up 2.5% year-on-year. Consumption is resisting. In short: the US economy is slowing, but not breaking.
Equity markets: rotation rather than rupture
The S&P 500 continues to run into resistance around 7,000. In contrast, the equal-weight index is posting fresh highs. Small and mid-caps are outperforming, while technology is correcting. Historically, this kind of configuration aligns more with an extended expansion phase than with the run-up to a recession. The market is not pricing in a collapse, but rather a normalization helped by upward earnings revisions for the 493 at the expense of the "Magnificent Seven”.
In Japan, bond risk is receding, at least for now. Takaichi's election victory and the prospect of fresh fiscal stimulus have reassured investors. Long Japanese yields have eased, the yen has rebounded slightly and Japanese equities are rising. There is no "Truss moment”. No uncontrolled bond-market crisis. The risk of a global shock via JGBs has been temporarily pushed back, easing pressure on international markets.
Currencies: back to a "data-driven” regime
We are moving out of a liquidity-dominated market and into a data-dominated regime. The strong jobs number reduces the probability of a second round of monetary easing in 2026 and pushes back the prospect of the next rate cut. That supports the dollar in the near term. However, the gradual slowdown in consumption and negative revisions limit the scope for a genuine, lasting bullish cycle in the greenback. We are looking at a tactically firm dollar, but not one that is structurally dominant. Technically, the dollar index failed to confirm its bullish structure on the weekly data, but all is not lost as long as 96.48 holds. A clear break above 98.00 will be needed to envisage a rebound worthy of the name towards 100.36.
On the yen side, the stabilization in Japanese yields has reduced the immediate risk of an unwinding of the carry trade. The yen has bounced, although without much conviction. As long as there is no pronounced global stress, the Japanese currency remains fragile. However, its profile is still asymmetric: it strengthens violently in the event of a shock, not gradually. The yen therefore remains a leading indicator of financial strain. Technically, USD/JPY has neatly structured the expected consolidation below 157.50 and reached 153.40. Attention now turns to 152.49/10 as the first support.
