January 28, 2025: US Consumer Confidence Rises as ECB's Lagarde Speech Looms—Markets at Critical Juncture

Consumer confidence jumped to 104.7 while durable goods orders showed mixed signals at -2.2% overall but +0.3% ex-transportation. Today's ECB President Lagarde speech could reshape market expectations for European monetary policy—here's what traders need to watch.

Key Developments

US economic data painted a complex picture today, with durable goods orders declining 2.2% against expectations of -1.9%, though core orders excluding transportation showed resilience with a 0.3% increase. The housing market continues to demonstrate strength, with the S&P/Case-Shiller Home Price Index reporting 4.3% year-over-year growth despite a modest -0.1% monthly decline. International indicators, including NAB Business Confidence from Australia and Spanish Consumer Confidence, suggest strengthening global sentiment.

Market Impact

The housing sector is showing remarkable resilience in the face of higher rates, supported by encouraging building permits data that points to sustained growth. Bond markets remain cautious ahead of multiple Treasury auctions, including 2-Year, 6-Month, 3-Month, and 5-Year notes. European markets are trading carefully as they await ECB President Lagarde's speech at 3:35 PM, which could significantly impact market direction.

Trading Strategies

Short-Term Traders:

  • Watch for heightened EUR/USD volatility during Lagarde's speech, with key resistance levels at previous highs
  • Consider participating in Treasury auctions, as yields are hovering near recent peak levels
  • Monitor housing sector stocks for potential short-term momentum plays

Long-Term Investors:

  • Consider strategic positions in the housing sector, given price stability and positive permit trends
  • Keep an eye on Eurozone inflation expectations (currently 2.6%) for portfolio rebalancing opportunities
  • Factor in CBO projections showing debt reaching 118% of GDP by 2035 for long-term allocation decisions

Looking Ahead

Critical upcoming catalysts include Australia's Q4 inflation data (expected 2.8% YoY) and the US Q4 GDP growth report (consensus 3.1%). The current trend in continuing jobless claims (223K) will be crucial for gauging labor market health. Key risks include potential hawkish messaging from the ECB, which could pressure global equities, and mounting concerns over U.S. debt levels.

The convergence of these factors suggests markets are at a pivotal point, with monetary policy decisions and economic indicators in the coming days likely to set the tone for near-term market direction.