Economic Weekly Wrap
27 Jan 2026 - 30 Jan 2026

Global trade tensions resurfaced once again as US President announced higher tariffs on South Korea and Canada. Accusing South Korea of not enacting the deal signed in Jul’25, the US President raised tariffs to 25% from 15% agreed as part of the deal. Earlier, President Trump had threatened to impose 100% tariff on Canada, if the latter signs a trade deal with China. While stocks in the US remained largely unaffected, DXY continued to slide. Investors’ focus this week remains on the Fed policy, wherein a status quo is expected. In China, industrial profits rose by 0.6% in 2025, marking for the first increase since 2021. This has been attributed largely to export diversification. In Dec’25, profits increased by 5.3%, after falling by 13.1% in Nov’25. In India, RBI announced further liquidity infusion measures. Focus remains on the Union Budget and Economic Survey.

US indices ended higher ahead of earning reports of major technology companies. Fed policy is also awaited this week. Nikkei fell sharply, tracking movement of JPY in the run up to the election campaign. Sensex closed lower dragged down by real estate and auto stocks. It is trading higher today, while Asian stocks are trading mixed amidst fear of higher tariff on S. Korea by US.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Except INR, other global currencies strengthened against the dollar. DXY fell by 0.6% to its lowest since Sep’25 as investors assessed the impact of US policies on growth. JPY appreciated amidst reports of intervention. INR depreciated to a record low. However, it is trading stronger today, in line with other Asian peers.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Risk-off sentiments surrounding geopolitical tension and volatility in Japanese market largely capped sovereign yields. Germany’s 10Y yield softened the most, followed by Japan. India’s 10Y yield rose by 3bps. It is trading at the same level today, despite the announcement of a host of liquidity measures by RBI.

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Table 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Table 5 – Liquidity

Source: RBI, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Table 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 20 Jan and 21 Jan 2026

Oil prices fell as demand concerns reappeared amidst fears of elevated tariffs.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

US Conference Board consumer confidence index dipped to 84.5 in Jan’26-to a more than 11 year low. Consumers remained wary of higher prices and a slowdown in labour market conditions. Separately, US President’s comments on the value of dollar, hinted that the US administration might be tolerant of a weaker domestic currency. It must be noted that the dollar has slumped by over 2% in 2026, after falling by over 9% in 2025. Focus now remains on the Fed’s policy decision due today. In Australia, CPI inflation inched up to 3.6% in Q4 2025 from 3.2% in Q3, raising expectations of a rate hike from the RBA next week. In India, market sentiments were upbeat as India concluded a historic trade deal with the EU. Under this, about 99% of Indian exports are expected to gain preferential entry into the EU. This will open up opportunities for MSMEs and create jobs for women, artisans etc.,.

Except Dow Jones, other global stocks ended higher. Hang Seng rose the most, followed by Nikkei. Equity markets were supported by a softer dollar ahead of Fed policy. Dow Jones moderated awaiting financial results of major technology companies. Sensex was supported by India-EU trade pact. It is trading higher today, while Asian stocks are trading mixed.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Except CNY, other global currencies rallied against a weaker dollar. DXY declined to a near 4-year low as US President termed the value of the dollar as “great”. EUR, GBP and JPY gained over 1% each. INR too appreciated tracking positive global cues. It is trading further stronger today, in line with Asian peers.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Global yields closed higher. Japan’s 10Y yield rose significantly ahead of the 40-year bond auction. 10Y yields in US and UK firmed up by 3bps each, tracking major macro data releases. In India, 10Y yield rose to its highest since 4 Mar 2025 amidst concerns of excess supply ahead of the Budget. It is trading lower at 6.69% today.

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Table 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Table 5 – Liquidity

Source: RBI, Bank of Baroda Research

Note: Markets in India were closed on 26 Jan 2026

Table 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 21 Jan and 22 Jan 2026

Markets in India were closed on 26 Jan 2026

Oil prices inched up as winter storm in the US disrupted supplies.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

In line with expectations, US Fed held rates steady at 3.5–3.75% in its meeting with a 10–2 vote. In the monetary policy statement, the Fed Chair noted that while growth remains on a strong footing, risks to both inflation and employment have eased. This is likely to keep the central bank on an extended pause. In particular, the Fed estimates the full impact of tariff-driven price hikes to taper out by mid-2026. Hence, the decision to lower rates further would depend on incoming data and will be contingent on the inflation trajectory.

In Germany, GfK’s consumer confidence index is estimated to have improved to -24.1 in Feb’26 from -26.9 in Jan’26, led by rising income expectations. In India, IIP growth rose to a near 2-year high at 7.8% in Dec’25, compared with 3.7% in Dec’24. This was led by a sharp improvement in manufacturing output (8.1% in Dec’25 versus 3.7% in Dec’24).

US stocks traded cautiously as investors tracked dollar movement. FTSE moderated in line with declines in European equities. Asian stocks closed higher, with Hang Seng rising to its highest level since Jul’21 supported by a tech-led rally. Sensex also inched up led by oil & gas and power stocks. It is trading lower today, while other Asian indices are mixed.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

DXY reversed course and rose by 0.2% after the Fed’s decision to hold rates. Despite improved consumer morale in Germany, EUR slipped. INR depreciated tracking higher oil prices. It is trading weaker today, while other Asian currencies are mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Japan’s 10Y yield declined by 5bps tracking a weaker JPY, with volatility rising ahead of elections. US 10Y yield closed stable, while India’s 10Y yield rose by 2bps on expectations of higher supply. It is trading further higher at 6.72% today.

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Table 4 – Short term rates

Table 5 – Liquidity

Table 6 – Capital market flows

Oil prices rose further as investors monitored developments in Iran-US relations.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets closed cautiously as investors monitored heightened tensions between US and Iran and the possibility of another US government shutdown, which also weighed on market sentiments. Macro data showed a drop in US weekly jobless claims by 1,000 to 209,000. US trade deficit widened to a near 34-year high at US$56.8bn in Nov’25 amidst a surge in capital goods imports. US factory orders rose by 2.7% in Nov’25, after declining by 1.2% in Oct’25 led by higher demand for commercial aircraft.

In Japan, both retail sales and industrial production declined, while the jobless rate held steady. Core inflation in Tokyo eased to 2% in Jan’26 from 2.3% in Dec’25, largely due to base effects, reinforcing expectations that the BoJ is likely to move cautiously on rates. In India, the Economic Survey pegged GDP growth for FY27 at 6.8–7.2%, with potential growth estimated at 7%.

Barring S&P 500 (lower) and Nikkei (flat), global indices closed higher. Among Asian stocks, Hang Seng continued its 7-day rally, tracking the listing of the first gold ETF. Sensex inched up, led by metal and power stocks. It is trading lower today, in line with other Asian stocks.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Global currencies ended mixed. DXY declined by 0.2% as investors monitored US macro data. EUR rose by 0.1% as Eurozone’s consumer confidence index improved in Jan’26. INR depreciated to a record low as oil prices increased. However, it is trading stronger today, while Asian currencies are trading mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Global yields closed mixed. UK’s 10Y yield softened the most followed by Germany over risk-off sentiments. In Japan, 10Y yield rose by 2bps tracking yen movement. India’s 10Y yield closed stable awaiting the Budget announcement and is trading slightly higher today.

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Table 4 – Short term rates

Oil prices rose to a 6-month high amidst US-Iran tensions.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research