Tag: Japan

  • Bitcoin Roars Back as Trump Plans Strategic Crypto Reserve; Tariffs, Geopolitics, NFP and ECB to Move Markets

    Bitcoin Roars Back as Trump Plans Strategic Crypto Reserve; Tariffs, Geopolitics, NFP and ECB to Move Markets


    Bitcoin led the charge in an otherwise quiet Asian session, rebounding over 20% from last week’s low after a major announcement from US President Donald Trump. The cryptocurrency sector saw dramatic relief from its steep selloff last week, as Trump revealed the creation of a strategic crypto reserve, including Bitcoin, Solana, XRP, and other digital assets.

    The wording of the post also drew attention, with Trump emphasizing that BTC and ETH would be at the “heart of the reserve.” Unlike a simple stockpile, which implies holding onto existing government-owned crypto assets, a reserve suggests active purchases in regular installments.

    However, the move has not been without criticism. Crypto purists argue that Bitcoin and other decentralized assets were created to exist outside government control, and they reject the notion of a nation-state amassing a large share of the market. Some others see the announcement as politically motivated rather than a structural shift in policy, raising concerns about long-term regulatory implications.

    Technically, Bitcoin’s strong rebound ahead of 73812 cluster zone (38.2% retracement of 15452 to 109571 at 73617) suggests that price actions from 10957 are likely forming a medium term consolidation pattern only, rather than bearish trend reversal. Sustained trading above 55 D EMA (now at 95271) will solidify this bullish case, and extend range trading below 109571 for a while before eventual upside breakout.

    Meanwhile, in the currency markets, Euro is leading gains, followed by Sterling and Aussie. Dollar is the worst performer, trailed by Kiwi and Yen. Swiss Franc and Loonie are positioning in the middle.

    Looking ahead, multiple US tariffs on Canada, Mexico, and China are set to take effect on Tuesday, March 4, and speculation is mounting over retaliatory measures. China has already hinted at countermeasures, including tariffs on U.S. agricultural products and non-tariff barriers.

    On the geopolitical front, all eyes will be on the US response to a new UK-EU effort to draft a Ukraine peace plan, a move coming on the heels of President Volodymyr Zelenskiy’s high-profile clash with Trump at the Oval Office just two days ago.

    In addition, crucial US economic data, including non-farm payrolls and ISM manufacturing and services indexes, will be closely watched. Across the Atlantic, ECB is expected to cut interest rates again this week, continuing its “regular, gradual” easing.

    In Asia, at the time of writing, Nikkei is up 1.70%. Hong Kong HSI is up 1.30%. China Shanghai SSE is up 0.32%. Singapore Strait Times is up 0.47%. Japan 10-year JGB yield is up 0.029 at 1.405.

    Japan’s PMI manufacturing finalized at 49 in Feb, modest improvement but outlook remains weak

    Japan’s manufacturing sector showed slight improvement in February, with PMI finalized at 49.0, up from 48.7 in January. However, the sector remains in contraction territory, reflecting ongoing struggles with weak demand.

    According to Usamah Bhatti at S&P Global Market Intelligence, manufacturers cited soft global and domestic demand, with “muted conditions” in key markets such as the US, Europe, and China. Additionally, purchasing activity saw a solid and sustained decline.

    The “near-term outlook remains clouded”. Business confidence fell to its lowest level since mid-2020, driven by growing concerns over the impact of US trade policies and a slower-than-expected global economic recovery.

    China’s Caixin PMI manufacturing rises to 50.8, but employment remains a concern

    China’s Caixin PMI Manufacturing climbed to 50.8 in February, up from 50.1, exceeding expectations of 50.3.

    Wang Zhe, Senior Economist at Caixin Insight Group, noted that new export orders rebounded, corporate purchasing increased, and logistics remained smooth. However, employment continued to decline, and output prices stayed weak.

    Additionally, official PMI data released over the weekend further reinforced signs of recovery. The official PMI Manufacturing rebounded from 49.1 to 50.2, marking its highest level since November and moving back into expansionary territory. Additionally, the non-manufacturing PMI, which covers services and construction, ticked up to 50.4 from 50.2.

    Market sentiment hinges on US NFP, ECB cut and other data to watch

    While trade war and geopolitics might continue to dominate headlines, key economic events this week could also inject extra volatility into the markets.

    The week’s most significant market-moving event could come from the US. February non-farm payrolls report will be a crucial test for investor sentiment, particularly after recent economic data—including consumer confidence, business activity, and retail sales—showed signs of weakness. Additionally, ISM manufacturing and services data will provide further insight into business conditions. The impact of tariffs on the economy is beginning to surface in economic data, and a set of disappointing data could amplify the emerging concerns.

    It should noted that while a softer NFP print could bring forward expectations for a Fed rate cut, optimism about policy easing may be overshadowed by broader economic worries, which would drive further volatility across asset classes. The key is whether the job market can hold up against growing uncertainty, or if fears of a sharper slowdown will escalate.

    ECB is widely anticipated to proceed with its “regular, gradual” approach to policy easing at its meeting this week, with a 25bps cut to the deposit rate, bringing it down to 2.50%. The latest Economic Bulletin suggests policymakers see neutral rate in the range of 1.75%-2.25%, implying that further rate reductions beyond this week’s move will be calculated cautiously.

    Analysts largely expect two more 25bps cuts by ECB in Q2 to bring an end to the cycle. But the outcome could vary depending on economic growth and inflation developments. Markets will closely analyze ECB’s updated economic projections hints on the central bank’s view, at least the base case.

    Eurozone inflation data will also be in the spotlight. February’s flash CPI is expected to show headline inflation falling to 2.3%, following four consecutive months of increases. Core inflation, which has remained at 2.7% for five straight months, is projected to ease to 2.5%.

    Beyond the US and Eurozone, Australia will also be in focus. Although RBA initiated its easing cycle in February, policymakers have remained cautious about further cuts. RBA meeting minutes will provide more details on the board’s thinking regarding the next steps. Additionally, Australia’s Q4 GDP and January retail sales data will offer insight into whether more imminent easing is necessary.

    Other key data releases include Canada’s employment report and China’s Caixin PMIs.

    Here are some highlights for the week

    • Monday: Japan PMI manufacturing final; China Caixin PMI manufacturing; Swiss PMI manufacturing; Eurozone CPI flash, PMI manufacturing final; UK PMI manufacturing final; Canada PMI manufacturing; US ISM manufacturing, construction spending.
    • Tuesday: New Zealand building permits; Japan unemployment rate, capital spending, monetary base, consumer confidence; Australia RBA minutes, retail sales; Eurozone unemployment rate.
    • Wednesday: Australia GDP; China Caxin PMI services; Eurozone PMI services final, PPI; UK PMI services final; US ADP employment, ISM services, factory orders, Fed’s Beige Book report.
    • Thursday: Australia building permits, goods trade balance; Swiss unemployment rate; UK PMI construction; Eurozone retail sales, ECB rate decision, US jobless claims, trade balance; Canada Ivey PMI.
    • Friday: China trade balance; Germany factory orders; Swiss foreign currency reserves; Eurozone GDP revision; Canada employment; US non-farm payrolls.

    EUR/AUD Daily Outlook

    Daily Pivots: (S1) 1.6660; (P) 1.6717; (R1) 1.6768; More…

    Intraday bias in EUR/AUD stays on the upside for the moment. As noted before, consolidation from 1.6800 should have already completed with three waves down to 1.6355. Firm break of 1.6800 resume the rise from 1.5963 to 61.8% projection of 1.5963 to 136800 from 1.6355 at 1.6872, and then 100% projection at 1.7192, which is close to 1.7180 high. On the downside, below 1.6657 minor support will delay the bullish case and turn intraday bias neutral again first.

    In the bigger picture, with 1.5996 key support (2024 low) intact, larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

    D

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Terms of Trade Index Q4 3.10% 1.50% 2.40% 2.50%
    00:00 AUD TD-MI Inflation Gauge M/M Feb -0.20% 0.10%
    00:30 JPY Manufacturing PMI Feb F 49 48.9 48.9
    01:45 CNY Caixin Manufacturing PMI Feb 50.8 50.3 50.1
    08:30 CHF Manufacturing PMI Feb 48.4 47.5
    08:50 EUR France Manufacturing PMI Feb F 45.5 45.5
    08:55 EUR Germany Manufacturing PMI Feb F 46.1 46.1
    09:00 EUR Eurozone Manufacturing PMI Feb F 47.3 47.3
    09:30 GBP Manufacturing PMI Feb F 46.4 46.4
    09:30 GBP Mortgage Approvals Jan 66K 67K
    09:30 GBP M4 Money Supply M/M Jan 0.20% 0.10%
    10:00 EUR Eurozone CPI Y/Y Feb P 2.30% 2.50%
    10:00 EUR Eurozone CPI Core Y/Y Feb P 2.50% 2.70%
    14:30 CAD Manufacturing PMI Feb 51.6
    14:45 USD Manufacturing PMI Feb F 51.6 51.6
    15:00 USD ISM Manufacturing PMI Feb 50.8 50.9
    15:00 USD ISM Manufacturing Prices Paid Feb 56.2 54.9
    15:00 USD ISM Manufacturing Employment Feb 50.3
    15:00 USD Construction Spending M/M Jan -0.10% 0.50%

     



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  • Japan Manufacturing Sector Shrinks At Slower Pace

    Japan Manufacturing Sector Shrinks At Slower Pace


    Japan’s manufacturing activity continued to contract in February albeit at a slower pace, final survey data from S&P Global revealed on Monday.

    The au Jibun Bank manufacturing Purchasing Managers’ Index rose to 49.0 in February from 48.7 in January. The flash reading was 48.9.

    However, a reading below 50.0 indicates contraction. Operating conditions deteriorated for eighth straight month.

    Factory output fell for the sixth successive month during February but at a slower pace. New orders dropped further. Manufacturers cited demand retrenchment and weak client confidence as the key factors behind the fall.

    The subdued manufacturing performance was also reflected in a broad stagnation in employment levels and solid declines in purchasing activity and backlogs of work.

    Expectations towards the year-ahead outlook for output remained positive but eased from January to the lowest since June 2020.

    For comments and feedback contact: editorial@rttnews.com

    Economic News

    What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.





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  • Sentiment Lifted by In-Line PCE Data, But Tariffs Could Limit Optimism

    Sentiment Lifted by In-Line PCE Data, But Tariffs Could Limit Optimism


    Risk sentiment received a boost in early US trading as January’s PCE inflation data came in line with expectations, lifting hopes that Fed may have room to cut rates in the first half of the year. Both headline and core PCE inflation slowed, adding to expectations that disinflation remains on track. Fed fund futures now indicate a roughly 70% chance of a 25bps rate cut in June, up from around 63% just a week ago.

    However, it remains to be seen whether the bounce in equities, as suggested by higher futures, can hold. Market sentiment remains fragile, particularly with ongoing uncertainty surrounding US tariff policies. Investors are cautious about the economic fallout from trade measures, which could overshadow any optimism from cooling inflation data.

    In the currency markets, Dollar is on track to close the week as the best performer, followed by Sterling and Swiss Franc. Meanwhile, Kiwi remains the weakest, followed by Aussie and Loonie, with little sign of a reversal. Euro and Yen are positioning in the middle.

    In Europe, at the time of writing, FTSE is up 0.36%. DAX is down -0.57%. CAC is down -0.55%. UK 10-year yield is down -0.024 at 4.490. Germany 10-year yield is down -0.026 at 2.394. Earlier in Asia, Nikkei fell -2.88% Hong Kong HSI fell -3.28%. China Shanghai SSE fell -1.98%. Singapore Strait Times fell -0.65%. Japan 10-year JGB yield fell -0.02 to 1.376.

    US PCE inflation slows as expected, personal income surges but spending contracts

    The latest US PCE inflation data showed price pressures moderating slightly in January. Both headline and core PCE (excluding food and energy) price indices rose 0.3% month-over-month, aligning with market expectations.

    On an annual basis, headline PCE inflation slowed to 2.5% yoy from 2.6% yoy, while core PCE eased to 2.6% yoy from 2.9% yoy, reinforcing the view that disinflation remains on track despite persistent price pressures in some sectors.

    However, the consumer sector showed signs of strain. Personal income surged 0.9% mom, far exceeding expectations of 0.3%, but personal spending unexpectedly declined by -0.2%, missing the anticipated 0.2% gain.

    Canada’s GDP grows 0.2% mom in Dec, misses expectations

    Canada’s GDP expanded by 0.2% mom in December, falling short of the expected 0.3% growth. Both services-producing (+0.2%) and goods-producing industries (+0.3%) contributed to the increase, marking the fifth gain in the past six months. A total of 11 out of 20 industrial sectors posted growth.

    Looking ahead, preliminary data suggests GDP grew by 0.3% mom in January, with gains led by mining, quarrying, oil and gas extraction, wholesale trade, and transportation. However, retail trade remained a weak spot, partially offsetting the overall growth.

    BoE’s Ramsden sees inflation risks two-sided

    BoE Deputy Governor Dave Ramsden indicated a shift in his inflation outlook, stating that he no longer views risks to achieving the 2% target as skewed to the downside. Instead, he now sees inflation risks as “two-sided,” acknowledging the potential for “more inflationary as well as disinflationary scenarios”.

    Ramsden also raised concerns about the UK’s sluggish economic growth, highlighting the possibility that the economy’s supply capacity might be “even weaker” than previously assessed by BoE.

    If this proves true, the UK’s “speed limit” for growth would be lower, leading to prolonged tightness in the labor market and sustained wage pressures. That would result in “greater persistence in domestic inflationary pressures.”

    Swiss KOF falls to 101.7, manufacturing and services under pressure

    Switzerland’s KOF Economic Barometer declined from 103.0 to 101.7 in February, missing expectations of 102.1.

    The data suggests weakening momentum in the economy, with most production-side sectors facing increasing pressure. According to KOF, manufacturing and services sectors saw the most notable deterioration.

    However, the report also pointed to some stabilizing factors, as foreign demand and private consumption showed resilience, helping to offset some of the negative trends.

    BoJ’s Uchida: Yield rise reflects market’s views on economic and global developments

    Speaking in parliament today, BoJ Deputy Governor Shinichi Uchida said recent rise in JGB yields “reflects the market’s view on the economic and price outlook, as well as overseas developments.”

    “There’s no change to our stance on short-term policy rates and government bond operations,” he emphasized, adding that the bond holdings “continue to exert a strong monetary easing effect” on the economy.

    When asked whether the prospect of further rate hikes and tapering would continue to drive yields higher, Uchida responded that it is ultimately “up to markets to decide.”

    Japan’s Tokyo CPI slows to 2.2% yoy in Feb, industrial production down -1.1% mom in Jan

    Tokyo’s core CPI (ex-food) slowed to 2.2% yoy in February, down from 2.5% yoy and below market expectations of 2.3% yoy. This marks the first decline in four months, largely due to the reintroduction of energy subsidies. Meanwhile, core-core CPI (ex-food and energy) held steady at 1.9% yoy. Headline CPI slowed from 3.4% yoy to 2.9% yoy.

    In the industrial sector, production contracted by -1.1% mom in January, a sharper decline than the expected -0.9%. Manufacturers surveyed by Japan’s Ministry of Economy, Trade, and Industry anticipate a strong 5.0% mom rebound in February, followed by a -2.0% mom drop in March.

    On the consumer front, retail sales grew 3.9% yoy in January, slightly missing the 4.0% yoy forecast, but still pointing to resilient domestic demand.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0365; (P) 1.0430; (R1) 1.0462; More…

    Intraday bias in EUR/USD stays on the downside at this point. Consolidations from 1.0176 should have completed with three waves up to 1.0527. Deeper fall should be seen to retest 1.0176/0210 support zone. Firm break there will resume whole decline from 1.1213. For now, risk will stay on the downside as long as 1.0527 holds, in case of recovery.

    In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Tokyo CPI Y/Y Feb 2.90% 3.40%
    23:30 JPY Tokyo CPI Core Y/Y Feb 2.20% 2.30% 2.50%
    23:30 JPY Tokyo CPI Core-Core Y/Y Feb 1.90% 1.90%
    23:50 JPY Industrial Production M/M Jan P -1.10% -0.90% -0.20%
    23:50 JPY Retail Trade Y/Y Jan 3.90% 4.00% 3.70% 3.50%
    00:30 AUD Private Sector Credit M/M Jan 0.50% 0.60% 0.60%
    05:00 JPY Housing Starts Y/Y Jan -4.60% -2.60% -2.50%
    07:00 EUR Germany Import Price Index M/M Jan 1.10% 0.70% 0.40%
    07:00 EUR Germany Retail Sales M/M Jan 0.20% 0.10% -1.60%
    07:45 EUR France Consumer Spending M/M Jan -0.50% -0.80% 0.70%
    07:45 EUR France GDP Q/Q Q4 -0.10% -0.10% -0.10%
    08:00 CHF KOF Economic Barometer Feb 101.7 102.1 101.6 103
    08:55 EUR Germany Unemployment Change Jan 5K 15K 11K
    08:55 EUR Germany Unemployment Rate Jan 6.20% 6.20% 6.20%
    13:00 EUR Germany CPI M/M Feb P 0.40% 0.40% -0.20%
    13:00 EUR Germany CPI Y/Y Feb P 2.30% 2.30% 2.30%
    13:30 CAD GDP M/M Dec 0.20% 0.30% -0.20%
    13:30 USD Personal Income M/M Jan 0.90% 0.30% 0.40%
    13:30 USD Personal Spending Jan -0.20% 0.20% 0.70% 0.80%
    13:30 USD PCE Price Index M/M Jan 0.30% 0.30% 0.30%
    13:30 USD PCE Price Index Y/Y Jan 2.50% 2.50% 2.60%
    13:30 USD Core PCE Price Index M/M Jan 0.30% 0.30% 0.20%
    13:30 USD Core PCE Price Index Y/Y Jan 2.60% 2.60% 2.80% 2.90%
    13:30 USD Goods Trade Balance (USD) Jan P 153.3B -114.9B -122.0B
    13:30 USD Wholesale Inventories Jan P 0.70% 0.10% -0.50% -0.40%
    14:45 USD Chicago PMI Feb 40.3 39.5

     



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  • Markets Reel Under Trade War Fears, Dollar Gains Traction, Gold Falls

    Markets Reel Under Trade War Fears, Dollar Gains Traction, Gold Falls


    Global stock markets are under heavy selling pressure as risk-off sentiment dominates the final trading day of February. The selloff intensified across major indices, with Japan’s Nikkei plunging -3% and Hong Kong’s Hang Seng Index down -2.8%, following the steep declines in US equities overnight. Investors are increasingly wary of escalating trade tensions, which could further weigh on the fragile global recovery.

    Market sentiment took a sharp hit after confirmation that the 25% US tariffs on Mexico and Canada will take effect on March 4. The more consequential reciprocal tariffs, set for April 2, have also drawn attention, particularly with US President Donald Trump threatening to extend a 25% tariff on European Union imports.

    NASDAQ was the hardest hit among US indices, tumbling -2.78%, with semiconductor giant Nvidia leading the declines with an -8.5% drop. Despite reporting strong quarterly earnings, the company is facing increased concerns that it won’t be immune to the broader trade war, particularly if Taiwan’s chip industry comes under new US tariff measures. Given Nvidia’s dominant role in the AI sector, any disruption in its supply chain could ripple through the entire tech sector.

    In the currency markets, Dollar is now firmly leading the weekly performance rankings after its sharp rally overnight. Swiss Franc follows as the second-strongest, while Sterling also benefits from the broader selloff in Euro. Meanwhile, commodity-linked currencies are bearing the brunt of risk aversion, with New Zealand Dollar plunging the most, followed by Australian and Canadian Dollars. While Euro and Yen are positioned in the middle of the performance spectrum, the single currency is looking rather vulnerable.

    Technically, Gold’s extended decline is another confirmation of the Dollar’s underlying strength. The break of 2876.93 support confirms short-term topping at 2956.09, just below the key psychological 3000 level, with bearish divergence in 4H MACD.

    Deeper correction should be seen to 38.2% retracement of 2584.24 to 2956.09 at 2814.04. Rebound from there indicate that it’s just a near term correction, and keep the larger up trend intact. However, sustained break of 2814.04 will suggest that a larger scale correction is already unfolding.

    In Asia, at the time of writing, Nikkei is down -2.97%. Hong Kong HSI is down -2.58%. China Shanghai SSE is down -1.11%. Singapore Strait Times is down -0.72%. Japan 10-year JGB yield is down -0.023 at 1.373. Overnight, DOW fell -0.45%. S&P 500 fell -1.59%. NASDAQ fell -2.78%. 10-year yield rose 0.036 to 4.285.

    BoJ’s Uchida: Yield rise reflects market’s views on economic and global developments

    Speaking in parliament today, BoJ Deputy Governor Shinichi Uchida said recent rise in JGB yields “reflects the market’s view on the economic and price outlook, as well as overseas developments.”

    “There’s no change to our stance on short-term policy rates and government bond operations,” he emphasized, adding that the bond holdings “continue to exert a strong monetary easing effect” on the economy.

    When asked whether the prospect of further rate hikes and tapering would continue to drive yields higher, Uchida responded that it is ultimately “up to markets to decide.”

    Japan’s Tokyo CPI slows to 2.2% yoy in Feb, industrial production down -1.1% mom in Jan

    Tokyo’s core CPI (ex-food) slowed to 2.2% yoy in February, down from 2.5% yoy and below market expectations of 2.3% yoy. This marks the first decline in four months, largely due to the reintroduction of energy subsidies. Meanwhile, core-core CPI (ex-food and energy) held steady at 1.9% yoy. Headline CPI slowed from 3.4% yoy to 2.9% yoy.

    In the industrial sector, production contracted by -1.1% mom in January, a sharper decline than the expected -0.9%. Manufacturers surveyed by Japan’s Ministry of Economy, Trade, and Industry anticipate a strong 5.0% mom rebound in February, followed by a -2.0% mom drop in March.

    On the consumer front, retail sales grew 3.9% yoy in January, slightly missing the 4.0% yoy forecast, but still pointing to resilient domestic demand.

    Fed’s Hammack signals cautious approach, stresses policy patience

    Cleveland Fed President Beth Hammack said Fed has the “luxury of being patient” given the strength of the labor market and the uneven progress in reducing inflation.

    In a speech overnight, she noted that while inflation has moderated, it remains above the 2% target, and policymakers are not yet confident that price pressures will fully subside. As a result, she expects the federal funds rate to stay steady “for some time”.

    Hammack acknowledged that the current policy stance has helped ease inflation, but she warned that risks remain. While Fed anticipates a gradual return to 2% inflation over the medium term, she stressed that this is “far from a certainty.”

    She suggested Fed will need to take a “patient approach” in monitoring how inflation and the labor market adjust before making any policy changes.

    Fed’s Harker says one inflation report shouldn’t sway policy in either direction

    Philadelphia Fed President Patrick Harker noted in a speech overnight that recent inflation data continues to show an uneven path toward the 2% target. He acknowledged that January’s consumer price data came in hotter than expected, marking the fastest increase in 18 months.

    However, he stressed that policymakers should “not be moved to act, in either direction” based on a single month’s data.

    Harker reaffirmed his stance that the Fed’s current policy rate remains sufficiently restrictive to keep inflation in check without undermining overall economic stability.

    Despite inflation’s persistence, Harker remains optimistic about the economic outlook. He stated, “I am of a position that we let monetary policy continue to work.”

    Looking ahead

    Germany will release CPI flash, import prices, retail sales and unemployment in European session. Swiss will release KOF economic barometer.

    Later in the day, Canada will publish GDP. Focus is also on US PCE inflation, goods trade balance and Chicago PMI.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6207; (P) 0.6261; (R1) 0.6291; More…

    AUD/USD’s fall from 0.6407 accelerated lower today and intraday bias stays on the downside for retesting 0.6087 low. Decisive break there will resume larger decline from 0.6941. On the upside, above 0.6284 minor resistance will turn intraday bias neutral first. But outlook will remain bearish as long as 38.2% retracement of 0.6941 to 0.6087 at 0.6413 holds, in case of recovery.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6505) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Tokyo CPI Y/Y Feb 2.90% 3.40%
    23:30 JPY Tokyo CPI Core Y/Y Feb 2.20% 2.30% 2.50%
    23:30 JPY Tokyo CPI Core-Core Y/Y Feb 1.90% 1.90%
    23:50 JPY Industrial Production M/M Jan P -1.10% -0.90% -0.20%
    23:50 JPY Retail Trade Y/Y Jan 3.90% 4.00% 3.70% 3.50%
    00:30 AUD Private Sector Credit M/M Jan 0.50% 0.60% 0.60%
    05:00 JPY Housing Starts Y/Y Jan -2.60% -2.50%
    07:00 EUR Germany Import Price Index M/M Jan 0.70% 0.40%
    07:00 EUR Germany Retail Sales M/M Jan 0.10% -1.60%
    07:45 EUR France Consumer Spending M/M Jan -0.80% 0.70%
    07:45 EUR France GDP Q/Q Q4 -0.10% -0.10%
    08:00 CHF KOF Economic Barometer Feb 102.1 101.6
    08:55 EUR Germany Unemployment Change Jan 15K 11K
    08:55 EUR Germany Unemployment Rate Jan 6.20% 6.20%
    13:00 EUR Germany CPI M/M Feb P 0.40% -0.20%
    13:00 EUR Germany CPI Y/Y Feb P 2.30% 2.30%
    13:30 CAD GDP M/M Dec 0.30% -0.20%
    13:30 USD Personal Income M/M Jan 0.30% 0.40%
    13:30 USD Personal Spending Jan 0.20% 0.70%
    13:30 USD PCE Price Index M/M Jan 0.30% 0.30%
    13:30 USD PCE Price Index Y/Y Jan 2.50% 2.60%
    13:30 USD Core PCE Price Index M/M Jan 0.30% 0.20%
    13:30 USD Core PCE Price Index Y/Y Jan 2.60% 2.80%
    13:30 USD Goods Trade Balance (USD) Jan P -114.9B -122.0B
    13:30 USD Wholesale Inventories Jan P 0.10% -0.50%
    14:45 USD Chicago PMI Feb 40.3 39.5

     



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  • Japan’s economy is on a moderate recovery path

    Japan’s economy is on a moderate recovery path


    Bank of Japan Deputy Governor Shinichi Uchida said on Friday that Japan’s economy is experiencing a moderate recovery, though some weaknesses persist.

    Key quotes

    Japan’s economy is experiencing a moderate recovery, though some weaknesses persist.
    The underlying inflation rate is gradually rising toward the 2% target.
    The Bank of Japan’s JGB holdings continue to provide a strong monetary easing effect.

    Market reaction 

    At the time of writing, the USD/JPY pair is trading 0.07% higher on the day to trade at 149.78.

    Bank of Japan FAQs

    The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

    The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

    The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

    A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.

     



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  • Risk Aversion Returns as US Tariff Fears Resurface, Dollar Recovers Late

    Risk Aversion Returns as US Tariff Fears Resurface, Dollar Recovers Late


    Geopolitical developments dominated global headlines last week, particularly surrounding peace negotiations over Russia’s invasion of Ukraine and evolving US-Ukraine relations. While US President Donald Trump’s tariffs took a backseat, concerns over their impact on consumer spending and economic growth resurfaced by the end of the week, triggering renewed risk aversion.

    Markets lacked clear direction for most of the week, with major assets struggling to gain momentum in either direction. However, risk sentiment soured late in the week as fresh worries emerged over the potential inflationary effects of tariffs, particularly on US consumers. This shift in tone could set the market narrative for the near term.

    Against this backdrop, Dollar initially struggled but recovered some ground by the week’s close, finishing as the third worst performer overall. The late-week risk-off mood helped Dollar stabilize, with Dollar Index showing potential for a rebound off key Fibonacci support if risk aversion deepens further.

    Euro finished as the second weakest currency, partly weighed down by disappointing PMI data. Hopes for a political boost from German election over the weekend could be short-lived, as renewed US tariff threats may quickly drag Euro lower again. The worst performer was Canadian Dollar, which faced additional pressure from concerns over trade and slowing economy.

    In contrast, Yen emerged as the strongest currency, benefiting from increasing speculation of an earlier-than-expected BoJ rate hike. Divergence in yields also provided support, as Japan’s JGB yields rose while US Treasury yields declined.

    Sterling and the Swiss Franc were the second and third strongest, respectively, as both benefited from uncertainty surrounding Euro. Australian and New Zealand Dollars ended mixed, weighed down by the late-week risk aversion. However, Kiwi ended up with a slight upper hand over Aussie.

    Stocks Slide as Consumer Confidence Plunges, Dollar Index Holds Key Support

    US stocks ended the week notably lower as earlier resilience turned into steep selloff on Friday. S&P 500, which had set a new record high, ended the week with -1.7% loss, while DOW and NASDAQ both fell -2.5%. DOW’s -700-point drop on Friday marked its worst trading day of the year, catching many investors off guard and raising concerns over broader market sentiment.

    At the heart of the selloff was the unexpected deterioration in consumer sentiment. The University of Michigan Consumer Sentiment Index for February was finalized at 64.7, significantly below January’s 71.7 and the preliminary reading of 67.8. This was the lowest level since November 2023, signaling growing unease among US households about economic conditions.

    Adding to market anxiety, inflation expectations surged. Households now expect inflation over the next year to rise to 4.3%, the highest since November 2023, up from 3.3% last month. Over the next five years, inflation expectations climbed to 3.5%, the highest level since 1995, compared to 3.2% in January.

    Some analysts attribute the drop in sentiment to uncertainty over US President Donald Trump’s policies, particularly the potential for inflationary effects from new tariffs. The University of Michigan noted that the deterioration in sentiment was led by the -19% drop in buying conditions for durable goods, as consumers fear tariff-driven price hikes. Additionally, expectations for personal finances and the short-run economic outlook fell by nearly -10%.

    However, there are differing views on the inflationary impact of tariffs. Some analysts argue that Trump’s tariff threats are more of a strategic negotiation tool aimed at broader geopolitical objectives, such as pressuring Canada and Mexico on fentanyl issues. If these concerns fade, inflation expectations could retreat, allowing consumer confidence to rebound.

    Technically, DOW’s steep decline and strong break of 55 D EMA (now at 43848.97) is clearly a near term bearish sign. However, current fall from 45054.36 are seen as the third leg of the corrective pattern from 45073.63 only. Hence, while deeper fall could be seen to medium term rising channel support (now at around 42530) or below, strong support should emerge around 41884.89 to complete the pattern and bring up trend resumption.

    However, decisive break of 41844.89 will complete a double top reversal pattern (45073.63, 45054.36). DOW would then be at least in correction to the up trend form 32327.20. That would open up deeper correction to 38.2% retracement of 32327.20 to 45054.36 at 40204.49, or even further to 38499.27 support. But then, this is far from being the base scenario at this point.

    For now, Dollar Index is still sitting above 38.2% retracement of 100.15 to 110.17 at 106.34. Near term risk aversion could help Dollar Index defend this support level, with prospect of a bounce from there. Firm break of 55 D EMA (now at 107.40) should bring stronger rally back towards 110.17 high. However, Decisive break below the 106.34 support would deepen the decline to 61.8% retracement at 103.98, even still as a correction.

    Yen Ends Week Strong as BoJ Might Hike Rates Again Sooner

    Yen ended last week as the best-performing currency, thanks to robust inflation data and hawkish remarks from BoJ officials. The rally briefly paused midweek after BoJ Governor Kazuo Ueda signaled readiness to intervene in the bond market, causing Japan’s 10-year JGB yield to retreat from its 15-year high. However, this setback proved temporary, as Yen quickly regained strength amid rising risk aversion and falling US Treasury yields.

    According to the latest Reuters poll, 65% of economists (38 out of 58) expect BoJ to raise rates from 0.50% to 0.75% in July or September. Among the 39 analysts who gave a specific month, 59% (23 respondents) chose July, while 15% (six analysts) expected a June hike. The remaining 10 analysts were evenly split between April and September.

    However, stronger-than-anticipated inflation could give BoJ further cause to pull the timetable forward. Last week’s data already showed core CPI surging more than expected to 3.2% in January, marking the fastest pace in 19 months. If consumer price pressures remain elevated, markets speculate that policymakers might prefer to act sooner rather than wait for the second half.

    The April 30 – May 1 policy meeting could stand out as an appropriate window for BoJ to act. By then, BoJ will have access to Shunto wage negotiation results and an updated economic outlook, providing the necessary justification for an earlier rate hike.

    USD/JPY’s extended decline last week suggests that rebound from 139.57 has already completed with three waves up to 158.86. Fall from 158.86 is now seen as the third leg of the pattern from 161.94.

    Deeper fall is expected as long as 150.92 support turned resistance holds, to 61.8% retracement of 139.57 to 158.86 at 146.32. Firm break there will pave the way back to 139.57. Meanwhile, break of 150.92 will delay the bearish case and bring some consolidations first.

    Any extended USD/JPY weakness should limit Dollar’s rebound. However, this alone shouldn’t be enough to push DXY below key fibonacci support at 106.34 mentioned above.

    AUD/NZD Reverses after RBA and RBNZ Rate Cuts

    Both RBA and RBNZ delivered rate cuts last week, with RBA lowering its cash rate by 25bps to 4.10% and RBNZ cutting by 50bps to 3.75%, in line with expectations.

    RBA maintained a cautious tone, with Governor Michele Bullock emphasizing “patience” before considering another cut. The accompanying statement warned against easing “too much too soon,” highlighting concerns that disinflation progress could stall and inflation could settle above the midpoint of the target range if policy is loosened aggressively.

    Australian economic data also reinforced RBA’s cautious stance, with strong job growth and elevated wage pressures supporting a measured pace of policy easing.

    Meanwhile, RBNZ delivered a more defined path for easing, with Governor Adrian Orr clearly ruling out further 50bps cuts barring an economic shock. Instead, the central bank has outlined two additional 25bps cuts in the first half of the year.

    In the currency markets, AUD/NZD saw a sharp decline, falling back toward its 55 D EMA (now at 1.1063). The key driver of this move is likely the perception that RBNZ is nearing the end of its rate-cutting cycle, while RBA has only just begun easing, leaving room for further reductions if economic conditions weaken.

    With the OCR at 3.75% already close to the neutral band, there is limited downside for RBNZ, while RBA at 4.10% has more room to cut rates. This policy divergence, particularly if Australia’s economy slows further due to trade tensions between US and China, could keep downward pressure on AUD/NZD in the near term.

    Technically, sustained trading below 55 D EMA should confirm rejection by 1.1177 resistance. Fall from 1.1173 would be seen as the third leg of the corrective pattern from 1.1177. Further break of near term channel support (now at 1.1029) would pave the way back to 1.0940 support next.

    EUR/USD Weekly Outlook

    Range trading continued in EUR/USD last week and outlook is unchanged. Initial bias remains neutral this week first. Price actions from 1.0176 are seen as a corrective pattern only. IN case of further rise, upside should be limited by 38.2% retracement of 1.1213 to 1.0176 at 1.0572. On the downside, break of 1.0400 support will turn bias back to the downside for 1.0176/0210 support zone. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

    In the bigger picture, focus stays on on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, strong rebound from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    In the long term picture, down trend from 1.6039 remains in force with EUR/USD staying well inside falling channel, and upside of rebound capped by 55 M EMA (now at 1.0929). Consolidation from 0.9534 could extend further and another rising leg might be seem. But as long as 1.1274 resistance holds, eventual downside breakout would be mildly in favor.



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  • Euro Briefly Dips on Soft PMI, CAD Shrugs Off Robust Retail Sales

    Euro Briefly Dips on Soft PMI, CAD Shrugs Off Robust Retail Sales


    Trading is rather subdued in the forex markets today, with most major pairs and crosses stuck within yesterday’s range. Loonie failed to react to significantly stronger-than-expected retail sales data. Euro dipped earlier following weak PMI reports, but selling pressure quickly fizzled out. Yen saw some volatility during the Asian session, initially weakening alongside Japanese bond yields after BoJ Governor Kazuo Ueda’s comments, but selling was short-lived.

    For the week so far, Yen remains the strongest performer, although it could now pause for consolidation after its recent rally. Sterling pound ranks second, followed by Aussie. On the weaker side, Euro has slipped to the bottom, just below Loonie and Dollar. However, the gap between the three remains tight, leaving room for shifts before the weekly close. Meanwhile, Swiss Franc and Kiwi are positioning in the middle.

    In Europe, at the time of writing, FTSE is up 0.02%. DAX is up 0.29%. CAC is up 0.52%. UK 10-year yield is up 0.0044 at 4.619. Germany 10-year yield is down -0.0478 at 2.492.Earlier in Asia, Nikkei rose 0.26%. Hong Kong HSI rose 3.99%. China Shanghai SSE rose 0.85%. Singapore Strait Times rose 0.06%. Japan 10-year JGB yield fell -0.0229 to 1.428.

    Canada’s retail sales surge in 2.5% mom Dec, but Jan set for pullback

    Canada’s retail sales jumped 2.5% mom to CAD 69.6B in December, far surpassing market expectations of 1.6% mom. Sales increased across all nine subsectors, with the strongest contributions from food and beverage retailers and motor vehicle and parts dealers.

    In volume terms, retail sales also rose 2.5% mom, indicating that the increase was not solely due to price effects.

    For Q4, retail sales climbed 2.4% qoq, marking the second consecutive quarterly gain. Adjusted for inflation, sales volumes rose 1.8% qoq.

    However, momentum may have slowed at the start of 2025. Advance estimate for January suggests retail sales declined by -0.4% mom.

    Eurozone PMI manufacturing rises to 47.3, but services falls to 50.7

    Eurozone Manufacturing PMI improved from 46.6 to 47.3 in February, a nine-month high. However, Services PMI declined to 50.7 from 51.3, dragging Composite PMI flat at 50.2, indicating near stagnant overall growth.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted that services sector price pressures remain elevated, creating complications for the ECB ahead of its next meeting. Persistent wage growth and rising input costs in manufacturing, driven by energy prices, add to inflationary risks.

    Regionally, France’s services sector led the slowdown, with business activity deteriorating at an accelerated pace since September. In contrast, Germany maintained modest growth, supported by expectations of greater political stability ahead of its federal elections.

    UK PMI composite dips to 50.5, stagflation dilemma for BoE

    UK’s PMI Manufacturing dropped from 48.3 to 46.4 in February, a 14-month low. PMI Services edged up slightly to 51.1 from 50.8, while Composite PMI dipped to 50.5 from 50.6, indicating minimal overall growth.

    Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that business activity remained “largely stalled” for the fourth straight month, with job losses accelerating amid declining sales and rising costs. He cautioned that the combination of stagnant growth and mounting price pressures is creating a “stagflationary environment,” presenting a “growing dilemma” for BoE.

    A primary driver of inflationary pressure is the increase in firms raising prices to offset rising staff costs tied to the National Insurance hike and minimum wage increase announced in the autumn Budget. However, these same fiscal measures have also exacerbated job cuts, with employment falling at its fastest pace since the global financial crisis, excluding the pandemic period.

    UK retail sales rebound sharply by 1.7% mom in Jan

    UK retail sales volumes surged 1.7% mom in January, far exceeding market expectations of 0.3% m/m, marking a strong recovery from December’s -0.6% mom decline.

    This sharp rebound pushed monthly sales index levels to their highest since August 2024.

    However, the broader trend remains mixed. Over the three months to January 2025, sales volumes declined by -0.6% compared to the previous three months. On a year-over-year basis, sales volumes rose 1.4%, showing some improvement in spending patterns compared to early 2024.

    Despite the monthly rebound, UK retail sales volumes remain -1.3% below pre-pandemic levels from February 2020.

    BoJ’s Ueda pledges action against sharp JGB yield rise, Yen tumbles

    Yen pulled back sharply from its recent rally, along with steep fall in 10-year JGB yield from its 15-year high. The move came after BoJ Governor Kazuo Ueda reminded markets of the central bank’s commitment to curbing excessive yield volatility.

    In parliamentary comments, Ueda stated, “We expect long-term interest rates to fluctuate to some extent.”

    However, he cautioned that “when markets make abnormal moves and lead to a sharp rise in yields, we are ready to respond nimbly to stabilize markets.”

    The pledge to increase bond purchases, if necessary, knocked the 10-year JGB yield off its 15-year high

    Ueda declined to specify when BoJ might conduct emergency bond market operations, stating only that the central bank would closely monitor the market for signs of destabilization.

    Japan’s core CPI jumps to 3.2% in Jan, above expectations

    Japan’s inflation accelerated in January, with core CPI (ex-food) rising from 3.0% yoy to 3.2% yoy, surpassing expectations of 3.1% yoy and marking the fastest pace in 19 months, driven by higher rice and energy costs.

    This was also the third consecutive month of acceleration, with core CPI rebounding sharply from 2.3% yoy in October. Inflation has now remained at or above BoJ’s 2% target since April 2022.

    Core-core CPI (ex-food and energy) climbed to 2.5% yoy, up from 2.4% yoy, signaling broader price pressures beyond energy and food. Food prices, excluding perishables, surged 5.1% yoy, up from 4.4% yoy, driven by a 70.9% yoy spike in rice prices, the largest increase since data collection began in 1971. This sharp rise was attributed to supply shortages and higher production and transportation costs.

    Energy prices also saw a notable increase of 10.8% yoy, up from 10.1% yoy in December, as gasoline costs rose following government subsidy reductions. Meanwhile, services inflation slowed slightly to 1.4% yoy from 1.6% yoy.

    Headline CPI surged from 3.6% yoy to 4.0% yoy, a two-year high.

    Japan’s PMI improves, but business confidence hits lowest since 2021

    Japan’s PMI data for February showed slight improvements, with PMI Manufacturing rising from 48.7 to 48.9. Meanwhile, PMI Services edged up from 53.0 to 53.1. Composite PMI increased from 51.1 to 51.6, the highest in five months.

    According to Usamah Bhatti, Economist at S&P Global Market Intelligence, the “modest improvement” was driven by sustained growth in services, with firms crediting business expansion plans and improved sales.

    However, optimism about future business activity weakened, with confidence dropping to its lowest level since January 2021. Companies cited labor shortages, persistent inflation, and weak domestic economic conditions as major concerns.

    Employment growth slowed to its weakest pace in over a year, reflecting businesses’ caution about hiring amid economic uncertainty. Additionally, input price inflation remained elevated, similar to January’s historically high levels.

    RBA’s Bullock: More rate cuts possible, but patience needed

    At a parliamentary committee hearing today, RBA Governor Michele Bullock explained that this week’s 25bps rate cut was based on better-than-expected inflation data, weaker private demand, and wage growth aligning with forecasts.

    Also, she acknowledged that the board is mindful of timing, stating, “What’s also playing on the board’s mind is that the board also doesn’t want to be late, and arguably we were late raising interest rates on the way up.”

    While further easing remains on the table, Bullock emphasized the need for caution. “We are not pre-committed. We’re going to be data-driven on this and I think people just have to be patient,” she added.

    Deputy Governor Andrew Hauser echoed this sentiment, reinforcing the RBA’s wait-and-see approach. He remarked, “If we’re wrong and inflation moves more quickly downwards, you could celebrate that fact and policy will need to respond, but we’d rather wait and see than assume that’s what’s going to happen.”

    Australia’s PMI composite hits 6-month high, but business confidence dips

    Australia’s PMI data for February showed continued expansion in private sector activity, with Manufacturing PMI rising to from 50.2 to 50.6, its highest level in 27 months. Meanwhile, Services PMI edged up from 51.2 to 51.4, and Composite PMI ticked up from 51.1 to 51.2, both reaching six-month highs.

    According to Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, the latest figures indicate a “modest” but steady improvement in economic conditions, while growth was broad-based.

    However, business sentiment weakened to its lowest level since October 2024. This caution also affected pricing strategies, with businesses reluctant to fully pass on cost increases, leading to a slowdown in selling price inflation.

    RBNZ’s Conway: 50bps cut the clear choice, signs of economic turnaround emerging

    RBNZ Chief Economist Paul Conway revealed in a Reuters interview that the central bank considered both 25bps and 75bps rate cuts ahead of this week’s policy decision. But the bank ultimately concluded that a 50bps reduction “was the way to go” given the state of the economy and inflation.

    Conway pointed to recent data in manufacturing and services, indicating that some businesses may already be “starting to feel a bit of a turnaround.” However, he acknowledged that companies remain cautious.

    Regarding the labor market, Conway noted that employment trends typically lag economic activity. He added that”businesses need to have confidence that growth is returning and that growth will be sustained into the future before they start to think about employing someone.”

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0446; (P) 1.0475; (R1) 1.0532; More…

    Outlook in EUR/USD remains unchanged despite today’s mild dip. Consolidation from 1.0176 is still extending and intraday bias remains neutral. Stronger rebound might be seen but outlook will remain bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. On the downside, break of 1.0176 will resume whole fall from 1.1213. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

    In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Trade Balance (NZD) Jan -486M 225M 219M 94M
    22:00 AUD Manufacturing PMI Feb P 50.6 50.2
    22:00 AUD Services PMI Feb P 51.4 51.2
    23:50 JPY CPI Y/Y Jan 4.00% 3.60%
    23:50 JPY CPI Core Y/Y Jan 3.20% 3.10% 3.00%
    23:50 JPY CPI Core-Core Y/Y Jan 2.50% 2.40%
    00:01 GBP GfK Consumer Confidence Feb -20 -22 -22
    00:30 JPY Manufacturing PMI Feb P 48.9 49 48.7
    00:30 JPY Services PMI Feb P 53.1 53
    07:00 GBP Retail Sales M/M Jan 1.70% 0.30% -0.30% -0.60%
    07:00 GBP Public Sector Net Borrowing (GBP) Jan -15.4B -20.5B 17.8B 18.1B
    08:15 EUR France Manufacturing PMI Feb P 45.5 45.3 45
    08:15 EUR France Services PMI Feb P 44.5 49 48.2
    08:30 EUR Germany Manufacturing PMI Feb P 46.1 45.6 45
    08:30 EUR Germany Services PMI Feb P 52.2 52.6 52.5
    09:00 EUR Eurozone Manufacturing PMI Feb P 47.3 47.1 46.6
    09:00 EUR Eurozone Services PMI Feb P 50.7 51.5 51.3
    09:30 GBP Manufacturing PMI Feb P 46.4 48.5 48.3
    09:30 GBP Services PMI Feb P 51.1 51 50.8
    13:30 CAD Retail Sales M/M Dec 2.50% 1.60% 0% 0.20%
    13:30 CAD Retail Sales ex Autos M/M Dec 2.70% 0.40% -0.70%
    14:45 USD Manufacturing PMI Feb P 51.3 51.2
    14:45 USD Services PMI Feb P 53 52.9
    15:00 USD Existing Home Sales M/M Jan 4.17M 4.24M
    15:00 USD Michigan Consumer Sentiment Index Jan F 67.8 67.8

     



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  • Sterling Unmoved by CPI Surprise, Gold to Try 3000 Again ahead of FOMC Minutes

    Sterling Unmoved by CPI Surprise, Gold to Try 3000 Again ahead of FOMC Minutes


    The forex markets remain rather indecisive today. Traders are paring back expectations for BoE rate cuts after UK inflation surged to a 10-month high. A March rate cut is now off the table, and markets are no longer fully pricing in two BoE cuts this year. However, this shift has provided only minimal support for the British pound, as broader market sentiment remains cautious.

    Meanwhile, Dollar is mildly firmer but lacks strong upside momentum. Traders are now focused on FOMC minutes, which are expected to reaffirm that Fed is in no rush to cut rates. Current Fed funds futures show a 55% probability that rates will remain at 4.25-4.50% through the first half of 2025, a view that is unlikely to change much without further clarity on President Donald Trump’s fiscal and trade policies.

    In the commodities market, Gold surged to a record high, approaching the critical 3000 psychological level for another attempt. This marks a key inflection point—a decisive break above 3,000 could pave the way to 61.8% projection of 1810.26 to 2789.92 from 2584.24 at 3189.66.

    However, failure to sustain gains above 3000 could lead to deeper pullback. Firm break 2876.93 support should set up correction back towards 2789.92 resistance turned support instead.

    In Europe, at the time of writing, FTSE is down -0.61%. DAX is down -1.16%. CAC is down -0.84%. UK 10-year yield is up 0.0696 at 4.629. Germany 10-year yield is up 0.058 at 2.558. Earlier in Asia, Nikkei fell -0.27%. Hong Kong HSI fell -0.14%. China Shanghai SSE rose 0.81%. Singapore Strait Times rose 0.22%. Japan 10-year JGB yield rose 0.0038 to 1.440.

    ECB’s Schnabel: Rate Cut Pause May Be Approaching

    ECB Executive Board member Isabel Schnabel suggested in an FT interview that the central bank is approaching a point where it “may have to pause or halt” rate cuts.

    While she refrained from making a firm prediction for upcoming policy meetings, she acknowledged that the ECB needs to “start that discussion”.

    Schnabel highlighted that the degree of monetary restriction “has come down significantly”, to the extent that policymakers can “no longer say with confidence” that ECB’s stance remains restrictive.

    She defended the ECB’s gradual and cautious approach, arguing that domestic inflation remains high, wage growth is still elevated, and energy price shocks continue to impact inflation expectations.

    ECB’s Panetta: Eurozone economic weakness more persistent than expected

    Italian ECB Governing Council member Fabio Panetta acknowledged that economic weakness in the Eurozone is proving “more persistent than we expected”, as the long-anticipated consumption-driven recovery has yet to materialize.

    After two consecutive quarters of stagnation, he noted that “tensions in the manufacturing sector, employment is giving signs of weakening”

    Panetta also highlighted the downside risks to inflation stemming from weak growth. However, he also noted that upside inflation risks remain, primarily from energy costs.

    UK CPI surges to 3.0%, highest since March 2024

    UK headline CPI accelerated to 3.0% yoy in January, up from 2.5% yoy and exceeding market expectations of 2.8% yoy. This marks the highest inflation level since March 2024, reinforcing concerns that price pressures remain persistent.

    Core inflation also surged, with CPI excluding energy, food, alcohol, and tobacco rising to 3.7% yoy, up from 3.2% yoy in December.

    Meanwhile, CPI goods inflation edged higher from 0.7% yoy to 1.0% yoy, while CPI services inflation climbed from 4.4% yoy to 5.0% yoy.

    RBNZ cuts by 50bps, signals further easing through 2025

    RBNZ cut the Official Cash Rate (OCR) by 50bps to 3.75%, as widely expected, while maintaining a clear easing bias.

    The central bank stated that “if economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” According to the latest projections, the OCR is expected to decline to 3.1% by year-end and remain at that level until early 2028.

    RBNZ acknowledged that economic activity remains subdued, though it expects growth to recover in 2025, driven by lower interest rates encouraging spending. However, elevated global economic uncertainty is likely to weigh on business investment. The bank also noted that inflation is expected to be volatile in the near term, influenced by a weaker exchange rate and higher petrol prices.

    Regarding global risks, the RBNZ flagged concerns and warned that higher global tariffs could slow growth in key trading partners, dampening demand for New Zealand exports and weakening domestic economic momentum over the medium term.

    However, the impact on inflation is “ambiguous”, depending on factors such as trade diversion, supply-chain adjustments, and financial market reactions.

    Australian wages growth slow 0.7% qoq, pressures easing

    Australia’s wage price index rose 0.7% qoq in Q4, marking a slowdown from 0.9% qoq and missing expectations of 0.8% qoq. This matches the lowest quarterly growth since March 2022, reinforcing signs that wage pressures are easing, albeit still elevated.

    On an annual basis, wages increased 3.2% yoy, making it the slowest pace since Q3 2022. Private sector wage growth came in at 3.3% yoy, the weakest since Q2 2022. Public sector wages rose 2.8% yoy, falling below 3% for the first time since Q2 2023.

    BoJ’s Takata: Gradual policy shifts should continue beyond January hike

    BoJ Board Member Hajime Takata emphasized the need for the central bank to continue to “implement gear shifts gradually, even after the additional rate hike decided in January 2025”, to mitigate the risk of rising prices and financial market overheating.

    Takata noted in a speech today that as “positive corporate behavior” persists, BoJ should consider a “further gear shift” in policy.

    He highlighted three key risks that could drive prices above BoJ’s baseline scenario: a stronger wage-price cycle, inflationary pressures from domestic factors, and market volatility, especially in the exchange rates, stemming from a recovery in the US economy.

    Nevertheless, due to uncertainties surrounding the US economy and the challenge of identifying the neutral interest rate, Takata advocated for a “vigilant approach”.

    Japan’s trade deficit widens as imports surge, exports to China drop

    Japan’s trade deficit expanded sharply in January, reaching JPY -2.759T, the largest shortfall in two years, as imports surged 16.7% yoy, far exceeding the expected 9.3% yoy gain.

    Meanwhile, exports rose 7.2% yoy, falling slightly short of the 7.7% yoy forecast, with strong shipments to the U.S. (+18.1% yoy) offset by a -6.2% yoy decline in exports to China.

    On a seasonally adjusted basis, exports declined -2.0% mom to JPY 9.253T, while imports climbed 4.7% mom to JPY 10.109T, leading to a JPY -857B trade deficit.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2587; (P) 1.2609; (R1) 1.2637; More…

    GBP/USD dips mildly today but stays in established tight range. Intraday bias remains neutral, and focus stays on 38.2% retracement of 1.3433 to 1.2099 at 1.2609. Rejection by this level will keep near term outlook bearish. Break of 1.2331 support will suggest that the rebound from 1.2099 has completed as a correction, and bring retest of 1.2099 low. However, firm break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD PPI Input Q/Q Q4 -0.90% 1.40% 1.90%
    21:45 NZD PPI Output Q/Q Q4 -0.10% 1.10% 1.50%
    23:50 JPY Machinery Orders M/M Dec -1.20% 0.30% 3.40%
    23:50 JPY Trade Balance (JPY) Jan -0.86T -0.24T -0.03T -0.22T
    00:30 AUD Wage Price Index Q/Q Q4 0.70% 0.80% 0.80% 0.90%
    01:00 NZD RBNZ Rate Decision 3.75% 3.75% 4.25%
    07:00 GBP CPI M/M Jan -0.10% -0.30% 0.30%
    07:00 GBP CPI Y/Y Jan 3.00% 2.80% 2.50%
    07:00 GBP Core CPI Y/Y Jan 3.70% 3.70% 3.20%
    07:00 GBP RPI M/M Jan -0.10% -0.10% 0.30%
    07:00 GBP RPI Y/Y Jan 3.60% 3.70% 3.50%
    07:00 GBP PPI Input M/M Jan 0.80% 0.70% 0.10% 0.20%
    07:00 GBP PPI Input Y/Y Jan -0.10% -0.50% -1.50% -1.30%
    07:00 GBP PPI Output M/M Jan 0.50% 0.20% 0.10% -0.20%
    07:00 GBP PPI Output Y/Y Jan 0.30% 0.10% 0.10% -0.10%
    07:00 GBP PPI Core Output M/M Jan 0.30% 0%
    07:00 GBP PPI Core Output Y/Y Jan 1.50% 1.50% 1.60%
    09:00 EUR Eurozone Current Account (EUR) Dec 38.4B 30.2B 27.0B 25.1B
    13:30 USD Building Permits Jan 1.48M 1.45M 1.48M
    13:30 USD Housing Starts Jan 1.37M 1.39M 1.50M
    19:00 USD FOMC Minutes

     



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  • Kiwi Wobbles After RBNZ Cut, Markets Eye UK CPI and FOMC Minutes

    Kiwi Wobbles After RBNZ Cut, Markets Eye UK CPI and FOMC Minutes


    New Zealand Dollar initially weakened following RBNZ’s 50bps rate cut today, but quickly regained ground as Governor Adrian Orr indicated that the pace of easing will slow in the coming months. Orr suggested that the central bank is likely to implement just more 25bps cuts, in April and May, provided that economic conditions unfold as expected. However, the Kiwi’s upside remains limited, as RBNZ revised its terminal rate forecast downward to 3.1% by year-end, slightly below November’s projection of 3.2%.

    Technically, we’d maintain the view that AUD/NZD’s choppy rise from 1.0940 is a corrective move. So upside should be limited by 1.1177 resistance to bring near term reversal. Break of 1.1071 support will argue that the pattern from 1.1177 has started the third leg, and should decline towards 1.0940 support next.

    Outside of NZD-driven moves, the broader forex market remains subdued, with a lack of major catalysts. Dollar is the weakest performer of the day so far, as the momentum from this week’s recovery has faded. Traders are now looking ahead to FOMC minutes, though they are unlikely to provide new insights, instead reaffirming that Fed remains cautious and in no hurry to cut rates again.

    British Pound is also under pressure, ranking as the second weakest currency, as investors await the release of UK CPI data. A hot inflation print could diminish expectations for a consecutive BoE rate cut in March, potentially offering some relief to the currency. Swiss franc rounds out the three weakest performers, showing broad softness.

    On the stronger side, New Zealand Dollar leads the market. Yen follows, benefiting from continued speculation over future BoJ policy hikes, while the Australian Dollar also holds firm. Euro and Canadian Dollar are positioning in the middle.

    In Asia, at the time of writing, Nikkei is down -0.38%. Hong Kong HSI is down -0.28%. China Shanghai SSE is up 0.54%. Singapore Strait Times is up 0.11%. Japan 10-year JGB yield is up 0.002 at 1.439. Overnight, DOW rose 0.02%. S&P 500 rose 0.24%. NASDAQ rose 0.07%. 10-year yield rose 0.072 to 4.544.

    RBNZ cuts by 50bps, signals further easing through 2025

    RBNZ cut the Official Cash Rate (OCR) by 50bps to 3.75%, as widely expected, while maintaining a clear easing bias.

    The central bank stated that “if economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” According to the latest projections, the OCR is expected to decline to 3.1% by year-end and remain at that level until early 2028.

    RBNZ acknowledged that economic activity remains subdued, though it expects growth to recover in 2025, driven by lower interest rates encouraging spending. However, elevated global economic uncertainty is likely to weigh on business investment. The bank also noted that inflation is expected to be volatile in the near term, influenced by a weaker exchange rate and higher petrol prices.

    Regarding global risks, the RBNZ flagged concerns and warned that higher global tariffs could slow growth in key trading partners, dampening demand for New Zealand exports and weakening domestic economic momentum over the medium term.

    However, the impact on inflation is “ambiguous”, depending on factors such as trade diversion, supply-chain adjustments, and financial market reactions.

    Australian wages growth slow 0.7% qoq, pressures easing

    Australia’s wage price index rose 0.7% qoq in Q4, marking a slowdown from 0.9% qoq and missing expectations of 0.8% qoq. This matches the lowest quarterly growth since March 2022, reinforcing signs that wage pressures are easing, albeit still elevated.

    On an annual basis, wages increased 3.2% yoy, making it the slowest pace since Q3 2022. Private sector wage growth came in at 3.3% yoy, the weakest since Q2 2022. Public sector wages rose 2.8% yoy, falling below 3% for the first time since Q2 2023.

    BoJ’s Takata: Gradual policy shifts should continue beyond January hike

    BoJ Board Member Hajime Takata emphasized the need for the central bank to continue to “implement gear shifts gradually, even after the additional rate hike decided in January 2025”, to mitigate the risk of rising prices and financial market overheating.

    Takata noted in a speech today that as “positive corporate behavior” persists, BoJ should consider a “further gear shift” in policy.

    He highlighted three key risks that could drive prices above BoJ’s baseline scenario: a stronger wage-price cycle, inflationary pressures from domestic factors, and market volatility, especially in the exchange rates, stemming from a recovery in the US economy.

    Nevertheless, due to uncertainties surrounding the US economy and the challenge of identifying the neutral interest rate, Takata advocated for a “vigilant approach”.

    Japan’s trade deficit widens as imports surge, exports to China drop

    Japan’s trade deficit expanded sharply in January, reaching JPY -2.759T, the largest shortfall in two years, as imports surged 16.7% yoy, far exceeding the expected 9.3% yoy gain.

    Meanwhile, exports rose 7.2% yoy, falling slightly short of the 7.7% yoy forecast, with strong shipments to the U.S. (+18.1% yoy) offset by a -6.2% yoy decline in exports to China.

    On a seasonally adjusted basis, exports declined -2.0% mom to JPY 9.253T, while imports climbed 4.7% mom to JPY 10.109T, leading to a JPY -857B trade deficit.

    Looking ahead

    UK CPI is the main focus in European session. EUrozone will release current account. Later in the day, main focus is on FOMC minutes while US will also publish building permits and housing starts.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6335; (P) 0.6352; (R1) 0.6368; More…

    Intraday bias in AUD/USD stays neutral for consolidations below 0.6373 temporary top. Rebound from 0.6087 is seen as a correction to the fall from 0.6941. In case of another rise, upside should be limited by 38.2% retracement of 0.6941 to 0.6087 at 0.6413. On the downside, break of 0.6234 support will suggest that the rebound has completed as a correction, and turn bias back to the downside for retesting 0.6087 low. Nevertheless, sustained break of 0.6413, will pave the way back to 61.8% retracement at 0.6615.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6504) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD PPI Input Q/Q Q4 -0.90% 1.40% 1.90%
    21:45 NZD PPI Output Q/Q Q4 -0.10% 1.10% 1.50%
    23:50 JPY Machinery Orders M/M Dec -1.20% 0.30% 3.40%
    23:50 JPY Trade Balance (JPY) Jan -0.86T -0.24T -0.03T -0.22T
    00:30 AUD Wage Price Index Q/Q Q4 0.70% 0.80% 0.80% 0.90%
    01:00 NZD RBNZ Rate Decision 3.75% 3.75% 4.25%
    07:00 GBP CPI M/M Jan -0.30% 0.30%
    07:00 GBP CPI Y/Y Jan 2.80% 2.50%
    07:00 GBP Core CPI Y/Y Jan 3.70% 3.20%
    07:00 GBP RPI M/M Jan -0.10% 0.30%
    07:00 GBP RPI Y/Y Jan 3.70% 3.50%
    07:00 GBP PPI Input M/M Jan 0.70% 0.10%
    07:00 GBP PPI Input Y/Y Jan -0.50% -1.50%
    07:00 GBP PPI Output M/M Jan 0.20% 0.10%
    07:00 GBP PPI Output Y/Y Jan 0.10% 0.10%
    07:00 GBP PPI Core Output M/M Jan 0%
    07:00 GBP PPI Core Output Y/Y Jan 1.50%
    09:00 EUR Eurozone Current Account (EUR) Dec 30.2B 27.0B
    13:30 USD Building Permits Jan 1.45M 1.48M
    13:30 USD Housing Starts Jan 1.39M 1.50M
    19:00 USD FOMC Minutes

     



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  • Yen Rallies as Strong GDP Fuels BoJ Rate Hike Speculation

    Yen Rallies as Strong GDP Fuels BoJ Rate Hike Speculation


    Yen gained strength across the board after Japan’s Q4 GDP growth exceeded expectations, with both private consumption and capital investment rebounding. This development supports BoJ’s decision to hike in January and has fueled speculation that another rate increase could arrive sooner than expected.

    It’s now seen by some economists that the timing of the next BoJ move will largely hinge on the outcome of the Shunto wage negotiations, with markets eyeing a hike as early as May if wage growth matches 2024 levels.

    Beyond Japan, Aussie and Kiwi have maintained their footing, benefitting from a mildly positive risk-on sentiment, even as both the RBA and RBNZ are expected to cut interest rates this week. Meanwhile, Dollar continues to struggle, extending its losses from last week. Euro and Swiss Franc are also on the softer side, while Loonie and Sterling trade mixed.

    AUD/NZD would be a pair to watch this week with some bearish risks. Technically, choppy recovery from 1.0940 is likely just a corrective move. Hence, in case of another upside, upside should be limited by 1.1177 resistance. On the downside, firm break of the near term rising channel support (now at 1.1023) will argue that the recovery has already complete at 1.1141. Deeper decline should be seen back towards 1.0940 support as the third leg of the pattern from 1.1177.

    In Asia, at the time of writing, Nikkei is down -0.01%. Hong Kong HSI is down -0.45%. China Shanghai SSE is down -0.44%. Singapore Strait Times is up 0.49%. Japan 10-year JGB yield is up 0.0114 at 1.368.

    Japan’s Q4 GDP beats forecasts with 0.7% qoq growth

    Japan’s economy expanded by 0.7% qoq in Q4 2024, surpassing market expectations of 0.3% qoq and improving from the previous quarter’s 0.4% qoq rise. On an annualized basis, GDP grew 2.8%, significantly above 1.0% forecast and accelerating from Q3’s 1.7% pace.

    Private consumption, which accounts for over half of Japan’s economic output, edged up by 0.1% qoq, defying expectations of a -0.3% qoq contraction. However, it slowed sharply from the 0.7% qoq increase recorded in Q3, reflecting a cautious spending environment.

    Capital spending improved by 0.5% qoq, reversing the -0.1% qoq decline in Q3, but fell short of the anticipated 1.0% qoq rise.

    Price pressures continued climbing, with the GDP deflator inching up from 2.4% yoy to 2.8% yoy.

    Despite the strong Q4 performance, full-year 2024 GDP growth slowed sharply to 0.1%, a steep decline from the 1.5% expansion in 2023.

    NZ BNZ services rises to 50.4, stabilization rather than elevation

    New Zealand BusinessNZ Performance of Services Index climbed from 48.1 to 50.4 in January, marking a return to expansion after four consecutive months of contraction. While this signals some improvement, the index remains below its long-term average of 53.1.

    A closer look at the components reveals a mixed picture. Activity/sales saw a notable rebound, rising from 46.5 to 54.0, while new orders/business ticked up slightly from 49.4 to 50.0. Stocks/inventories also edged into expansion territory at 50.1, up from 48.9. However, employment continued to struggle, slipping from 47.4 to 47.1. Supplier deliveries showed minimal improvement, moving from 47.7 to 47.8.

    Despite the headline figure turning positive, sentiment remains weak. The proportion of negative comments rose to 61.9% in January, up from 57.5% in December and 53.6% in November. Respondents cited economic uncertainty and broader downturn concerns as key issues.

    BNZ’s Senior Economist Doug Steel noted that the PSI reflects “stabilization rather than elevation,” highlighting that while the upward move is a positive sign, the sector is far from robust growth.

    RBA, RBNZ rate cuts, FOMC minutes, and more

    The upcoming week is set to be highly eventful for global markets, with two major central bank meetings and a packed economic calendar. RBA and RBNZ are both expected to lower interest rates. Additionally, investors will scrutinize Fed’s January FOMC minutes to gauge the timing and conditions for policy shifts. Meanwhile, key economic indicators from the UK, Eurozone, Canada, and Japan will provide further insights into their economic trends.

    RBA is widely expected to cut interest rates by 25 bps to 4.10%, marking its first rate reduction in this cycle. The decision follows the latest Q4 trimmed mean CPI, which revealed stronger-than-expected disinflation. Market participants will closely analyze the accompanying Statement on Monetary Policy for clues on the outlook. Some analysts anticipate a steady quarterly pace of 25 bps cuts, which could bring the cash rate to a neutral level of 3.35% by the end of the year.

    RBNZ is expected to move more aggressively, with a 50 bps cut to 3.75%, as it seeks to transition its policy stance toward a neutral level of 2.50%-3.50%. However, with the rate approaching this estimated range, the central bank may soon opt for smaller rate cuts moving forward. Investors will carefully assess the updated Monetary Policy Statement to determine whether RBNZ signals a slowdown in its pace of easing and to gauge expectations for the terminal rate of this cycle.

    Fed’s January FOMC meeting minutes will provide additional insights into policymakers’ discussions on the policy outlook. It is well understood that Fed is in no rush to resume policy easing, given persistent inflation and other risks. However, investors will be looking for answers to key questions: What conditions would trigger a resumption of rate cuts? When does the Fed expect this to happen? Is a rate hike completely off the table?

    BoE’s rate path has been relatively uncertain in recent weeks. The stronger-than-expected Q4 UK GDP data has significantly reduced the likelihood of a back-to-back rate cut in March. However, this week’s UK employment, wage growth, CPI, retail sales, and PMI reports will be critical in shaping market expectations. If these indicators show resilience in the economy and inflation remains sticky, markets will likely fully revert to pricing in a gradual, one-cut-per-quarter approach.

    For Euro and DAX, German ZEW Economic Sentiment and Eurozone PMIs will be particularly important. If these data points confirm that Germany’s sluggish economy is finally starting to turnaround, it would provide a significant boost to investor sentiment and strengthen the case for continued DAX and Euro gains. Apart from central bank decisions, inflation data from Canada and Japan will also be closely watched.

    Here are some highlights for the week:

    • Monday: New Zealand BNZ services; Japan GDP; Eurozone trade balance.
    • Tuesday: RBA rate decision; UK employment; German ZEW economic sentiment; Canada CPI; US Empire state manufacturing, NAHB housing index.
    • Wednesday: New Zealand PPI; Japan trade balance, machine orders; Australia wage price index; RBNZ rate decision; UK CPI, PPI; Eurozone current account; US building permits and housing starts, FOMC minutes.
    • Thursday: Australia employment; Swiss trade balance; Germany PPI; Canada IPPI and RMPI; US jobless claims, Philly Fed survey.
    • Friday: New Zealand trade balance; Australia PMIs; Japan CP, PMIs; UK Gfk consumer confidence, retail sales; PMIs; Eurozone PMIs; Canada retail sales; US PMIs, existing home sales.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 151.83; (P) 152.49; (R1) 152.96; More…

    Intraday bias in USD/JPY stays neutral first. Strong support from 38.2% retracement of 139.57 to 158.86 at 151.49 would maintain near term bullishness. On the upside, break of 154.79 will revive the case that correction from 158.86 has completed at 150.29. Further rise should be seen to retest 158.86 high. However, break of 150.92 and sustained trading below 151.49 will raise the chance of trend reversal, and target 148.64 support instead.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PSI Jan 50.4 47.9 48.1
    23:50 JPY GDP Q/Q Q4 P 0.70% 0.30% 0.30% 0.40%
    23:50 JPY GDP Deflator Y/Y Q4 P 2.80% 2.80% 2.40%
    04:30 JPY Tertiary Industry Index M/M Dec 0.10% 0.20% -0.30%
    04:30 JPY Industrial Production M/M Dec -0.20% 0.30% 0.30%
    10:00 EUR Eurozone Trade Balance (EUR) Dec 15.0B 12.9B
    13:15 CAD Housing Starts Jan 250K 231K

     



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  • EUR/JPY falls to near 159.00 following robust Japan’s GDP data

    EUR/JPY falls to near 159.00 following robust Japan’s GDP data


    • EUR/JPY declined following the release of Japan’s Gross Domestic Product report on Monday.
    • Japan’s GDP rose by 0.7% QoQ in Q4, marking the third straight quarter of growth.
    • The Euro may gain if a ceasefire in Ukraine is agreed upon and gas supplies resume.

    EUR/JPY gives up gains from the previous session, trading around 159.10 during the Asian hours on Monday. This decline is linked to a stronger Japanese Yen (JPY), driven by a robust Japan’s Gross Domestic Product (GDP) report that exceeded expectations, reinforcing market speculation that the Bank of Japan (BoJ) will continue to raise interest rates.

    Japan’s economy grew by 0.7% in the fourth quarter, compared to the revised 0.4% increase in the previous quarter. This marks the third consecutive quarter of growth, fueled by a strong rebound in business investment. Yearly growth accelerated from a revised 1.7% in Q3 to 2.8%, supporting the BoJ’s stance on further rate hikes amid signs of broadening inflation.

    Japanese Chief Cabinet Secretary Yoshimasa Hayashi remarked on Monday that Japan faces significant risks if its companies become targets due to US President Donald Trump’s policies, and the government will respond cautiously to potential impacts.

    The Euro could strengthen against its peers if a ceasefire in Ukraine is reached and gas supplies resume. Reports suggest that Trump and Russian President Vladimir Putin have agreed to start negotiations to end the conflict. BBC sources indicate that Trump administration officials are set to meet with Russian counterparts in Saudi Arabia on Tuesday to discuss a potential peace agreement.

    However, any upside for the Euro may be capped as several European Central Bank (ECB) officials remain comfortable with expectations that the central bank will lower its Deposit Facility rate three more times this year. The ECB already reduced interest rates by 25 basis points (bps) to 2.75% last month.

    Economic Indicator

    Gross Domestic Product (QoQ)

    The Gross Domestic Product (GDP), released by Japan’s Cabinet Office on a quarterly basis, is a measure of the total value of all goods and services produced in Japan during a given period. The GDP is considered as the main measure of Japan’s economic activity. The QoQ reading compares economic activity in the reference quarter to the previous quarter. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

    Read more.

    Last release: Sun Feb 16, 2025 23:50 (Prel)

    Frequency: Quarterly

    Actual: 0.7%

    Consensus: 0.3%

    Previous: 0.3%

    Source: Japanese Cabinet Office

     



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  • Japan Manufacturing Sector Shrinks At Slower Pace

    Japan GDP Jumps 0.7% In Q4


    Japan’s gross domestic product expanded a seasonally adjusted 0.7 percent on quarter in the fourth quarter of 2024, the Cabinet Office said in Monday’s preliminary report.

    That beat forecasts for an increase of 0.3 percent and was up from the upwardly revised 0.4 percent gain in the previous three months (originally 0.3 percent).

    On an annualized basis, GDP was up 2.8 percent – again exceeding expectations for an increase of 2.0 percent and up from the upwardly revised 1.7 percent gain in the three months prior (originally 1.2 percent).

    Capital expenditure was up 0.5 percent on quarter after slipping 0.1 percent in Q3, while external demand added 0.7 percent after slipping 0.1 percent in the previous quarter.

    The GDP price index was up 2.8 percent on year, in line with estimates and up from 2.4 percent in the third quarter.

    For comments and feedback contact: editorial@rttnews.com

    Economic News

    What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.





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  • Dollar’s Wild Week Ends in Uncertainty, Awaits Next Tariff Cue

    Dollar’s Wild Week Ends in Uncertainty, Awaits Next Tariff Cue


    Dollar faced significant volatility last week as shifting trade policy signals from the White House left investors scrambling for clarity. Initially, tariffs on Canadian and Mexican imports were imposed, only to be quickly suspended for 30 days following new agreements on border security and fentanyl control. Now, the focus turns to “reciprocal tariffs,” a move that could see the US impose duties equivalent to those faced by American exports in key markets.

    While traders hope for clarity once the reciprocal tariffs are officially announced, the risk of another abrupt reversal remains high. The unpredictability of the administration’s trade stance, particularly regarding its approach toward key partners like the European Union, suggests continued volatility in currency markets. Until the full scope of Trump’s trade strategy is revealed, market sentiment is likely to remain fragile, with investors hesitant to commit to a firm direction.

    Amid these confusions, Yen stood out as the strongest performer, supported by positive economic data that reinforced expectations of further BoJ rate hikes. Canadian Dollar followed behind, benefiting from a temporary tariff reprieve and stronger-than-expected employment report. Meanwhile, Australian and New Zealand Dollars managed to recover some ground, but their gains were limited by the continued US tariffs on Chinese goods and the lack of any progress in US-China trade negotiations.

    On the weaker side, Euro was the worst-performing currency, struggling under the weight of tariff threats. Despite its late-week bounce, Dollar ended the week near the bottom of the performance rankings. British Pound also weakened after the BoE delivered a surprisingly dovish rate cut, while the Swiss Franc was also soft.

    Duel Uncertainty of Trade War and Hawkish Fed Outlook in the US

    Investors in US financial markets are grappling with two major uncertainties—President Donald Trump’s evolving tariff strategy and Fed’s interest rate outlook. This dual uncertainty has led to volatile but indecisive trading in major equity indices and large price swings in Dollar, reflecting broader confusion in the markets.

    Trump’s Tariff Play: Economic Policy or Political Leverage?

    The core intention behind Trump’s tariff policies remains unclear. His administration initially imposed 25% tariffs on imports from Canada and Mexico, only to suspend them for 30 days following agreements with both nations on border security and fentanyl control measures. This move suggests that Trump may be using tariffs as a tool for securing non-trade-related concessions rather than purely as an economic strategy. The immediate delay in enforcement highlights that these tariffs could be more of a negotiation tactic than an outright protectionist measure.

    However, fresh concerns emerged on Friday when Trump said that the US would announce, in the coming days, “reciprocal tariffs” on a range of trading partners to ensure American exports are treated “evenly.” This move, if implemented broadly, could have far-reaching economic consequences, particularly if the US targets major trade partners like the European Union. Unlike the previous round of tariffs during Trump’s first term, which were primarily aimed at China, this time the scope appears much wider, raising the specter of more extensive trade disruptions.

    The biggest risk is that tariffs could become an ongoing feature of US trade policy rather than a temporary bargaining tool. With Trump also eyeing the EU as a target, the outlook for global trade is highly uncertain. For now, investors are clearly staying in wait-and-see mode, monitoring Trump’s next steps closely.

    Strong US Job Market to Keep Fed on Hold, Inflation Risks Re-Emerging?

    While trade concerns dominate the headlines, the strength of the US labor market has reinforced expectations that Fed will remain in a prolonged pause on rate cuts.

    Dallas Fed President Lorie Logan articulated a noteworthy point last week. She argued falling inflation with robust labor market means interest rates are already near neutral. That would leave little room for further easing in the near term. Fed would then stay on hold until there is clear evidence of a labor market slowdown, not just declining inflation.

    Friday’s non-farm payroll report added weight to this narrative. While job growth slowed to 143K, falling short of expectations, revisions to previous months were significant, with December’s figure being adjusted upward to 307K. Additionally, the unemployment rate unexpectedly declined from 4.1% to 4.0%, suggesting that the labor market remains resilient. Wage growth also accelerated, with average hourly earnings rising 0.5% mom —above expectations—bringing the annual increase to 4.1%.

    Another concerning development in recent data was the sharp rise in consumer inflation expectations. University of Michigan’s Surveys of Consumers revealed that short-term inflation expectations jumped from 3.3% to 4.3%, the highest level since November 2023. Long-term inflation expectations also ticked higher, reaching 3.3%, marking the highest reading since June 2008.

    If inflation expectations continue rising alongside strong wage growth, Fed could face renewed pressure to reconsider its monetary policy stance. A scenario where inflation remains stubbornly above target while employment stays strong could force Fed to maintain high rates longer than markets currently anticipate. In an extreme case, policymakers may even have to consider reintroducing rate hikes—an outcome that is not currently priced into the market but remains a potential risk, albeit minor.

    S&P 500 Stuck in Range, Upside Appears Limited

    Technically, S&P 500’s price actions from 6128.18 (Jan high) are still corrective looking, suggesting larger up trend remains intact. However, even in case of up trend resumption, loss of momentum as seen in D MACD could limit upside at 61.8% projection of 5119.26 to 6099.97 from 5773.31 at 6379.38.

    On the other hand, strong break of 55 D EMA (now at 5970.70) would put 5773.31 structural support into focus. Firm break of 5773.31 will argue that a medium term top was already in place, and larger scale correction is underway.

    Sideway Trading to Continue in Dollar Index and 10-Year Yield

    Dollar Index’s initial spike was capped below 110.17 resistance, and followed by steep pull back. Overall outlook is unchanged that consolidation pattern from 110.17 is still extending. In case of another selloff, downside should be contained by 38.2% retracement of 100.15 to 110.17 at 106.34 to bring rebound. However, firm break of 110.17 is needed to confirm up trend resumption, which is unlikely for the near term. Hence, sideway trading is set to continue for a while.

    10-year yield’s fall from 4.809 extended lower last week but recovered notably on Friday to close at 4.487. As long as 38.2% retracement of 3.603 to 4.809 at 4.348 stays intact, price actions from 4.809 are viewed as a corrective pattern. Break of 4.590 will bring stronger rebound. But upside should be limited by 4.809, at least on first attempt. That is, similar to Dollar Index, range trading will likely continue for a while.

    EUR/JPY and GBP/JPY Tumble as Yen Rides Rate Expectations and Trade Uncertainty

    Yen emerged as a dominant force in the forex markets last week, with EUR/JPY and GBP/JPY among the biggest losers, down -2.7% and -2.3% respectively. The shift was driven by a combination of declining US and European benchmark yields, alongside increasing expectations of further BoJ rate hikes. These factors reinforced the Yen’s bullish momentum and kept both EUR/JPY and GBP/JPY under heavy selling pressure.

    BoJ board member Naoki Tamura, the most hawkish voices within the central bank, continued to advocate his view that interest rates should rise to at least 1% by the end of fiscal 2025. His stance gained additional credibility after IMF also backed a gradual rate hike approach, recommending that the policy rate reach the midpoint of 1.5% within the 1-2% neutral range by the end of 2027.

    The case for BoJ tightening has been reinforced by strong nominal wage growth, with real wages increasing for a second consecutive month. More importantly, the wage gains are feeding into stronger consumption, a critical factor in sustaining inflation at the central bank’s 2% target. If this trend continues, BoJ will have even more reason to proceed with further hikes.

    Meanwhile, Euro came under additional pressure from Trump’s tariff threats. With a formal reciprocal tariff announcement expected soon, the EU is almost certain to be included, raising fears of another prolonged trade conflict. Given the region’s reliance on exports, such a development could have a significant negative impact on Eurozone already sluggish growth prospects, forcing ECB to take a more dovish stance than currently anticipated.

    ECB Chief Economist Philip Lane has been advocating for a “middle path” in policy easing, balancing inflation risks with economic headwinds. However, should tariffs materialize, ECB might be forced to accelerate rate cuts to cushion the economy from external shocks

    The UK has fared somewhat better as it is not a primary target of Trump’s trade measures. However, BOE’s unexpectedly dovish rate cut last week has left the Pound vulnerable too. Notably, hawkish policymaker Catherine Mann made a surprising U-turn, voting for a 50bps rate cut, a sharp departure from her previous stance. The base case still remains a quarterly 25bps cut throughout 2025 for BoE, but the risk is now tilted slightly toward a more aggressive easing cycle.

    Technically, as selloff in EUR/JPY intensified, the development in the next few weeks would be crucial. Attention will be on 100% projection of 100% projection of 166.7 to 156.16 from 164.89 at 154.38, which is close to 154.40 key support.

    Firm break there will resume whole pattern from 175.41 medium term top. More importantly, that would make 38.2% retracement of 114.42 to 175.41 at 152.11 key long term fibonacci level vulnerable.

    For GBP/JPY, the focus will be on 100% projection of 198.94 to 189.31 from 194.73 at 185.10. Decisive break there could prompt downside acceleration through 180.00 low to resume whole decline from 208.09 medium term top. That would at least put 38.2% retracement of 123.94 to 208.09 at 175.94 as next target.

    USD/CAD Weekly Outlook

    USD/CAD spiked higher to 1.4791 last week but reversed sharply from there. Nevertheless, downside is contained by 1.4260 cluster support (38.2% retracement of 1.3418 to 1.4791 at 1.4267), which is also close to 55 D EMA (now at 1.4264). There is no sign of reversal yet. Initial bias remains neutral this week first. On the upside, above 1.4501 minor resistance will turn bias back to the upside for stronger rebound. Larger up trend is expected to resume through 1.4791 at a later stage. However, firm break of 1.4260 will indicate that deeper correction is underway.

    In the bigger picture, long term up trend is tentatively seen as resuming with breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

    In the longer term picture, up trend from 0.9506 (2007 low) is in progress and possibly resuming. Next target is 61.8% projections of 0.9406 to 1.4689 from 1.2005 at 1.5270. While rejection by 1.4689 will delay the bullish case, further rally will remain in favor as long as 55 M EMA (1.3392) holds.



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  • Dollar Gains Modestly on NFP, But Lacks Momentum

    Dollar Gains Modestly on NFP, But Lacks Momentum


    Dollar edged higher in early US session following the non-farm payrolls (NFP) report, but the overall momentum remains lackluster. Stock futures are flat, while 10-year Treasury yield is staging a slight recovery, suggesting a measured market response as traders hold back from aggressive positioning ahead of next week’s key economic events including US CPI and Fed Chair Jerome Powell’s testimony.

    While headline NFP figure of 143k fell short of expectations, the dip in the unemployment rate to 4.0% and strong wage growth at 0.5% mom have reinforced the Fed’s cautious stance towards further policy easing. Markets now see over 90% chance that Fed will keep rates unchanged in March, while expectations for another hold in May stands at 70%.

    Overall, despite today’s recovery, Dollar is still trading as the worst performer for the week, followed by Euro, and then Swiss Franc. Yen continues to sit at the top of the ladder, followed by Canadian, and then Aussie. Kiwi and Sterling are mixed in the middle.

    In Europe, at the time of writing, FTSE is down -0.18%. DAX is down -0.06%. CAC is down -0.02%. UK 10-year yield is down -0.0014 at 4.489. Germany 10-year yield s up 0.0149 at 2.395. Earlier in Asia, Nikkei fell -0.72%. Hong Kong HSI rose 1.16%. China Shanghai SSE rose 1.01%. Singapore Strait Times rose 0.81%. Japan 10-year JGB yield rose 0.0357 to 1.303.

    US NFP grows 143k, wages growth strong

    US non-farm payroll job growth fell short of expectations but wage growth exceeding forecasts. Employers added 143k jobs, missing the 169k estimate and coming in below the 2024 monthly average of 166k. However, the downward surprise was offset by a significant upward revision to December’s number, which was adjusted from 256k to 307k.

    Unemployment rate unexpectedly dropped from 4.1% to 4.0%. At the same time, the labor force participation rate ticked slightly higher to 62.6%, reinforcing signs of a still-active workforce. While the decline in headline job creation might signal a cooling labor market, the improvement in unemployment suggests that the slowdown is not yet severe.

    The standout data point in the report was wage growth, with average hourly earnings surging 0.5% mom, surpassing the expected 0.3% mom increase. On an annual basis, wages rose 4.1% yoy, a sign that businesses are still competing for workers despite moderation in hiring.

    Canada’s employment grows 76k, unemployment rate down to 6.6%

    Canada’s labor market significantly outperformed expectations in January, with employment rising by 76.0k, far exceeding 26.5k forecast. The biggest job gains were seen in manufacturing (+33k, +1.8%) and professional, scientific, and technical services (+22k, +1.1%).

    The unexpected strength in employment was further reinforced by decline in the unemployment rate from 6.7% to 6.6%, beating market expectations of a slight uptick to 6.8%.

    Despite the surge in hiring, wage growth showed signs of moderation, with average hourly earnings rising 3.5% yoy, down from 4.0% yoy in December. Total actual hours worked rose 0.9% mom, with a 2.2% annual increase.

    IMF backs BoJ’s gradual rate hikes, sees policy rate moving toward neutral by 2027

    Nada Choueiri, deputy director of IMF’s Asia-Pacific Department and mission chief for Japan, stated that IMF remains “supportive” of BoJ’s current monetary policy course. She emphasized that rate hikes should be implemented in a gradual and flexible manner to ensure that domestic demand continues to recover.

    Choueiri projected that BoJ’s policy rate could rise “beyond 0.5%” by the end of this year, with a longer-term path toward the “neutral level” by the end of 2027.

    IMF estimates Japan’s neutral rate to be within a band of 1% to 2%, with a midpoint of 1.5%.

    Also, IMF maintains an optimistic outlook for Japan’s economy, forecasting 1.1% GDP growth in 2025, supported by increasing wages and stronger consumer spending.

    Given these projections, IMF expects BoJ to continue its tightening cycle in a controlled manner.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0355; (P) 1.0381; (R1) 1.0410; More…

    EUR/USD dips mildly but stays well inside range of 1.0176/0531. Intraday bias remains neutral and more consolidations could be seen. Strong resistance is expected from 1.0531 to limit upside. On the downside, break of 1.0176 will resume whole fall from 1.1213. However, sustained break of 1.0531 will rise the chance of bullish reversal and turn bias back to the upside for stronger rally.

    In the bigger picture, immediate focus is back on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, strong support from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Household Spending Y/Y Dec 2.70% 0.30% -0.40%
    05:00 JPY Leading Economic Index Dec P 108.9 108.1 107.5
    07:00 EUR Germany Industrial Production M/M Dec -2.40% -0.70% 1.50% 1.30%
    07:00 EUR Germany Trade Balance (EUR) Dec 20.7B 17.1B 19.7B
    07:45 EUR France Trade Balance (EUR) Dec -3.9B -5.3B -7.1B -6.3B
    08:00 CHF Foreign Currency Reserves (CHF) Jan 736B 731B
    13:30 CAD Net Change in Employment Jan 76.0K 26.5K 90.9K
    13:30 CAD Unemployment Rate Jan 6.60% 6.80% 6.70%
    13:30 USD Nonfarm Payrolls Jan 143K 169K 256K 307K
    13:30 USD Unemployment Rate Jan 4.00% 4.10% 4.10%
    13:30 USD Average Hourly Earnings M/M Jan 0.50% 0.30% 0.30%
    15:00 USD Wholesale Inventories Dec F -0.50% -0.50%

     



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  • Yen Rises Further as IMF Backs Gradual BoJ Tightening; Dollar Awaits NFP Impact

    Yen Rises Further as IMF Backs Gradual BoJ Tightening; Dollar Awaits NFP Impact


    The forex market was relatively subdued during Asian session, with one clear exception: Japanese Yen continues to outperform. Fresh data from Japan showed a 2.7% yoy increase in household spending, not only marking the first rise in five months, but also the fastest pace since August 2022. Paired with this week’s solid wage growth figures, the numbers suggest real wage gains are driving consumption—a development that could reinforce BoJ’s push toward gradual policy normalization.

    Additionally, IMF offered further support for Yen by endorsing a gradual rise in BoJ rates to a neutral range of 1-2% by the end of 2027. Although this view appears somewhat conservative compared to hawkish BoJ board member Naoki Tamura’s call for a 1% rate by the second half of fiscal 2025, the gap isn’t significant. If Japan’s inflation and wage growth hold up, it’s feasible that interest rates could reach the midpoint of 1.5% within a few quarters from Tamura’s target.

    Attention now shifts to the US non-farm payroll report, with prospects of upside surprise. Dallas Fed President Lorie Logan raised an interesting argument that Fed may not ease policy further unless the labor market noticeably softens, even if inflation trends lower. A strong NFP reading would bolster expectations for an extended Fed pause. However, it may not be enough to spark an upside breakout in the Dollar from recent ranges, given ongoing uncertainties tied to US trade policies.

    Overall for the week so far, Dollar is currently the worst performer, followed by Euro, and then Sterling. Yen is the best, followed by Loonie, and then Aussie. Swiss Franc and Kiwi are positioning in the middle.

    Technically, CHF/JPY’s break of 168.02 support confirms resumption of fall from 177.29. This decline is seen as the third leg of the corrective pattern from 180.05 high. Further fall is expected as long as 168.54 support turned resistance holds. Firm break of 100% projection of 177.29 to 168.02 from 175.80 at 166.53 should bring deeper fall through 165.28 support to 138.2% projection at 162.98.

    In Asia, at the time of writing, Nikkei is down -0.72%. Hong Kong HSI is up 1.05%. China Shanghai SSE is up 1.02%. Singapore Strait Times is up 0.83%. Japan 10-year JGB yield is up 0.0339 at 1.301. Overnght, DOW fell -0.28%. S&P 500 rose 0.36%. NASDAQ rose 0.51%. 10-year yeld rose 0.018 to 4.440.

    NFP may beat expectations, but unlikely to trigger Dollar range breakout

    Today’s US Non-Farm Payroll report is the focal point for market participants, with consensus estimates pointing to 169k new jobs in January and an unemployment rate holding steady at 4.1%. Average hourly earnings growth is expected at 0.3% month-over-month, maintaining the robust wage gains of recent months.

    There are indications the data could surprise to the upside. Latest ISM surveys showed employment components improving, with manufacturing’s gauge jumping from 45.4 back into expansion at 50.3, and services employment rising to 52.3 from 51.3. ADP private payrolls number also showed a solid 183k increase, little changed from December’s 176k. Meanwhile, initial jobless claims remain near historical lows, with the four-week moving average inching up only slightly from 213k to 217k.

    If today’s jobs report beats expectations, the case for Fed to maintain its pause on easing for longer would strengthen. However, persistent uncertainties—especially US trade policies—may limit the Dollar’s ability to rally significantly. While a strong labor market may keep rate cuts at bay, investors will weigh other geopolitical and economic factors before pushing the greenback through key near term resistance levels.

    Technically, Dollar Index is currently extending the consolidation pattern from 110.17 short term top. In case of deeper pull back, downside should be contained by 38.2% retracement of 110.15 to 110.17 at 106.34 to bring rebound. On the upside, firm break of 110.17 is needed to confirm resumption of recent up trend. Otherwise, outlook would remains neutral for more sideway trading.

    Fed’s Logan sees rates on hold “for quite some time” even if inflation drops

    Dallas Fed President Lorie Logan suggested at a BIS conference overnight that interest rates may remain on hold for “quite some time,” even if inflation continues to move closer to the 2% target. She emphasized that a decline in inflation alone would not be a sufficient trigger for policy easing, as long as labor market conditions remain strong.

    She argued that such a scenario would “strongly suggest that” interest rate is already pretty close to neutral, “without much near-term room for further cuts”.

    Instead, Logan highlighted that signs of a weakening labor market or a slowdown in demand would be more relevant factors in determining when easing should begin.

    BoC’s Macklem warns tariff threats already weighing on confidence

    Speaking at a conference in Mexico City, BoC Governor Tiff Macklem raised concerns over the economic uncertainty stemming from U.S. President Donald Trump’s tariff threats. He noted that “threats of new tariffs are already affecting business and household confidence, particularly in Canada and Mexico.”

    “The longer this uncertainty persists, the more it will weigh on economic activity in our countries,”  he warned.

    Macklem stressed that central banks face a challenging task in managing the economic fallout. He explained that policymakers cannot counteract both “weaker output” and “higher inflation” simultaneously.

    The challenge will be to assess the downward pressure on inflation from reduced economic activity while balancing it against the upward pressure from higher input costs and supply chain disruptions caused by tariffs.

    IMF backs BoJ’s gradual rate hikes, sees policy rate moving toward neutral by 2027

    Nada Choueiri, deputy director of IMF’s Asia-Pacific Department and mission chief for Japan, stated that IMF remains “supportive” of BoJ’s current monetary policy course. She emphasized that rate hikes should be implemented in a gradual and flexible manner to ensure that domestic demand continues to recover.

    Choueiri projected that BoJ’s policy rate could rise “beyond 0.5%” by the end of this year, with a longer-term path toward the “neutral level” by the end of 2027.

    IMF estimates Japan’s neutral rate to be within a band of 1% to 2%, with a midpoint of 1.5%.

    Also, IMF maintains an optimistic outlook for Japan’s economy, forecasting 1.1% GDP growth in 2025, supported by increasing wages and stronger consumer spending.

    Given these projections, IMF expects BoJ to continue its tightening cycle in a controlled manner.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 150.83; (P) 151.86; (R1) 152.48; More…

    USD/JPY is now pressing 38.2% retracement of 139.57 to 158.86 at 151.49 as fall from 158.86 extended. Strong bounce from current level will keep this decline as a correction, and retain near term bullishness. Firm break of 153.70 support turned resistance will turn bias back to the upside for stronger rebound. However, sustained break of 151.49 will raise the chance of bearish reversal, and target 61.8% retracement at 146.32 next.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Household Spending Y/Y Dec 2.70% 0.30% -0.40%
    05:00 JPY Leading Economic Index Dec P 108.9 108.1 107.5
    07:00 EUR Germany Industrial Production M/M Dec -2.40% -0.70% 1.50% 1.30%
    07:00 EUR Germany Trade Balance (EUR) Dec 20.7B 17.1B 19.7B
    07:45 EUR France Trade Balance (EUR) Dec -5.3B -7.1B
    08:00 CHF Foreign Currency Reserves (CHF) Jan 731B
    13:30 CAD Net Change in Employment Jan 26.5K 90.9K
    13:30 CAD Unemployment Rate Jan 6.80% 6.70%
    13:30 USD Nonfarm Payrolls Jan 169K 256K
    13:30 USD Unemployment Rate Jan 4.10% 4.10%
    13:30 USD Average Hourly Earnings M/M Jan 0.30% 0.30%
    15:00 USD Wholesale Inventories Dec F -0.50% -0.50%

     



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  • Sterling Tumbles on BoE’s Dovish Rate Cut

    Sterling Tumbles on BoE’s Dovish Rate Cut


    The British Pound weakened significantly after BoE delivered a 25bps rate cut. The policy decision was more dovish than anticipated, primarily due to the unexpected shift in the MPC voting split. Catherine Mann, previously one of the most hawkish members of the committee, reversed course and joined Swati Dhingra in voting for a more aggressive 50bps cut.

    Adding to the bearish sentiment on Sterling, BoE’s updated economic projections painted a complicated macroeconomic outlook. The central bank sharply downgraded its 2025 GDP growth forecast. At the same time, inflation forecasts were revised higher. Facing the increased uncertainty, BoE emphasized its commitment to a “gradual and careful” approach to policy easing.

    Overall with today’s announcement, risk is clearly tilted toward a more dovish policy stance. The base case remains as one 25bps cut per quarter throughout 2025,. But today’s decision raises the probability of a faster easing cycle, in particular if growth conditions worsen further.

    Technically, EUR/GBP’s strong break of 0.8353 minor resistance argue that the pullback from 0.8472 might have completed at 0.8290 already. This also revives that case that rebound from 0.8221 is not totally completed. Further rise is now in favor back to 0.8472 resistance next.

    Overall in the currency markets, Yen is currently the strongest one, followed by Canadian, and then Dollar. Sterling is the worst, followed by Kiwi, and then Swiss Franc. Euro and Aussie are positioning in the middle. The picture is rather mixed with the exception of clear strength in Yen and weakness in Sterling. Other parts of the markets might need tomorrow’s US NFP data to provide more clarity.

    In Europe at the time of writing, FTSE is up 1.53%. DAX is up 0.82%. CAC is up 0.97%, UK 10-year yield is down -0.0249 at 4.416. Germany 10-year yield is up 0.004 at 2.369. Earlier in Asia, Nikkei rose 0.61%. Hong Kong HSI rose 1.43%. China Shanghai SSE rose 1.27%. Singapore Strait Times rose 0.39%. Japan 10-year JGB yield fell -0.0166 to 1.267.

    US initial jobless claims rises to 219k vs exp 214k

    US initial jobless claims rose 11k to 219k in the week ending February 1, above expectation of 214k. Four-week moving average of initial claims rose 4k to 217k.

    Continuing claims rose 36k to 1886k in the week ending January 25. Four-week moving average of continuing claims rose 2k to 1872k.

    BoE cuts rates to 4.50% in surprisingly dovish vote

    BoE lowered its policy rate by 25 basis points to 4.50%, as widely expected, but the tone of the decision was unexpectedly dovish.

    The Monetary Policy Committee vote split at 7-2, with Swati Dhingra advocating for a more aggressive 50bps cut—as expected—but hawkish member Catherine Mann surprisingly joining her, marking a significant shift in her stance.

    BoE emphasized a “gradual and careful” approach to easing, a slight adjustment from December’s messaging, which only referenced “gradual” reductions. This shift highlights policymakers’ growing concerns over inflation persistence and economic fragility. Governor Andrew Bailey reaffirmed that rate adjustments would be assessed on a “meeting-by-meeting” basis, with no pre-determined path for cuts.

    In its updated economic projections, BoE raised its inflation outlook, now expecting headline CPI to peak at 3.7% in Q3 2025, up from a prior forecast of 2.8%. The revision reflects higher energy costs and expected increases in regulated utility and transport prices. Inflation is not anticipated to return to the 2% target until Q4 2027, six months later than previously projected.

    Growth forecasts were also downgraded sharply for 2025, with expected GDP expansion halved to 0.75%, citing weak business sentiment, sluggish consumer activity, and poor productivity growth. However, projections for 2026 and 2027 were revised slightly upward to 1.5% from 1.25%, suggesting policymakers see a slow but eventual economic recovery.

    ECB’s Cipollone open to March cut, flags risks of full US-China trade war

    ECB Executive Board member Piero Cipollone indicating that while “there is still room for adjusting rates downwards”, the March decision remains uncertain. He stated that ECB must be “extremely careful” in its assessment, and he will enter the meeting “with an open mind”.

    Discussing the concept of the neutral rate in a Reuters interview, Cipollone downplayed its practical significance in policy setting. He pointed out that when estimates for the neutral rate vary widely—such as between 1.75% and 2.25%—it becomes “not terribly useful for setting monetary policy.” If ECB operates near either end of the range, it could risk either undershooting or overshooting its inflation target.

    Cipollone also raised concerns about the evolving global trade situation. The immediate impact of US tariffs depends on European retaliation and specific product categories affected, He warned that a “full trade war” between the US and China poses a more significant threat.

    With China accounting for 35% of global manufacturing capacity, broad trade restrictions could flood European markets with Chinese goods. This would create a dual challenge— “deflationary” pressures from lower-priced imports and a “contractionary” effect as European producers struggle to compete.

    Eurozone retail sales falls -0.2% mom in Dec, EU down -0.3% mom

    Eurozone retail sales slipped by -0.2% mom in December, missing market expectations of -0.1% decline and pointing to continued weakness in consumer demand. The drop was largely driven by -0.7% contraction in food, drinks, and tobacco sales, while non-food products saw a modest 0.3% increase. Automotive fuel sales in specialized stores also ticked up 0.2%, providing some offset to the broader decline.

    At the EU-wide level, retail sales fell even further, down 0.3% mom. The country-level breakdown highlights stark contrasts in retail activity. Slovenia (-2.2%), Germany (-1.6%), and Poland (-1.5%) saw the sharpest contractions, while Slovakia (+8.2%), Finland (+2.1%), and Spain (+1.4%) registered solid gains.

    BoJ’s Tamura advocates rate hike to 1% by late fiscal 2025

    BoJ board member Naoki Tamura, a known hawk, reinforced his stance on the need for tighter monetary policy, stating that Japan’s short-term interest rates should rise to at least 1% by the second half of fiscal 2025 to mitigate inflation risks.

    Tamura explained that inflationary pressures are mounting, necessitating a shift away toward a more neutral rate. He highlighted that by late fiscal 2025, the Japanese economy is expected to reach a point where the 2% inflation target can be considered sustainably achieved, supported by broad-based wage increases, including among smaller firms.

    “Bearing in mind that short-term interest rates should be at 1% by the second half of fiscal 2025, I think the Bank needs to raise rates in a timely and gradual manner, in response to the increasing likelihood of achieving its price target,” he said.

    Australia’s NAB business confidence improves, but profitability weakens

    Australia’s NAB Business Confidence rose from -7 to -4 in Q4, reflecting a slight improvement in sentiment. However, Business Conditions remained unchanged at 3, as trading conditions slipped from 6 to 5, and profitability turned negative from 0 to -1. Employment conditions as steady at 3.

    Forward-looking indicators showed a mixed picture. Expected business conditions for the next three months edged lower, but sentiment for the 12-month horizon improved by five points, aligning with a three-point increase in capital expenditure plans, suggesting firms are cautiously optimistic about long-term prospects.

    Cost pressures moderated, with labor cost growth slowing to 0.9% qoq from 1.2%, and purchase costs easing to 0.7% qoq from 1.0%. Retail price growth also softened to 0.5% qoq from 0.7%, though overall product price growth remained stable at 0.4% qoq, indicating ongoing margin pressure despite easing input costs. Wage costs remained the top concern for businesses, while demand constraints and labor shortages persisted as key challenges.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2462; (P) 1.2506; (R1) 1.2548; More…

    GBP/USD dips notably today but stays above 1.2248 support and intraday bias remains neutral. While corrective rebound from 1.2099 could still extend, upside should be limited by 38.2% retracement of 1.3433 to 1.2099 at 1.2609. On the downside, break of 1.2248 support will bring retest of 1.2099 first. Firm break there will resume whole decline from 1.3433. However, decisive break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD NAB Business Confidence Q4 -4 -6 -7
    00:30 AUD Trade Balance (AUD) Dec 5.09B 6.73B 7.08B 6.79B
    06:45 CHF Unemployment Rate M/M Jan 2.70% 2.70% 2.60% 2.70%
    07:00 EUR Germany Factory Orders M/M Dec 6.90% 1.70% -5.40% -5.20%
    09:30 GBP Construction PMI Jan 48.1 53.7 53.3
    10:00 EUR Eurozone Retail Sales M/M Dec -0.20% -0.10% 0.10% 0.00%
    12:00 GBP BoE Interest Rate Decision 4.50% 4.50% 4.75%
    12:00 GBP MPC Official Bank Rate Votes 0–9–0 0–8–1 0–3–6
    12:30 USD Challenger Job Cuts Y/Y Jan -39.50% 11.40%
    13:30 USD Initial Jobless Claims (Jan 31) 219K 214K 207K 208K
    13:30 USD Nonfarm Productivity Q4 P 1.20% 1.80% 2.20%
    13:30 USD Unit Labor Costs Q4 P 3.00% 3.30% 0.80%
    15:00 CAD Ivey PMI Jan 53 54.7
    15:30 USD Natural Gas Storage -167B -321B

     



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  • Sterling Awaits BoE Guidance Amid Stagflation Concerns; Yen Leads FX Markets

    Sterling Awaits BoE Guidance Amid Stagflation Concerns; Yen Leads FX Markets


    Yen continues to dominate the forex market this week, additionally supported by further decline in US and European benchmark yields overnight. The persistent strength in Yen is being reinforced by hawkish rhetoric from a known hawkish BoJ board member, who reiterated calls for a gradual rate hike toward the 1% neutral level. While this stance isn’t new, the reaffirmation signals a continued push within the BoJ for higher rates. Recent economic data, including strong wage growth and Tokyo inflation, have provided additional support for the case of tighter monetary policy. As a result, Yen remains anchored as a favored currency, particularly amid falling yields in global markets.

    Meanwhile, market attention shifts to the British Pound ahead of today’s BoE policy announcement. A widely expected 25bps rate cut is already priced in, but the key drivers for Sterling will be the updated economic forecasts, voting split, and guidance from Governor Andrew Bailey. The ongoing debate over stagflation risks in the UK could lead to a further division within the Monetary Policy Committee. Any significant disagreement among policymakers would add further uncertainty to BoE’s rate path and could lead to Sterling volatility.

    Across the broader forex market, Yen remains the best performer of the week, followed by Canadian Dollar and Swiss Franc. On the other end of the spectrum, Dollar remains under pressure as the weakest currency, trailed closely by Euro and New Zealand Dollar. The Australian Dollar and Sterling are hovering in the middle.

    Technically, the anticipated rebound in US 10-year yields from 55 D EMA failed to materialize, with the yield accelerated further overnight to close at 4.422. The next key support level lies at 38.2% retracement of 3.603 to 4.809 at 4.348. Strong rebound from this level, coupled with decisive break above 4.590 resistance, would help reaffirm the broader bullishness. However, a clear break below 4.348 would shift the focus toward the 61.8% retracement level at 4.063%, raising the risk of a deeper correction. Extended fall in 10-year yield could drag USD/JPY through corresponding 38.2% retracement of 139.57 to 158.86 at 151.49 too.

    In Asia, at the time of writing, Nikkei is up 0.55%. Hong Kong HSI is up 0.64%. China Shanghai SSE is up 0.81%. Singapore Strait Times is up 0.38%. Japan 10-year JGB yield is down -0.012 at 1.272. Overnight, DOW rose 0.71%. S&P 500 rose 0.39%. NASDAQ rose 0.19%. 10-year yield fell -0.091 to 4.422.

    BoE to cut 25bps, focus on MPC split and stagflation risks

    BoE is widely expected to lower interest rates by 25bps to 4.50% today, marking its third cut in the current cycle. The central bank is likely to maintain a cautious stance, reinforcing its guidance of a “gradual” approach, which suggests a pace of four quarter-point cuts throughout 2025.

    The Monetary Policy Committee’s vote split will be a key focus, as divisions among policymakers could influence BoE’s forward guidance. Known hawk Catherine Mann may dissent and argue for keeping rates steady, while dovish member Swati Dhingra could push for a more aggressive 50bps cut. A wider split would highlight internal uncertainty over the pace of easing.

    Alongside the rate decision, BoE will release its updated quarterly Monetary Policy Report, which is expected to reflect downward revisions to growth projections for 2025-2027. However, inflation forecasts, at least for 2025, could be revised higher. Such a combination would reinforce concerns over stagflation, a scenario where sluggish growth coincides with persistent inflationary pressures.

    GBP/USD is hovering near a critical technical resistance zone ahead of BoE decision. The zone include 55 D EMA (now at 1.2522) and 38.2% retracement of 1.3433 to 1.2099 at 1.2609. Firm rejection from this zone would reinforce the view that recent price action from 1.2099 remains corrective, keeping the broader bearish trend intact. In this case, decline from 1.3433 should resume through 1.2099 low at a later stage.

    BoJ’s Tamura advocates rate hike to 1% by late fiscal 2025

    BoJ board member Naoki Tamura, a known hawk, reinforced his stance on the need for tighter monetary policy, stating that Japan’s short-term interest rates should rise to at least 1% by the second half of fiscal 2025 to mitigate inflation risks.

    Tamura explained that inflationary pressures are mounting, necessitating a shift away toward a more neutral rate. He highlighted that by late fiscal 2025, the Japanese economy is expected to reach a point where the 2% inflation target can be considered sustainably achieved, supported by broad-based wage increases, including among smaller firms.

    “Bearing in mind that short-term interest rates should be at 1% by the second half of fiscal 2025, I think the Bank needs to raise rates in a timely and gradual manner, in response to the increasing likelihood of achieving its price target,” he said.

    Australia’s NAB business confidence improves, but profitability weakens

    Australia’s NAB Business Confidence rose from -7 to -4 in Q4, reflecting a slight improvement in sentiment. However, Business Conditions remained unchanged at 3, as trading conditions slipped from 6 to 5, and profitability turned negative from 0 to -1. Employment conditions as steady at 3.

    Forward-looking indicators showed a mixed picture. Expected business conditions for the next three months edged lower, but sentiment for the 12-month horizon improved by five points, aligning with a three-point increase in capital expenditure plans, suggesting firms are cautiously optimistic about long-term prospects.

    Cost pressures moderated, with labor cost growth slowing to 0.9% qoq from 1.2%, and purchase costs easing to 0.7% qoq from 1.0%. Retail price growth also softened to 0.5% qoq from 0.7%, though overall product price growth remained stable at 0.4% qoq, indicating ongoing margin pressure despite easing input costs. Wage costs remained the top concern for businesses, while demand constraints and labor shortages persisted as key challenges.

    Goolsbee warns Fed may struggle to distinguish tariff-driven inflation from overheating

    Chicago Fed President Austan Goolsbee cautioned that a “series of new challenges to the supply chain”, ranging from natural disasters to trade policy shifts, could create fresh inflationary pressures.

    He highlighted the increasing risks from events like tariffs and trade wars, hurricanes, port closures, geopolitical tensions, and labor strikes, all of which could complicate the inflation outlook in 2025.

    A key concern for Fed, Goolsbee noted, is differentiating between inflation stemming from economic overheating versus price increases caused by new tariffs. This distinction will be critical in determining the Fed’s policy response.

    Goolsbee also compared the current situation to the 2018 trade tensions under President Donald Trump, noting that while companies previously shifted production out of China, further adjustments could be more challenging this time. The remaining imports from China may be less replaceable.

    “In that case, the impact on inflation might be much larger this time,” Goolsbee noted.

    Separately, Fed Vice Chair Philip Jefferson signaled that the central bank is in no rush to adjust its policy stance as it assesses the economic impact of the Trump administration’s policy policies on tariffs, immigration, deregulation and taxes. “We can be patient and wait to see the net effect of any policy changes by the current administration,” he said.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 151.66; (P) 153.06; (R1) 154.00; More…

    USD/JPY’s fall from 158.86 is in progress and intraday bias stays on the downside for 38.2% retracement of 139.57 to 158.86 at 151.49. Strong support could be seen from there to complete the corrective fall from 158.86. Break of 153.70 minor resistance will turn intraday bias back to the upside for rebound. However, sustained break of 151.49 will raise the chance of bearish reversal.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD NAB Business Confidence Q4 -4 -6 -7
    00:30 AUD Trade Balance (AUD) Dec 5.09B 6.73B 7.08B 6.79B
    06:45 CHF Unemployment Rate M/M Jan 2.70% 2.60%
    07:00 EUR Germany Factory Orders M/M Dec 1.70% -5.40%
    09:30 GBP Construction PMI Jan 53.7 53.3
    10:00 EUR Eurozone Retail Sales M/M Dec -0.10% 0.10%
    12:00 GBP BoE Interest Rate Decision 4.50% 4.75%
    12:00 GBP MPC Official Bank Rate Votes 0–8–1 0–3–6
    12:30 USD Challenger Job Cuts Y/Y Jan 11.40%
    13:30 USD Initial Jobless Claims (Jan 31) 214K 207K
    13:30 USD Nonfarm Productivity Q4 P 1.80% 2.20%
    13:30 USD Unit Labor Costs Q4 P 3.30% 0.80%
    15:00 CAD Ivey PMI Jan 53 54.7
    15:30 USD Natural Gas Storage -167B -321B

     



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