Tag: United Kingdom

  • Euro Rallies as Germany Said to Reach Landmark Debt Deal to Boost Growth

    Euro Rallies as Germany Said to Reach Landmark Debt Deal to Boost Growth


    Euro jumped notably higher following reports that Germany’s political leaders have reached a crucial agreement on the historic debt deal. According to sources close to the negotiations, Chancellor-in-waiting Friedrich Merz and the Greens have agreed on a massive increase in state borrowing, just days before a decisive parliamentary vote next week. While some details are still being finalized, the development marks a major step toward unlocking substantial funding for infrastructure, military expansion, and economic revival in Europe’s largest economy.

    Merz has been pushing for the outgoing German parliament to approve a EUR 500B infrastructure fund alongside sweeping reforms to borrowing rules that would provide greater fiscal flexibility for future investments. However, securing a two-thirds majority for constitutional changes requires support not only from his own conservative bloc and his likely coalition partner, the Social Democrats , but also from the Greens. With the Greens now onboard, the proposal has gained significant momentum, boosting confidence in Germany’s economic outlook and supporting Euro in currency markets.

    Overall for the week, Euro’s rally has helped it reclaim the top-performing spot, solidifying its strong positioning as trading nears a close. New Zealand Dollar has also performed well, buoyed by upbeat manufacturing data from New Zealand, which signaled faster-than-anticipated recovery. Meanwhile, British Pound has slipped to third place after UK GDP unexpectedly contracted in January.

    At the other end of the spectrum, Swiss Franc and Japanese Yen are the weakest performers. Canadian Dollar has also struggled amid trade war uncertainties, keeping it in the lower tier of performers. Dollar and Australian Dollar are mixed, positioning somewhere in the middle of the pack.

    In Europe, at the time of writing, FTSE is up 0.67%. DAX is up 1.92%. CAC is up 1.21%. UK 10-year yield is up 0.092 at 4.725. Germany 10-year yield is up 0.085 at 2.939. Earlier in Asia, Nikkei rose 0.15%. Hong Kong HSI rose 0.25%. China Shanghai SSE rose 0.23%. Singapore Strait Times fell -0.06%.

    Japan 10-year JGB yield fell -0.002 to 1.544.

    UK GDP down -0.1% mom in Jan, production drags while services support

    The UK economy shrank by -0.1% mom in January, falling short of market expectations for a modest 0.1% expansion. The decline was primarily driven by weakness in the production sector, which saw output fall by -0.9% mom , while construction activity also dipped by -0.2% mom. On the other hand, the services sector—accounting for the bulk of the UK economy—managed a modest 0.1% mom gain, helping to cushion the overall contraction.

    The broader three-month growth trend is weak too, with real GDP estimated to have expanded by 0.2% in the three months to January 2025 compared to the three months ending in October 2024. Services led the way with a 0.4% rise, while construction also posted a similar 0.4% gain. However, the production sector continued to struggle, contracting by -0.9% over the same period.

    NZ BNZ manufacturing hits 53.9 as recovery gains unexpected momentum

    New Zealand’s BusinessNZ Performance of Manufacturing Index rose from 51.7 to 53.9 in February, marking its highest level since August 2022.

    This solid improvement was driven by stronger production (52.4) and new orders (51.5), both also reaching their best levels since August 2022. Meanwhile, employment surged to 54.0, climbing 3.2 points from January and hitting its highest level since September 2021.

    Despite the stronger data, business sentiment remains cautious. The proportion of negative comments from respondents rose to 59.5% in February, up from 57.7% in January. Many manufacturers cited weak orders and sluggish sales as ongoing challenges, signaling that while expansion has resumed.

    BNZ’s Senior Economist Doug Steel welcomed the sustained improvement, noting that “pickup may be a bit faster than we are currently forecasting”.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0818; (P) 1.0857; (R1) 1.0892; More…

    EUR/USD recovers mildly but stays below 1.0946 temporary top. Intraday bias remains neutral and more consolidations could be seen. In case of another fall, downside should be contained by 38.2% retracement of 1.0358 to 1.0946 at 1.0721. On the upside, break of 1.0946 will resume the rally from 1.0176 to retest 1.1274 key resistance next.

    In the bigger picture, the strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PMI Feb 53.9 51.4 51.7
    07:00 EUR Germany CPI M/M Feb F 0.40% 0.40% 0.40%
    07:00 EUR Germany CPI Y/Y Feb F 2.30% 2.30% 2.30%
    07:00 GBP GDP M/M Jan -0.10% 0.10% 0.40%
    07:00 GBP Industrial Production M/M Jan -0.90% -0.10% 0.50%
    07:00 GBP Industrial Production Y/Y Jan -1.50% -0.70% -1.90%
    07:00 GBP Manufacturing Production M/M Jan -1.10% 0.00% 0.70%
    07:00 GBP Manufacturing Production Y/Y Jan -1.50% -0.40% -1.40%
    12:30 CAD Manufacturing Sales M/M Jan 1.70% 2.00% 0.30%
    12:30 CAD Wholesale Sales M/M Jan 1.20% 1.80% -0.20%
    14:00 USD UoM Consumer Sentiment Mar P 63.8 64.7
    14:00 USD UoM Inflation Expectations Mar P 3.50%

     



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  • Risk Aversion Creeps Back as Markets Unconvinced by Trump’s Temporary Tariff Exemptions

    Risk Aversion Creeps Back as Markets Unconvinced by Trump’s Temporary Tariff Exemptions


    Risk sentiment in the forex markets appears to be tilting towards risk aversion in Asian trading, marking a shift from the broad Dollar selloff earlier in the week. Overnight, US President Donald Trump granted temporary tariff exemptions for Canadian and Mexican goods under the USMCA, delaying a full-scale implementation until April 2. While this provided some relief for Canadian Dollar, overall market sentiment remained fragile, with major US equity indexes closing in the red, led by losses in NASDAQ.

    The temporary exemption covers roughly 50% of Mexican imports and 38% of Canadian imports. However, Trump’s move has done little to inspire confidence, as markets remain skeptical about his erratic trade policies. Investors have become wary of his inconsistent messaging—one day insisting on strict tariff enforcement, the next day granting exemptions. This unpredictability has left traders cautious, unsure of how to position for potential future shifts in trade policy.

    Despite the tariff delay, risk-sensitive currencies like Australian and New Zealand Dollars have come under renewed selling pressure in Asia. The broader market focus has shifted toward the April 2 deadline, when Trump’s proposed “reciprocal tariffs” are set to take effect. These tariffs will target foreign nations that impose import taxes on US goods, keeping trade war fears firmly in play.

    Adding to market unease is the upcoming US non-farm payrolls report. With sentiment already on shaky ground, any significant weakness in the jobs data could deepen risk aversion. While a weaker NFP might increase expectations for a Fed rate cut, traders are growing concerned that deteriorating labor market conditions could signal a sharper economic slowdown. This dynamic suggests that even rising Fed cut bets may not be enough to offset broader recession fears.

    So far for the week, Dollar remains the worst-performing currency, struggling to find any solid footing. Canadian Dollar follows closely as the second weakest, alongside Australian Dollar. On the stronger side, Euro continues to outperform, driven by optimism over fiscal expansion plans in Europe. Sterling and Swiss Franc are also holding firm, while Yen and Kiwi are settling in the middle.

    In Asia, the time of writing, Nikkei is down -2.07%. Hong Kong HSI is down -0.06%. China Shanghai SSE is up 0.15%. Singapore Strait Times is down -0.01%. Japan 10-year JGB yield is up 0.023 at 1.535. Overnight, DOW fell -0.99%. S&P 500 fell -1.78%. NASDAQ fell -2.61%. 10-year yield rose 0.021 to 4.286.

    NFP in focus: NASDAQ and S&P 500 at risk of deeper correction

    US markets are standing on precarious footing, with investors attention on the February non-farm payrolls report due later in the day. There has been noticeable anxieties surrounding the impact of fiscal and trade policies changes. A set of weaker-than-expected NFP data could be taken as another signal of swift deceleration in the economy and rattle market sentiment further.

    Cooldown in the job market might prompt Fed to resume rate cuts earlier. Markets are currently pricing in 53% chance of a 25bps rate cut in March, reflecting growing belief that Fed will need to act sooner rather than later. However, the immediate market response to downside surprises may not be relief over monetary easing but rather heightened concerns about the pace of economic weakening, given recent policy uncertainties and trade disruptions.

    Markets anticipate 156k increase in NFP for February, up from 143k in January. The unemployment rate is forecast to remain at 4.0%, while average hourly earnings should hold steady at 0.3% m/m.

    The latest indicators paint a mixed picture: ISM Manufacturing PMI Employment subindex dropped to 47.6 from 50.3, while ISM Services PMI Employment inched up to 53.9 from 52.3. Meanwhile, ADP Employment reading of 77k missed last month’s 186k, and the 4-week moving average of jobless claims rose to 224k—its highest level so far this year.

    Technically, NASDAQ has been sliding for two consecutive weeks, now testing its 55-week EMA at 17,874.13. A decisive break below this level would confirm that the index is at least in a correction relative to the broader uptrend from the 10,088.82 low in 2022. The next key support to watch is the 38.2% Fibonacci retracement of 10,088.82 to 20,204.58, which comes in at 16,340.36. Extended losses here could set a negative tone for broader U.S. equities.

    The S&P 500, still trading comfortably above its 55-week EMA at 5,590.31, may follow in the NASDAQ’s footsteps if sentiment sours further. Should the index breach this EMA convincingly, it would likely confirm that the fall from 6,147.43 is a correction of the uptrend from the 3,491.58 low in 2022. This scenario would set a 38.2% retracement target around 5,132.89, marking a significant downside pivot.

    Overall, whether today’s NFP meets, misses, or exceeds expectations, the market’s reaction will hinge on how investors interpret the labor data in the context of looming trade uncertainties and weakening growth momentum. A softer reading could drive near-term Fed cut bets higher but might also deepen concerns that the U.S. economy is losing steam, thereby raising the stakes for traders and policymakers alike.

    Technically, NASDAQ is now eyeing 55 W EMA (now at 17874.13) with the extended decline in the past two weeks. Sustained break there will confirm that it’s at least in correction to the up trend from 10088.82 (2022 low). Next target will be 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

    Extended selloff in NASDAQ could be a prelude to the similar development in S&P 500. While it’s still well above 55 W EMA (now at 5590.31), sustained break there will align the outlook with NASDAQ. Fall from 6147.43 would then be correcting the up trend from 3491.58 (2022 low) at least, and target 38.2% retracement of 3491.58 to 6147.43 at 5132.89.

    Fed’s Waller: No immediate rate cut, but open to future easing

    Fed Governor Christopher Waller suggested that another rate cut at the next FOMC meeting is unlikely, but he remains open to further easing down the line.

    “I would’t say at the next meeting, but could certainly see [cuts] going forward,” he noted. Waller particularly highlighted the February inflation report and the evolving impact of trade policies as key factors in shaping the Fed’s outlook.

    Waller acknowledged the challenges in assessing the economic effects of tariffs, citing changing economic conditions and President Trump’s harder trade stance as factors complicating policy decisions.

    He noted that evaluating the impact of tariffs is more difficult this time, adding, “It’s very hard to eat a 25% tariff out of the profit margins.”

    Fed’s Bostic: Economy in flux, no rush to adjust policy

    Atlanta Fed President Raphael Bostic emphasized the high level of uncertainty in the US economy due to evolving policies under the Trump administration. With inflation, trade policies, and government spending all in flux, he suggested that meaningful clarity may not emerge until “late spring or summer”. Given this, he reiterated “We’ll have to just sort of really be patient.”

    Speaking overnight, he described the situation as being in “incredible flux,” with rapid shifts in trade and fiscal policies making it difficult to predict economic trends. Given this backdrop, Bostic urged caution, stating, “You’ve got to be patient and not want to get too far ahead.”

    He noted that just this week, there have been significant swings in expectations regarding economic policy. “If I was waiting before to see and get a clear signal about where the economy is going to go, I’m definitely waiting now,” he said.

    BoE’s Mann: Larger rate cuts needed as global spillovers worsen

    BoE MPC member Catherine Mann argued that recent monetary policy actions have been overshadowed by “international spillovers.” Financial market volatility, particularly from cross-border shocks, has disrupted traditional policy signals, making “founding premise for a gradualist approach to monetary policy is no longer valid”.

    Mann said that larger rate cuts, like the 50bps reduction she supported at the last BoE meeting, would better “cut through this turbulence” and provide clearer guidance to the economy.

    She believes that a more decisive policy stance would help steer inflation expectations and stabilize economic conditions, rather than allowing uncertainty to linger with smaller, incremental moves.

    Despite her stance, the BoE opted for a smaller 25bps rate cut in its latest decision, with Mann and dovish member Swati Dhingra being outvoted 7-2.

    China’s exports rise 2.3% yoy, imports fall -8.4% yoy

    China’s exports rose just 2.3% yoy to USD 539.9B in the January–February period, coming in below forecasts of 5.0% yoy and down sharply from December’s 10.7% yoy.

    Meanwhile, imports sank -8.4% yoy to USD 369.4B, missing expectations of 1.0% yoy growth and marking a noticeable drop from December’s 1.0% yoy.

    As a result, trade balance resulted in USD 170.5B surplus exceeding projections of USD 147.5B.

    Looking ahead

    Germany factory orders, Swiss foreign currency reserves and Eurozone GDP revision will be released in European session. Later in the day, Canada employment will also be published alongside US NFP.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8800; (P) 0.8863; (R1) 0.8900; More…

    Intraday bias in USD/CHF remains on the downside for the moment. Rise from 0.8374 should have completed at 0.9222, after rejection by 0.9223 key resistance. Deeper fall should be seen to 61.8% retracement of 0.8374 to 0.9200 at 0.8690 next. On the upside, above 0.8924 minor resistance will turn intraday bias neutral first. But rise will now stay on the downside as long as 0.9035 resistance holds, in case of recovery.

    In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    03:02 CNY Trade Balance (USD) Feb 170.5B 147.5B 104.8B
    07:00 EUR Germany Factory Orders M/M Jan -2.40% 6.90%
    07:45 EUR France Trade Balance (EUR) Jan -4.1B -3.9B
    08:00 CHF Foreign Currency Reserves (CHF) Feb 736B
    10:00 EUR Eurozone GDP Q/Q Q4 0.10% 0.10%
    13:30 CAD Net Change in Employment Feb 17.8K 76K
    13:30 CAD Unemployment Rate Feb 6.70% 6.60%
    13:30 CAD Capacity Utilization Q4 79.00% 79.30%
    13:30 USD Nonfarm Payrolls Feb 156K 143K
    13:30 USD Unemployment Rate Feb 4% 4%
    13:30 USD Average Hourly Earnings M/M Feb 0.30% 0.50%

     



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  • Euro and DAX Surge on German Spending Boost, Dollar Struggle Continues after Poor ADP

    Euro and DAX Surge on German Spending Boost, Dollar Struggle Continues after Poor ADP


    Investor sentiment in Europe is exceptionally upbeat today, with German stocks leading the rally as DAX surges over 3%, breaking above the 23k mark. Euro also rallies across the board with solid momentum, with help from rise in Germany’s benchmark yield, the overall positive sentiment, as well as a struggling Dollar.

    The boost to European sentiment was driven by the announcement that Germany’s two biggest parties, CDU/CSU and SPD, have agreed to overhaul borrowing rules to expand defense and infrastructure spending. More importantly, they are accelerating these investment plans rather than waiting out a lengthy coalition-building process. This commitment to boosting government spending is seen as a significant stimulus for the German economy, which has been struggling with recession.

    The prospect of higher public investment in Europe stands in stark contrast to the growing uncertainty surrounding the US economy. The latest ADP jobs report significantly missed expectations. The report cited policy uncertainty and slowing consumer spending as key factors behind the hiring slowdown. Focuses are now on Friday’s non-farm payrolls report, which could further cement concerns over a softening U.S. labor market.

    At the same time, the tariff situation remains highly fluid, with reports indicating that the Trump administration is considering exemptions for Canadian and Mexican products that comply with USMCA trade rules. However, no official confirmation has been made, leaving uncertainty over trade policy still hanging over the markets.

    In the currency markets, Euro is leading the pack as the strongest performer of the day, followed by Japanese Yen and New Zealand Dollar. Dollar remains the weakest, with Canadian Dollar also underperforming, followed by Swiss Franc. British Pound and Australian Dollar are positioned in the middle of the pack.

    Technically, an immediate focus is on 0.9516 resistance in EUR/CHF. Firm break above this level would confirm resumption of rebound from 0.9204. More significantly, it would also strengthen the case that the downtrend from 0.9928 (2024 high) is reversing. In this case, EUR/CHF should target 100% projection of 0.8204 to 0.9516 from 0.9331 at 0.9643 next.

    In Europe, at the time of writing, FTSE is up 0.37%. DAX is up 3.42%. CAC is up 2.05%. UK 10-year yield is up 0.118 at 4.619. Germany 10-year yield is up 0.219 at 2.713. Earlier in Asia, Nikkei rose 0.23%. Hong Kong HSI rose 2.84%. China Shanghai SSE rose 0.53%. Singapore Strait Times rose 0.20%. Japan 10-year JGB yield rose 0.020 to 1.446.

    US ADP jobs grow only 77, hiring slowdown

    US private sector employment growth slowed sharply in February, with ADP reporting an increase of just 77k jobs, far below market expectations of 140k.

    The breakdown showed that goods-producing sectors contributed 42k jobs, while service-providing sectors added only 36k. By company size, small businesses shed -12k jobs, while medium-sized firms led hiring with a 46k gain, followed by large businesses with a 37k increase.

    Wage growth showed little change, with job-changers seeing annual pay gains slow slightly from 6.8% to 6.7%, while job-stayers remained steady at 4.7%.

    ADP’s chief economist Nela Richardson attributed the hiring slowdown to “policy uncertainty and a slowdown in consumer spending,” which may have prompted layoffs or cautious hiring.

    Eurozone PPI up 0.8% mom 1.8% yoy in Jan, above expectations.

    Eurozone producer prices rose sharply by 0.8% mom and 1.8% yoy in January, exceeding expectations of 0.3% mom and 1.4% yoy, respectively.

    The monthly increase in Eurozone PPI was primarily driven by a 1.7% mom jump in energy prices, while capital goods and durable consumer goods also saw notable gains of 0.7% mom and 0.6%, respectively. Intermediate goods prices edged up by 0.3% mom, while non-durable consumer goods saw a modest 0.2% mom rise.

    The broader EU also recorded a 0.8% mom, 1.8% yoy in producer prices. Among individual member states, Ireland saw the largest monthly price jump at 6.2%, followed by Bulgaria (+5.4%) and Sweden (+2.3%).

    However, not all countries experienced inflationary pressures, as Portugal (-2.2%), Austria (-0.6%), Slovenia (-0.5%), and Cyprus (-0.3%) registered price declines.

    Eurozone PMI composite finalized at 50.2, barely grow for two months

    Eurozone economy showed little momentum in February, with PMI Services finalizing at 50.6, down from 51.3 in January, while PMI Composite was unchanged at 50.2.

    The picture was mixed across the region with Spain, Ireland, and Italy showing signs of expansion, while Germany’s services sector slowed and France’s continued its sharp contraction, posting its lowest reading in 13 months at 45.1.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that services growth is barely offsetting the prolonged slump in manufacturing. He pointed to rising input costs, particularly wage pressures, as a growing concern for ECB.

    Political uncertainty in key economies is also weighing on sentiment. France’s services sector is deteriorating at a much faster pace, likely influenced by unresolved political instability. In contrast, Germany’s services sector, though slowing, remains in expansion, with hopes that post-election stability could support economic recovery.

    However, with external risks from trade tensions and weak consumer spending, a decisive rebound in Eurozone remains uncertain.

    UK PMI services finalized at 51, stagflation risks grow

    The UK services sector showed little improvement in February, with PMI Services finalized at 51.0, slightly up from January’s 50.8 but still well below its long-run average of 54.3. Meanwhile, PMI Composite edged lower from 50.6 to 50.5, signaling stagnant overall economic activity as demand conditions continue to weaken both domestically and in export markets.

    Tim Moore, Economics Director at S&P Global Market Intelligence, warned of “elevated risk of stagflation on the horizon”. New orders falling at their sharpest rate in over two years. Rising payroll costs and economic uncertainty have eroded business confidence, bringing sentiment to its lowest level since December 2022.

    Concerns over slowing growth and persistent inflation pressures have also led to continued job losses, with employment in the services sector contracting for a fifth straight month—the longest period of decline outside of the pandemic since early 2011.

    Swiss annual CPI ticks down to 0.3% yoy, remains weak

    Swiss inflation accelerated on a monthly basis in February, with CPI rising 0.6% mom, slightly above the expected 0.5%. Core CPI, which excludes fresh and seasonal products, energy, and fuel, increased by 0.7% mom. The rise was driven by both domestic and imported product prices, which climbed 0.5% mom and 0.9% mom, respectively.

    However, the broader inflation trend remains subdued. On a year-over-year basis, headline CPI slowed to 0.3% yoy from 0.4% yoy, though it was still slightly above expectations of 0.2% yoy. Core CPI remained steady at 0.9% yoy. While domestic product price inflation eased from 1.0% yoy to 0.9% yoy, imported prices continued to contract, staying at -1.5% yoy.

    BoJ’s Uchida: Interest rate to gradually approach neutral by late FY 2025 to FY 2026

    BoJ Deputy Governor Shinichi Uchida reinforced today that interest rates will continue to rise if the bank’s economic projections hold. He highlighted in a speech that BoJ expects inflation to stabilize around the 2% target in the second half of fiscal 2025 to fiscal 2026, with “effects of the cost-push wane” while underlying inflation strengthens with wages growth.

    “The policy interest rate at that time is considered to approach an interest rate level that is neutral to economic activity and prices,” he added.

    However, Uchida acknowledged that determining the “neutral” interest rate level remains uncertain. While in theory, it should be around 2% plus Japan’s natural rate of interest, estimates for the latter vary significantly from -1% to +0.5%.

    Given this wide range and estimation errors, BoJ will avoid relying solely on theoretical models and instead “examine the response of economic activity and prices as it raises the policy interest rate”

    Japan’s PMI service finalized at 53.7, sector strengthens but confidence wanes on labor shortages and trade risks

    Japan’s PMI Services was finalized at 53.7 in February, up from January’s 53.0, marking a six-month high. PMI Composite also improved from 51.1 to 52.0, the strongest reading since September 2024.

    According to Usamah Bhatti, Economist at S&P Global Market Intelligence, service sector businesses saw higher sales volumes, with export demand contributing to the expansion. Meanwhile, the broader private sector recorded its steepest rise in activity in five months, supported by a milder contraction in manufacturing.

    Despite the growth, overall business confidence showed signs of softening. Bhatti noted Firms expressed concerns over labor shortages and uncertainty stemming from US trade policies, leading to the weakest sentiment since January 2021.

    RBA’s Hauser: Uncertain on further easing disputes market’s rate-cut outlook

    RBA Deputy Governor Andrew Hauser emphasized in a speech today that monetary policy is set to ensure inflation returns to the midpoint of the target range, which is crucial for maintaining price stability over the long run.

    He justified the February rate cut, stating that it “reduces the risks of inflation undershooting that midpoint.”

    However, Hauser pushed back against market expectations of a sustained easing cycle, saying the “Board does not currently share the market’s confidence that a sequence of further cuts will be required”.

    While Hauser acknowledged that interest rates will go where they need to go to balance inflation control with full employment, he made it clear that progress so far does not warrant complacency.

    He stressed that RBA will continue to assess economic developments on a “meeting by meeting” basis.

    Australia’s GDP grows 0.6% qoq in Q4, ending per capita contraction streak

    Australia’s GDP grew by 0.6% qoq in Q4, exceeding expectations of 0.5% qoq, while annual growth stood at 1.3% yoy. A key highlight was the 0.1% qoq per capita GDP growth, marking the first increase after seven consecutive quarters of contraction.

    According to Katherine Keenan, head of national accounts at the ABS, “Modest growth was seen broadly across the economy this quarter.” She noted that both public and private spending contributed positively, alongside a rise in exports of goods and services.

    China’s Caixin PMI services rises to 5.14, but uncertainties rising in employment and income

    China’s Caixin Services PMI climbed to 51.4 in February, up from 51.0, beating market expectations of 50.8. Composite PMI also improved slightly to 51.5, signaling steady expansion across both manufacturing and services for the 16th consecutive month.

    According to Wang Zhe, Senior Economist at Caixin Insight Group, supply and demand showed improvement in both sectors, supported by robust consumption during the Chinese New Year holiday and technological innovations in select industries. However, “employment saw a slight contraction”, mainly due to weakness in the manufacturing sector.

    Concerns remain over China’s broader economic recovery. Wang noted that overall price levels “remained subdued”, with declining sales prices in both manufacturing and services. “Rising uncertainties in employment and household income constraining efforts to boost domestic demand and stabilize the economy,” he added.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0522; (P) 1.0575; (R1) 1.0679; More…

    EUR/USD accelerates further higher today and met 100% projection of 1.0176 to 1.0531 from 1.0358 at 1.0173 already. There is no sign of topping yet. Intraday bias stays on the upside for 161.8% projection at 1.0932 next. On the downside, below 1.0636 minor support will turn intraday bias neutral again first.

    In the bigger picture, the strong rebound from 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199 argues that fall from 1.1274 might be a correction only. Sustained trading above 55 W EMA (now at 1.0668) should indicate that this correction has already completed with three waves down to 1.0176. Rise from 0.9534 (2022 low) might then be ready to resume through 1.1274. Nevertheless, rejection by 55 W EMA would keep outlook bearish for another fall through 1.0176 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD GDP Q/Q Q4 0.60% 0.50% 0.30%
    00:30 JPY Services PMI Feb F 53.7 53.1 53.1
    01:45 CNY Caixin Services PMI Feb 51.4 50.8 51
    07:30 CHF CPI M/M Feb 0.60% 0.50% -0.10%
    07:30 CHF CPI Y/Y Feb 0.30% 0.20% 0.40%
    08:50 EUR France Services PMI Feb F 45.3 44.5 44.5
    08:55 EUR Germany Services PMI Feb F 51.1 52.2 52.2
    09:00 EUR Eurozone Services PMI Feb F 50.6 50.7 50.7
    09:30 GBP Services PMI Feb F 51 51.1 51.1
    10:00 EUR Eurozone PPI M/M Jan 0.80% 0.30% 0.40% 0.50%
    10:00 EUR Eurozone PPI Y/Y Jan 1.80% 1.40% 0% 0.10%
    13:15 USD ADP Employment Change Feb 77K 140K 183K 186K
    13:30 CAD Labor Productivity Q/Q Q4 0.60% 0.30% -0.40% 0.10%
    14:45 USD Services PMI Feb F 49.7 49.7
    15:00 USD ISM Services PMI Feb 53 52.8
    15:00 USD Factory Orders M/M Jan 1.50% -0.90%
    15:30 USD Crude Oil Inventories 0.6M -2.3M
    19:00 USD Fed’s Beige Book

     



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  • “Coalition of the Willing” Fuels Euro Strength, Boosts Defense Outlook

    “Coalition of the Willing” Fuels Euro Strength, Boosts Defense Outlook


    European markets saw a strong rally today, with notable fund inflows driving gains in DAX and Euro. Investor sentiment was boosted by expectations of increased military spending after the announcement of the UK and France-led “Coalition of the Willing” to support Ukraine. FTSE and Sterling also benefited from the renewed optimism, as traders priced in the broader economic implications of higher defense expenditures across Europe.

    Defense stocks led the charge, as recent geopolitical developments, in particular the Trump-Zelenskiy clash in the Oval Office, pointed to the beginning of a European rearmament cycle. With growing isolationism in the US under President Donald Trump, European nations appear to be shifting toward greater self-reliance in military production, reducing dependence on the US. This shift has fueled expectations of long-term defense budget expansions, providing fresh momentum for European economies.

    Meanwhile, the latest Eurozone inflation data provided a mix of signals for policymakers at ECB. Prices growth did decelerate slightly in February, an outcome that might please the doves. However, the slowdown probably isn’t enough to change please the hawks for letting guard off inflation risk.. Policymakers are still certain to continue their measured approach to rate cuts with another 25bps reduction this week. But the data will spark fresh debate over the pace and extent of easing beyond the decision.

    Overall in the currency markets, Euro is the best performer for the day so far, followed by Sterling, and then Aussie. Yen is the worst, followed by Dollar, and then Kiwi, Loonie and Kiwi are positioning in the middle.

    Technically EUR/AUD’s break of 1.6800 resistance should confirm resumption of whole rally from 1.5693. Further rise should be seen to 61.8% projection of 1.5963 to 136800 from 1.6355 at 1.6872. Decisive break there could prompt upside acceleration to 100% projection at 1.7192. Nevertheless, break of 1.6702 support will delay the bullish case and bring consolidations first.

    In Europe, at the time of writing, FTSE is up 0.77%. DAX is up 2.33%. CAC is up 1.43%. UK 10-year yield is up 0.052 at 4.537. Germany 10-year yield is up 0.091 at 2.502. Earlier in Asia, Nikkei rose 1.70%. Hong Kong HSI rose 0.28%. China Shanghai SSE fell -0.12%. Singapore Strait Times rose 0.34%. Japan 10-year JGB yield rose 0.034 to 1.410.

    Eurozone CPI falls to 2.4%, core CPI slows to 2.6%, both above expectations

    Eurozone CPI ticked down from 2.5% yoy to 2.4% yoy in February, above expectation of 2.3% yoy. Core CPI (ex-energy, food, alcohol & tobacco), fell from 2.7% yoy to 2.6% yoy, above expectation of 2.5% yoy.

    Looking at the main components of inflation, services is expected to have the highest annual rate in February (3.7%, compared with 3.9% in January), followed by food, alcohol & tobacco (2.7%, compared with 2.3% in January), non-energy industrial goods (0.6%, compared with 0.5% in January) and energy (0.2%, compared with 1.9% in January).

    Eurozone PMI manufacturing finalized at 47.6, a 24-mth high

    Eurozone manufacturing activity showed signs of stabilization in February, with PMI finalized at 47.6, a 24-month high, up from January’s 46.6. While still in contraction territory, the improvement offers some hope that the sector may be finding its footing.

    Among individual countries, Ireland led the rankings at 51.9, marking a 12-month high, while the Netherlands reached the neutral 50.0 mark for the first time in eight months. However, Spain dipped to a 13-month low at 49.7, and Italy, Austria, Germany, and France all remained below 50, despite showing some improvement.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, emphasized that while the data is encouraging, it’s “too early to call it a recovery”. New orders are still falling but at the slowest rate since May 2022, and production is inching closer to stabilization. After nearly three years of recession, there is potential for modest growth in the coming months.

    Despite ongoing risks, most businesses remain optimistic about the future, with confidence slightly above its long-term average. This resilience is notable, given the looming threat of US tariffs. Additional positive factors include hopes that Russia’s war in Ukraine could come to an end this year, alongside expectations of greater political stability in Germany following the recent elections.

    UK PMI manufacturing finalized at 46.9, job cuts accelerate

    The UK manufacturing sector continued to struggle in February, with PMI Manufacturing finalized at 46.9, down from January’s 48.3, marking a 14-month low. Weak demand and declining confidence among clients have exacerbated the downturn, leading to falling output and new orders.

    Rob Dobson, Director at S&P Global Market Intelligence, noted that UK manufacturers are facing an “increasingly difficult trading environment.” The combination of subdued demand, rising cost pressures, and uncertainty over future economic conditions is making it harder for firms to sustain growth.

    Inflation fears are also rising, particularly due to changes in the national minimum wage and employer NICs announced in the Autumn Budget.

    One of the most concerning trends is the acceleration in job losses. The pace of staff reductions in the sector is now at levels not seen since the pandemic-induced slump in mid-2020.

    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.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0350; (P) 1.0385; (R1) 1.0410; More…

    EUR/USD’s strong rebound today is mixing up the near term outlook. But still, intraday bias stays neutral and further decline is in favor as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. Below 1.0358 will target 1.0176/0210 support zone first. Firm break there will resume whole fall from 1.1213, and carry larger bearish implications. However, sustained trading above 1.0572 will pave the way to 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 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 49.6 48.4 47.5
    08:50 EUR France Manufacturing PMI Feb F 45.8 45.5 45.5
    08:55 EUR Germany Manufacturing PMI Feb F 46.5 46.1 46.1
    09:00 EUR Eurozone Manufacturing PMI Feb F 47.6 47.3 47.3
    09:30 GBP Manufacturing PMI Feb F 46.9 46.4 46.4
    09:30 GBP M4 Money Supply M/M Jan 1.30% 0.20% 0.10%
    09:30 GBP Mortgage Approvals Jan 66K 66K 67K
    10:00 EUR Eurozone CPI Y/Y Feb P 2.40% 2.30% 2.50%
    10:00 EUR Eurozone CPI Core Y/Y Feb P 2.60% 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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  • 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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  • Dollar Attempts Another Comeback, Aussie Lags

    Dollar Attempts Another Comeback, Aussie Lags


    Dollar traded broadly higher in Asian session, trying to stage a comeback after a failed rally attempt overnight. Renewed focus on tariffs appears to be driving some of the greenback’s momentum. Meanwhile, broader market sentiment is just steady following Nvidia’s strong earnings report, with lingering concerns over competition from China’s DeepSeek AI continue to weigh.

    Tariffs are back in headlines after US Commerce Secretary Howard Lutnick revealed that the “big transaction” involving reciprocal tariffs is set for April 2. The date was pushed from April 1, as US President Donald Trump—citing superstition—chose to avoid making major policy moves on that day.

    Lutnick also noted that Canada and Mexico could avoid the planned 25% tariffs if they can demonstrate sufficient progress on border security and fentanyl control. However, he added that Trump would ultimately decide whether to pause again or proceed with the tariffs.

    Despite Nvidia reporting an impressive 78% year-over-year sales increase and a 93% jump in data center revenue, its struggle to rebound with momentum. The company has yet to fully recover from its 17% drop on January 27—its worst single-day decline since 2020—amid growing concerns about China’s emerging AI competitor, DeepSeek.

    Elsewhere, Aussie is struggling despite comments from a top RBA official suggesting that rate cuts are not on auto-pilot and that further easing would require more disinflation evidence. This cautious stance should have provided some support for the Aussie, but broader risk-off sentiment is keeping the currency under pressure.

    For now, Aussie is sitting at the bottom of today’s performance chart. Kiwi is also underperforming, while Swiss Franc is the third worst performer of the day so far. At the top of the performance table, Dollar leads, followed by Yen and Loonie. Euro and British Pound are positioning in the middle.

    Technically, AUD/JPY’s fall from 102.39 resumed this week and further fall should now be seen to 100% projection of 102.39 to 95.50 from 98.75 at 91.86. As this decline is seen as the second leg of the corrective pattern from 90.10, strong support should be seen around there to bring reversal. But risk will continue to stays on the downside as long as 55 D EMA (now at 96.74) holds, in case of recovery.

    In Asia, at the time of writing, Nikkei is up 0.14%. Hong Kong HSI is down -0.76%. China Shanghai SSE is down -0.49%. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is up 0.036 at 1.402. Overnight, DOW fell -0.43%. S&P 500 rose 0.01%. NASDAQ rose 0.26%. 10-year yield fell -0.049 to 4.249.

    RBA’s Hauser: Global uncertainty justifies rate cut, but more easing depends on disnflation evidence

    RBA Deputy Governor Andrew Hauser told the parliament today that mounting global uncertainty had a chilling effect on economic activity, which played a role in the board’s decision to cut the cash rate by 25 bps this month.

    He noted that businesses are becoming increasingly cautious, delaying investment projects and expansion plans as they wait for clearer economic signals, “just to see how things pan out.”

    This hesitation, he suggested, made a slight easing of monetary policy a “sensible” response to support economic stability.

    However, Hauser emphasized that further rate cuts are not guaranteed and will depend on incoming inflation data. Policymakers remain optimistic about further disinflation but need to see clear evidence before committing to additional policy easing.

    NZ ANZ business confidence rises to 58.4, on the path to recovery

    New Zealand’s ANZ Business Confidence rose from 54.4 to 58.4 in February. However, the Own Activity Outlook, slipped slightly from 45.8 to 45.1, highlighting that while sentiment is improving, actual activity remains uncertain.

    Pricing and cost indicators painted a mixed picture. Inflation expectations for the next year eased from 2.67% to 2.53% and cost expectations fell from 73.6 to 71.3. But wage expectations remained elevated at 79.2 despite fall from 83.1, and pricing intentions ticked up from 45.7 to 46.2.

    ANZ noted that the economy is on the “path to recovery,” supported by lower interest rates and stronger-than-expected commodity export prices. However, the bank cautioned that the next phase of growth remains “a point of debate.”

    The pace of expansion will depend on how households perceive current interest rates, the extent to which global uncertainty influences business investment, and whether firms push forward despite challenges. Additionally, potential labor shortages could emerge as a key constraint on further growth.

    BoE’s Dhingra: Orderly trade fragmentation unlikely to require monetary policy response

    BoE MPC member Swati Dhingra suggested that the inflationary impact of rising global tariffs could be tempered by weaker economic growth.

    She added that if the global economy undergoes a “fragmentation in an orderly way,” monetary policy might not need to react immediately as prices readjust to new geopolitical shifts.

    However, she cautioned that in an “extreme scenario” where multiple major economies erect significant trade barriers similar to those proposed by the US, “severe strain on a few sources of supply” could lead to sharp price spikes, reminiscent of those seen following Russia’s 2022 invasion of Ukraine.

    Despite the risks, Dhingra downplayed the likelihood of a severe disruption, noting that “the world economy seems to be moving closer to an orderly fragmentation.”

    Looking ahead

    Swiss GDP, Eurozone M3 monthly supply will be released in European session. ECB will publish meeting accounts.

    Later in the day, US will release GDP revision, durable goods orders and pending home sales.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8920; (P) 0.8943; (R1) 0.8969; More…

    USD/CHF recovered notably but stays below 0.9053 resistance and intraday bias remains neutral. The corrective pattern from 0.9200 could still extend lower. But strong support should be seen from 38.2% retracement of 0.8374 to 0.9200 at 0.8884 to complete it, and bring larger rise resumption. On the upside, above 0.9053 will bring retest of 0.9200 resistance. However, sustained break of 0.8884 will indicate bearish reversal, and target 61.8% retracement at 0.8690 instead.

    In the bigger picture, decisive break of 0.9223 resistance will argue that whole down trend from 1.0342 (2017 high) has completed with three waves down to 0.8332 (2023 low). Outlook will be turned bullish for 1.0146 resistance next. Nevertheless, rejection by 0.9223 will retain medium term bearishness for another decline through 0.8332 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:00 NZD ANZ Business Confidence Feb 58.4 54.4
    00:30 AUD Private Capital Expenditure Q4 -0.20% 0.60% 1.10% 1.60%
    08:00 CHF GDP Q/Q Q4 0.20% 0.40%
    09:00 EUR Eurozone M3 Money Supply Y/Y Jan 3.80% 3.50%
    10:00 EUR Eurozone Economic Sentiment Feb 96 95.2
    10:00 EUR Eurozone Industrial Confidence Feb -12 -12.9
    10:00 EUR Eurozone Services Sentiment Feb 6.8 6.6
    10:00 EUR Eurozone Consumer Confidence Feb F -13.6 -13.6
    12:30 EUR ECB Meeting Accounts
    13:30 CAD Current Account (CAD) Q4 -3.2B -3.2B
    13:30 USD Initial Jobless Claims (Feb 21) 220K 219K
    13:30 USD GDP Annualized Q4 P 2.30% 2.30%
    13:30 USD GDP Price Index Q4 P 2.20% 2.20%
    13:30 USD Durable Goods Orders Jan 2.00% -2.20%
    13:30 USD Durable Goods Orders ex Transport Jan 0.40% 0.30%
    15:00 USD Pending Home Sales M/M Jan -1.30% -5.50%
    15:30 USD Natural Gas Storage -276B -196B

     



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  • Dollar Rises Slightly After Trump Reaffirms March 4 Tariff Plans for Mexico and Canada

    Dollar Rises Slightly After Trump Reaffirms March 4 Tariff Plans for Mexico and Canada


    Dollar gained slightly overnight, buoyed by mild risk aversion and ongoing tariff threats from President Donald Trump. However, the lack of follow-through momentum in the greenback suggests traders remain hesitant to commit to large directional bets amid persistent policy uncertainty.

    US stock market weakness has been most pronounced in the NASDAQ, which fell by more than -1%. Some of this pullback appears related to profit taking ahead of Nvidia’s quarterly results, due on Wednesday. There are concerned about lower demand for AI technology if China’s low-cost DeepSeek gains traction, posing competition to the industry’s current frontrunners.

    Adding to the cautious tone, Trump doubled down on his plan to impose 25% tariffs on Mexico and Canada, stating the levies are “on time, on schedule” for March 4, following a one-month delay. However, markets have been reluctant to react too strongly, given Trump’s history of sudden policy reversals, which adds to the uncertainty surrounding trade relations.

    In currency markets, Euro is currently the strongest performer for the week, followed by Swiss Franc and then Dollar. Meanwhile, Loonie is the worst so far, trailed by Yen and Kiwi. Aussie and Sterling are trading in the middle of the pack. Looking ahead, US consumer confidence data could provide the next directional cue for the market.

    USD/CAD stands out as a pair to watch, especially under the looming tariff threat. Technically, the fall from 1.4791 (considered a correction to the rally from 1.3418) is in favor to continue as long as 1.4378 resistance holds. Break below 1.4150 would open the way to 1.3946 cluster support ( 61.8% retracement of 1.3418 to 1.4791 at 1.3942).

    However, firm break above 1.4378 would suggest the pullback has ended, paving the way for a stronger rebound to retest 1.4791 high.

    In Asia, at the time of writing, Nikkei is down -1.34%. Hong Kong HSI is down -0.62%. China Shanghai SSE is down -0.14%. Singapore Strait Times is down -0.11%. Overnight, DOW rose 0.08%. S&P 500 fell -0.50%. NASDAQ fell -1.21%. 10-year yield fell -0.027 to 4.393.

    Fed’s Goolsbee: Rate cuts on hold until policy uncertainty clears

    Chicago Fed President Austan Goolsbee emphasized the need for caution before resuming rate cuts, citing uncertainty over the economic impact of the Trump administration’s policies.

    Speaking in a TV interview overnight, Goolsbee stated that Fed remains in “wait-and-see” mode as it assesses the effects of new tariffs, immigration policies, tax cuts, government spending reductions, and federal workforce changes.

    Goolsbee made it clear that if the administration’s policies push inflation higher, Fed is obligated by law to respond accordingly. However, he stressed that the overall policy package remains unclear, making it difficult for Fed to determine its next steps.

    “There’s a lot of uncertainty, a lot of kind of dust in the air, and before the Fed can go back to cutting the rates, I feel and have expressed that we got to get a little dust out of the air,” he said.

    BoE’s Dhingra reaffirms dovish stance, signals concern over weak consumption

    BoE MPC member Swati Dhingra, one of the most dovish voices on the committee, reinforced her call for faster rate cuts. She argued that policy remains overly restrictive despite ongoing disinflation.

    Dhingra, who voted for a 50bps rate cut earlier this month, pushed back against the common interpretation that gradual easing cycle means 25bps cuts per quarter, stating that “that’s not actually what the committee has said. That’s not my definition, clearly.” She emphasized that even under the assumption of quarterly 25bps cuts, monetary policy would still be “in restrictive territory all of this year”.

    Her primary concern remains the persistent weakness in consumer spending, stating that “consumption remains pretty weak, so we’re not seeing that resurgence of inflationary pressures.” She also noted that the slow recovery in demand justifies a more accommodative stance, as “we basically aren’t recovering fully.”

    Despite concerns about potential inflationary pressures in certain items, Dhingra maintained that the disinflation process remains intact. She believes the key takeaway is that monetary policy is still restrictive, and reducing the level of restraint would not necessarily derail inflation’s downward trend.

    Her remarks highlight a clear divide within the MPC, where some members advocate patience, while doves like Dhingra and Catherine Mann argue that rate cuts should come sooner and in larger increments.

    Looking ahead

    Germany GDP final will be released in European session. Later in the day, US consumer confidence will be the main focus, and house price index will be published too.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6331; (P) 0.6362; (R1) 0.6379; More…

    AUD/USD is staying in tight range above 0.6327 support and intraday bias stays neutral. On the downside, firm break of 0.6327 will suggest that the corrective rebound from 0.6087 has completed ahead of 38.2% retracement of 0.6941 to 0.6087 at 0.6413. Intraday bias will be turned 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, even still as a correction.

    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
    23:50 JPY Corporate Service Price Index Y/Y Jan 3.10% 2.90% 2.90% 3.00%
    07:00 EUR Germany GDP Q/Q Q4 F -0.20% -0.20%
    14:00 USD S&P/CS Composite-20 HPI Y/Y Dec 4.30% 4.30%
    14:00 USD Housing Price Index M/M Dec 0.20% 0.30%
    15:00 USD Consumer Confidence Feb 103.3 104.1

     



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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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  • Muted Forex Action as Traders Overlook Data, Await RBNZ Cut

    Muted Forex Action as Traders Overlook Data, Await RBNZ Cut


    Forex markets remained subdued today, with muted reactions to key economic data. Dollar held broadly higher as traders focused on the US-Russia peace talks, where both sides agreed to continue discussions on ending Russia’s invasion of Ukraine. However, meaningful progress is unlikely without direct involvement from Ukraine and European nations, keeping market uncertainty elevated.

    Canadian Dollar traded mixed following slightly stronger-than-expected core inflation data. Despite this, with headline CPI below 2% and CPI common just above 2%, BoC is still expected to gradually lower rates toward neutral levels.

    British Pound showed little reaction to strong UK labor market data, including strong wage growth. BoE Governor Andrew Bailey commented that the figures did not alter the central bank’s outlook, keeping rate expectations steady. Similarly, Euro ignored a notable improvement in German economic sentiment, which suggests the economy may finally be stabilizing.

    Australian Dollar remains supported following RBA’s cautious rate cut, with the central bank signaling that the easing cycle will proceed gradually and may not be as deep as previously expected.

    Looking ahead, RBNZ rate decision is the primary focus in the upcoming Asian session, where markets anticipate a 50bps rate cut, bringing the OCR down to 3.75%, moving closer to neutral levels. A key point of interest will be whether RBNZ signals a slowdown in the pace of easing, and traders will analyze economic projections for insights into the terminal rate.

    Technically, NZD/USD’s rebound from 0.5515 is seen as a correction to the fall from 0.6378. While another rise cannot be ruled out, upside should be limited by 38.2% retracement of 0.6378 to 0.5515 at 0.5848. Break of 0.5622 minors support will argue that the corrective bounce has completed, and bring retest of 0.5515 low.

    In Europe, at the time of writing, FTSE is up 0.16%. DAX is up 0.24%. CAC is up 0.31%. UK 10-year yield is up 0.032 at 4.570. Germany 10-year yield is up 0.012 at 2.504. Earlier in Asia, Nikkei rose 0.25%. Hong Kong HSI rose 1.59%. China Shanghai SSE fell -0.93%. Singapore Strait Times rose 0.53%. Japan 10-year JGB yield rose 0.0435 to 1.436.

    Canada’s CPI rises to 1.9% in Jan, core inflation ticks up

    Canada’s headline CPI increased from 1.8% yoy to 1.9% yoy in January, in line with expectations. The rise was driven by higher energy costs, particularly gasoline and natural gas, while GST/HST tax break introduced in December helped offset broader price pressures.

    Food prices fell -0.6% yoy, marking the first annual decline since May 2017, led by a record -5.1% yoy drop in restaurant food prices.

    On a monthly basis, CPI rose 0.1% mom, rebounding from December’s -0.4% mom decline.

    Core inflation strengthened, with CPI median rising to 2.7% yoy from 2.6% yoy, CPI trimmed increasing to 2.7% yoy from 2.5% yoy, and CPI common edging up to 2.2% yoy from 2.0% yoy.

    German ZEW jumps to 26 in Feb, optimism ahead of elections

    German ZEW Economic Sentiment Index surged from 10.3 to 26.0 in February, surpassing expectations of 20.2 and reflecting growing optimism about Germany’s economic outlook. Current Situation Index also showed a slight improvement, rising from -90.4 to -88.5, beating forecasts of -89.0.

    Eurozone ZEW Economic Sentiment rose from 18.0 to 24.2, falling short of the anticipated 25.4, while the Current Situation Index climbed by 8.5 points to -45.3.

    According to ZEW President Achim Wambach, the sharp rise in expectations is likely driven by hopes for a “new German government capable of action” ahead of the federal election, alongside expectations for a rebound in private consumption over the next six months.

    UK wages growth accelerates in Dec, payrolled employment rose 21k in Jan

    The latest UK labor market data presents a mixed picture, with payrolled employment rising by 21k (0.1% mom) in January, but the Claimant Count increasing by 22 to 1.75 million. Meanwhile, median monthly pay reached £2,467, reflecting a 5.7% yoy increase, reinforcing concerns about wage-driven inflation pressures.

    Looking at the broader employment trend, data for the three months to December showed that the employment rate edged up by 0.1 percentage point to 74.9%, while the unemployment rate also ticked higher by 0.1 percentage point to 4.4%.

    Wage pressures remain elevated, with average earnings including bonuses accelerating from 5.5% yoy to 6.0% yoy, and earnings excluding bonuses rising from 5.6% yoy to 5.9% yoy.

    RBA cuts rates, but warns against easing too much too soon

    RBA lowered its cash rate target by 25bps to 4.10%, as widely anticipated, but signaled a cautious approach to further easing.

    In its statement, the central bank emphasized that monetary policy will remain restrictive even after today’s reduction, warning that if rates are “eased too much too soon”, disinflation progress could stall and inflation could settle above the midpoint of the target range.

    RBA acknowledged that some upside risks to inflation “appear to have eased”, and disinflation may be unfolding “a little more quickly than earlier expected”. However, it maintained that “risks on both sides” remain.

    While today’s cut reflects the central bank’s confidence in recent progress, policymakers remain “cautious about the outlook”, reinforcing the idea that future easing will be data-dependent rather than pre-committed.

    In the new economic projections:

    • Headline CPI is now projected to rise to 3.7% by the end of 2025, before gradually easing to 2.8% by the end of 2026 (raised from 2.5%), and settling at 2.7% by mid-2027.
    • Trimmed mean CPI is expected to remain at 2.7% throughout 2025, 2026, and mid-2027.
    • Unemployment rate forecast was lowered to 4.2% across the projection horizon
    • Year-average GDP growth was revised down by 0.1% to 2.1% for 2025, while 2026 remains unchanged at 2.3%, with growth expected to hold steady at 2.3% into 2026/2027.
    • Cash rate assumptions suggest an average rate of 3.6% in 2025, followed by 3.5% in 2026.

    USD/CAD Mid-Day Outlook

    Daily Pivots: (S1) 1.4165; (P) 1.4179; (R1) 1.4199; More…

    USD/CAD is staying in tight range above 1.4150 temporary low and intraday bias remains neutral. Deeper decline will remain in favor as long as 1.4378 resistance holds. Fall from 1.4791 is correcting whole rise from 1.3418. Break of 1.4150 will target 1.3946 cluster support (61.8% retracement of 1.3418 to 1.4791 at 1.3942).

    In the bigger picture, long term up trend is tentatively seen as resuming with prior 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.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    03:30 AUD RBA Rate Decision 4.10% 4.10% 4.35%
    07:00 GBP Claimant Count Change Jan 22K 10.0K 0.7K -15.1K
    07:00 GBP ILO Unemployment Rate (3M) Dec 4.40% 4.50% 4.40%
    07:00 GBP Average Earnings Including Bonus 3M/Y Dec 6.00% 5.90% 5.60% 5.50%
    07:00 GBP Average Earnings Excluding Bonus 3M/Y Dec 5.90% 5.90% 5.60%
    10:00 EUR Germany ZEW Economic Sentiment Feb 26 20.2 10.3
    10:00 EUR Germany ZEW Current Situation Feb -88.5 -89 -90.4
    10:00 EUR Eurozone ZEW Economic Sentiment Feb 24.2 25.4 18
    13:30 USD Empire State Manufacturing Index Feb 5.7 -1 -12.6
    13:30 CAD CPI M/M Jan 0.10% 0.10% -0.40%
    13:30 CAD CPI Y/Y Jan 1.90% 1.90% 1.80%
    13:30 CAD CPI Media Y/Y Jan 2.70% 2.40% 2.40% 2.60%
    13:30 CAD CPI Trimmed Y/Y Jan 2.70% 2.60% 2.50%
    13:30 CAD CPI Common Y/Y Jan 2.20% 2.00% 2.00%
    15:00 USD NAHB Housing Index Feb 47 47

     



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  • Dollar Muted Despite Strong PPI, Awaits Reciprocal Tariffs

    Dollar Muted Despite Strong PPI, Awaits Reciprocal Tariffs


    The currency markets are treading cautiously, with traders showing little reaction to stronger-than-expected US PPI data and a better-than-anticipated jobless claims report. Despite these inflationary signals, Dollar has struggled to gain further traction, as market participants hold their positions ahead of a highly anticipated announcement on US “reciprocal tariffs” from President Donald Trump. The announcement, expected later today in a news conference at the Oval Office, could provide a clearer picture of how US trade policy will evolve and its impact on global markets.

    While Fed’s restrictive stance on interest rates remains intact, this week’s hot CPI and PPI data suggest that inflation is proving more persistent than policymakers had hoped. Chair Jerome Powell has already reinforced that Fed is in no hurry to cut rates, and expectations for rate reductions in the first half of the year have now diminished. Market focus will now shift to upcoming US retail sales figures and additional comments from Fed officials, as traders assess how these data points might influence the central bank’s next policy moves.

    Sterling briefly found some boost after stronger-than-expected UK GDP data, which helped ease immediate concerns over a recession. However, the currency’s gains were short-lived, as investors remain cautious about the country’s sluggish economic outlook. While BoE has signaled a path of gradual easing, the market are more conservative than BoE guidance, with traders still pricing in just two rate cuts before year-end. Given the uncertainty around inflation and growth, the pace of BoE rate cuts will remain a key point of debate in the coming months.

    For the day, Swiss Franc leads currency gains as Japanese Yen follows behind, while Sterling holds firm too. On the weaker end, Australian and New Zealand Dollars are struggling. Dollar, despite its inflation-fueled rally earlier in the week, has lost momentum, as traders await further trade policy developments. Euro and Canadian Dollar are stuck in the middle of the pack.

    In Europe, at the time of writing, FTSE is down -0.56%. DAX is up 1.64%. CAC is up 1.40%. UK 10-year yield is down -0.045 at 4.493. Germany 10-year yield is down -0.050 at 2.431. Earlier in Asia, Nikkei rose 1.28%. Hong Kong HSI fell -0.20%. China Shanghai SSE fell -0.42%. Singapore Strait Times rose 0.21%. Japan 10-year JGB yield rose 0.0028 to 1.350.

    US PPI up 0.3% mom, 3.5% yoy in Jan, above expectations

    US PPI for final demand rose by 0.4% mom in January, exceeding market expectations of 0.2% mom.

    Final demand services increased by 0.3% mom, while final demand goods rose by 0.6% mom. Core PPI measure, which strips out volatile food, energy, and trade services, climbed 0.3% mom.

    On an annual basis, headline PPI accelerated to 3.5% yoy, surpassing forecasts of 3.2% yoy. Core PPI followed closely, advancing 3.4% yoy.

    US initial jobless claims falls to 213k vs exp 221k

    US initial jobless claims fell -7k to 213k in the week ending February 8, below expectation of 221k. Four-week moving average of initial claims fell -1k to 216k.

    Continuing claims fell -36k to 1850k in the week ending February 1. Four-week moving average of continuing claims fell -1k to 1872k.

    Eurozone industrial production falls -1.1% mom in Dec, EU down -0.8% mom

    Eurozone industrial production fell by -1.1% mom in December, significantly worse than the market expectation of -0.6% mom. The decline was driven by sharp contractions in intermediate and capital goods, while non-durable consumer goods provided some offset.

    Breaking down the data, intermediate goods production declined by -1.9% mom. The production of capital goods fell even further, down -2.6% mom. Durable consumer goods also posted a modest decline of -0.7% mom. On the other hand, energy production rose by 0.5% mom, and non-durable consumer goods surged by 5.1% mom.

    At the broader EU level, industrial production contracted by -0.8% mom, with Belgium (-6.8%), Portugal (-4.4%), and Austria (-3.3%) suffering the steepest declines. Meanwhile, Ireland (+8.2%), Luxembourg (+6.7%), and Croatia (+6.3%) posted strong rebounds.

    Swiss inflation softens again as CPI slows to 0.4% in Jan

    Switzerland’s CPI declined by -0.1% mom in January, in line with market expectations. Core CPI, which excludes fresh and seasonal products, energy, and fuel, also dropped by -0.1% mom. While domestic product prices ticked up by 0.1% mom, the steep -0.7% mom decline in imported product prices suggests that external factors continue to exert deflationary pressure on the Swiss economy.

    On a year-over-year basis, headline inflation eased from 0.6% yoy to 0.4% yoy, also matching expectations. However, core CPI edged higher to 0.9% yoy from 0.7% yoy. Domestic product inflation slowed from 1.5% yoy to 1.0% yoy, reflecting weaker demand and subdued price pressures in the local economy. Meanwhile, imported product prices remained in deflationary territory, improving slightly from -2.2% yoy to -1.5% yoy.

    UK GDP surprises to the upside, services lead the growth

    The UK economy outperformed expectations in December, with GDP expanding by 0.4% mom, significantly stronger than the 0.1% growth forecast. The services sector led the way, posting 0.4% monthly growth, while production output also rebounded, rising by 0.5%. However, the construction sector remained weak, contracting -0.2% mom.

    For Q4 as a whole, GDP increased by 0.1% qoq, defying expectations for a -0.1% contraction. Services grew by 0.2% in Q4, maintaining its position as the primary growth driver, while construction saw a moderate expansion of 0.5%. However, industrial production was a notable drag, shrinking by -0.8%.

    For full-year 2024, GDP increased by 0.8% compared to 2023, a modest but better-than-feared outcome given the economic uncertainties. Services expanded by 1.3%, cushioning the economy, while production sector contracted by -1.7%, and construction grew slightly by 0.4%.

    RBNZ survey shows rate cut expectations firm up

    The latest RBNZ Survey of Expectations showed a mixed shift in inflation forecasts, with short-term price pressures edging higher but long-term expectations trending lower. The survey, nonetheless, reinforces anticipation of further rate cuts.

    One-year-ahead inflation expectation rose from 2.05% to 2.15%, marking a slight uptick. However, two-year-ahead inflation expectations dipped from 2.12% to 2.06%, while five-year and ten-year expectations both declined by 11-12 basis points to 2.13% and 2.07%, respectively.

    RBNZ’s Official Cash Rate currently stands at 4.25% following 50bps reduction in last November. Survey respondents broadly expect another 50-bps cut to 3.75% by the end of Q1. The one-year-ahead OCR expectation also moved lower, falling 10bps to 3.23%, reinforcing the view that RBNZ will continue easing policy at a measured pace.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2387; (P) 1.2435; (R1) 1.2493; More…

    Outlook in GBP/USD is unchanged and intraday bias stays neutral. Corrective rebound from 1.2099 could still extend higher. But upside should be limited by 38.2% retracement of 1.3433 to 1.2099 at 1.2609. On the downside, below 1.2331 minor support will turn bias to the downside for 1.2248 support. Firm break there will argue that the correction has completed and bring retest of 1.2099 low. 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
    23:50 JPY PPI Y/Y Jan 4.20% 4.00% 3.80% 3.90%
    00:00 AUD Consumer Inflation Expectations Feb 4.60% 4.00%
    00:01 GBP RICS Housing Price Balance Jan 22% 27% 28% 26%
    02:00 NZD RBNZ Inflation Expectations Q1 2.06% 2.12%
    07:00 EUR Germany CPI M/M Jan F -0.20% -0.20% -0.20%
    07:00 EUR Germany CPI Y/Y Jan F 2.30% 2.30% 2.30%
    07:00 GBP GDP Q/Q Q4 P 0.10% -0.10% 0.00%
    07:00 GBP GDP M/M Dec 0.40% 0.10% 0.10%
    07:00 GBP Industrial Production M/M Dec 0.50% 0.30% -0.40% -0.50%
    07:00 GBP Industrial Production Y/Y Dec -1.90% -2.10% -1.80%
    07:00 GBP Manufacturing Production M/M Dec 0.70% 0.10% -0.30%
    07:00 GBP Manufacturing Production Y/Y Dec -1.40% -1.90% -1.20% -1.10%
    07:00 GBP Goods Trade Balance (GBP) Dec -17.4B -18.3B -19.3B -18.9B
    07:30 CHF CPI M/M Jan -0.10% -0.10% -0.10%
    07:30 CHF CPI Y/Y Jan 0.40% 0.40% 0.60%
    09:00 EUR ECB Economic Bulletin
    10:00 EUR Eurozone Industrial Production M/M Dec -1.10% -0.60% 0.20% 0.40%
    13:30 USD PPI M/M Jan 0.40% 0.20% 0.20% 0.50%
    13:30 USD PPI Y/Y Jan 3.50% 3.20% 3.30%
    13:30 USD PPI Core M/M Jan 0.30% 0.30% 0.00%
    13:30 USD PPI Core Y/Y Jan 3.60% 3.30% 3.50%
    13:30 USD Initial Jobless Claims (Feb 7) 213K 221K 219K 220K
    15:30 USD Natural Gas Storage -90B -174B

     



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  • Gold Nears 3000 as Muted Reaction to Metal Tariffs Fades, Fed Powell in Focus

    Gold Nears 3000 as Muted Reaction to Metal Tariffs Fades, Fed Powell in Focus


    Dollar is trading is a mildly firmer tone while Gold inches closer to the key 3000 psychological level after US President Donald Trump officially raised tariffs on aluminum and steel imports. However, the broader market reaction has been relatively subdued. Major US equity indexes managed to post modest gains overnight, and 10-year Treasury yield also recovered. Investor sensitivity to trade war escalations has somewhat diminished. The next test will be whether Trump’s upcoming reciprocal tariff announcement will trigger a similar lackluster response.

    In his proclamation on Monday, Trump lifted tariff rate on aluminum to 25% from the previous 10% and eliminating previous country-specific exemptions, including quota agreements and product-specific exclusions for both metals. The measures are set to take effect on March 4.

    Although Trump insisted there would be “no exceptions,” he later softened the tone and indicated the possibility of an exemption for Australia, citing that nation’s trade deficit with the US. As a result, uncertainty remains over how many countries or products may ultimately be exempt from the higher tariffs.

    Markets are now awaiting further details on Trump’s reciprocal tariff plan, expected to be unveiled between Tuesday and Wednesday. The plan could impose new duties on a range of imports to match tariffs levied by trading partners, with the EU particularly at risk due to its 10% tariff on American cars—much higher than the US’s 2.5% tariff on imported vehicles.

    In addition to trade policy developments, the focus is also on Fed Chair Jerome Powell’s Congressional testimony later today, followed by release of key US CPI data tomorrow. Powell’s remarks could provide further insight into the Fed’s rate outlook, particularly whether policymakers are shifting toward an even longer pause in monetary easing given recent strength in the labor market and lingering inflation risks.

    On the currency front, Dollar is currently the strongest major currency so far this week, followed by Aussie and then Swiss franc. Kiwi is the worst performer, trailed by Sterling and then Yen. Euro and Loonie are trading in the middle.

    Technically, immediate focus in on Gold’s reaction from 3000 psychological level, as well as 38.2% projection of 1810.26 to 2789.92 from 2584.24 at 2958.47. Strong resistance could be seen from there to limit upside on first attempt. Break of 2852.31 support would indicate that pullback is underway back to 2789.92 resistance turned support and possibly below. However, sustained break of 3000 would pave the way to next target at 61.8% projection at 3189.66 before topping.

    In Asia, Japan is on holiday. Hong Kong HSI is down -0.72%. China Shanghai SSE is down -0.16%. Singapore Strait Times is down -0.41%. Overnight, DOW rose 0.38% S&P 500 rose 0.67%. NASDAQ rose 0.98%. 10-year yield rose 0.006 to 4.493.

    Australia’s Westpac consumer sentiment ticks up, RBA to start cutting this month

    Australia’s Westpac Consumer Sentiment Index rose slightly by 0.1% mom to 92.2 in February. While consumer mood improved significantly in the second half of 2024, the past three months have shown stagnation.

    Westpac noted that financial pressures on households persist and a more uncertain global economic climate has also played a role in dampening optimism.

    RBA is likely to begin policy easing at its next meeting on February 17–18. Westpac highlighted that recent economic data on core inflation, wage growth, and household consumption indicate that inflation is “returning to target faster” than previously expected.

    These factors provide RBA with the confidence to initiate a 25bps rate cut this month, marking the first step in what is expected to be a “moderate” easing cycle through 2025.

    Australian NAB business confidence rebounds to 4, but conditions remain weak

    Australia’s NAB Business Confidence index made a strong recovery in January, rising from -2 to 4 and returning to positive territory. However, despite this uptick in sentiment, underlying business conditions deteriorated.

    Business Conditions index dropped from 6 to 3, marking a notable slowdown. Within this, trading conditions slipped from 10 to 6, while profitability conditions turned negative, falling from 4 to -2. On a more positive note, employment conditions edged up slightly from 4 to 5.

    Cost pressures remained a key concern for businesses. Purchase cost growth eased to 1.1% on a quarterly equivalent basis, down from 1.4%. Labor cost growth picked up slightly to 1.8%. Meanwhile, final product price growth held steady at 0.8%, while retail price inflation inched up to 0.9%. Businesses are struggling to fully pass on rising costs to consumers.

    NAB Chief Economist Alan Oster noted that while confidence improved, it is uncertain whether this momentum will be sustained. Elevated cost pressures, particularly on wages and input costs, continue to weigh on overall business conditions.

    BoE’s Mann: Larger rate cut needed to send clear market signal

    BoE MPC member Catherine Mann explained her unexpected vote for a 50bps rate cut last week. Speaking to the Financial Times, she emphasized that “Demand conditions are quite a bit weaker than has been the case”, prompting a reassessment of her stance on inflation risks.

    She now sees inflationary pressures easing faster, with pricing trends aligning closely to 2% target in the year ahead. This marks a notable shift from her previously hawkish position, which had consistently supported maintaining restrictive monetary policy.

    A key reason for her preference for a larger cut was the need to deliver a stronger signal to financial markets. She argued that a half-point move would help “cut through the noise” and provide clearer guidance on the need for looser financial conditions in the UK.

    “To the extent that we can communicate what we think are the appropriate financial conditions for the UK economy, a larger move is a superior communication device,” she noted.

    Mann’s stance aligns her with Swati Dhingra, the most dovish member of the MPC, who also advocated for a 50bps cut to 4.25% at last week’s meeting. The final decision was a more measured 25bps reduction to 4.50%.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6245; (P) 0.6267; (R1) 0.6299; More…

    AUD/USD is bounded in sideway trading in tight range and intraday bias remains neutral. With 0.6329 resistance intact, outlook will stay bearish. On the downside, break of 0.6239 minor support will turn bias back to the downside for retesting 0.6087 low. However, firm break of 0.6329 will bring stronger rebound to 38.2% retracement of 0.6941 to 0.6087 at 0.6413, even just as a corrective move.

    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 0.6516) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 AUD Westpac Consumer Confidence Feb 0.10% -0.70%
    00:30 AUD NAB Business Confidence Jan 4 -2
    00:30 AUD NAB Business Conditions Jan 3 6
    11:00 USD NFIB Business Optimism Jan 104.6 105.1
    13:30 CAD Building Permits M/M Dec 2.30% -5.90%

     



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  • Tariff Wave Expands with Metals and Reciprocal Duties, Dollar Strengthens Slightly

    Tariff Wave Expands with Metals and Reciprocal Duties, Dollar Strengthens Slightly


    Trade tensions remain at the forefront of market concerns as the US prepares to roll out another wave of tariffs. Over the weekend, President Donald Trump confirmed plans to impose a 25% tariff on all steel and aluminum imports, adding to the existing duties on these metals. The official announcement is expected today. Meanwhile, “reciprocal tariffs”—which would match the import duties imposed by other countries—are set to be unveiled between Tuesday and Wednesday, with immediate implementation.

    The largest suppliers of steel and aluminum to the US are Canada, Brazil, and Mexico, followed by South Korea and Vietnam. Canada, in particular, dominates the aluminum export market to the US, contributing 79% of total imports in the first 11 months of 2024. The announcement raises questions about how these countries might respond, given that Canada and Mexico only recently secured a temporary reprieve from tariffs on other goods.

    Interestingly, Hong Kong’s stock market has shown resilience, posting extended gains despite escalating trade tensions. Investors appear unfazed by the recent flurry of US tariff news, as well as China’s retaliatory levies on select American products. The factors supporting Hong Kong’s optimism remain unclear, and more time would be required to assess whether regional equities can maintain this momentum if trade frictions intensify further.

    Technically, HSI’s break of 21070.05 resistance last week suggests that correction from 23241.74 has completed at 18671.59 already, despite being deeper than expected. The medium term up trend from 14794.16 should remain intact, with notable support from 55 W EMA too. Retest of 23241.74 resistance should be seen next and firm break there will target 25k handle, which is close to 100% projection of 16964.28 to 23241.74 from 18671.49.

    Looking ahead, markets will keep a close watch on Fed Chair Jerome Powell’s upcoming Congressional testimonies, particularly any remarks concerning inflation and labor market conditions. Major data releases this week include US CPI, UK GDP, Swiss CPI, and key confidence reports from Australia and New Zealand.

    In Asia, at the time of writing, Nikkei is down -0.10%. Hong Kong HSI is up 1.15%. China Shanghai SSE is up 0.23%. Singapore Strait Times is up 0.63%. Japan 10-year JGB yield is up 0.0193 at 1.322, hitting a fresh high since 2011.

    China’s CPI picks up to 0.5%, but factory prices remain stuck in deflation

    China’s consumer inflation accelerated at the start of 2025, with CPI rising from 0.1% yoy to 0.5% yoy in January, slightly exceeding market expectations of 0.4%. This marked the fastest annual increase in five months. On a monthly basis, CPI surged 0.7% mom, the strongest rise in over three years.

    Core inflation, which strips out food and fuel prices, edged up from 0.4% yoy to 0.6% yoy, reflecting a modest pickup in underlying demand. Food prices climbed by 0.4% yoy, while non-food categories also posted a 0.5% yoy increase.

    However, despite these gains, consumer inflation remains well below the government’s target, with full-year 2024 CPI growth coming in at just 0.2%, the lowest since 2009, and reinforcing the persistent weakness in domestic consumption.

    Meanwhile, producer prices remained firmly in deflationary territory. PPI held steady at -2.3% yoy in January, missing expectations of a slight improvement to -2.2% yoy. This marks the 28th consecutive month of factory-gate deflation, highlighting ongoing struggles within the manufacturing sector and pricing pressures stemming from weak external demand and excess capacity.

    Powell’s testimony, US inflation data, and UK GDP in focus this week

    Fed Chair Jerome Powell’s upcoming Congressional testimony will be a key event this week as markets seek further clarity on Fed’s path. In particular, the main question is whether Fed’s hold at the last meeting is the start of a longer pause in the easing cycle.

    Following January’s FOMC decision to hold rates steady, Powell stated explicitly that Fed is in “no hurry” to cut interest rates. Several Fed officials have since emphasized that declining inflation alone may not be sufficient for additional rate reductions, with the labor market’s performance playing a crucial role. Lawmakers are expected to press Powell for further details on how Fed will balance these factors in shaping monetary policy.

    Meanwhile, Friday’s Monetary Policy Report offered minimal commentary on the impact of US tariff policies. It merely noted that “some market participants” cited tariff-related uncertainties as a factor driving the dollar higher in recent months. Given the evolving nature of Trump’s trade strategy and the lack of clear direction, Powell is unlikely to provide definitive answers on how tariffs will influence Fed policy. Nonetheless, market participants will closely follow any indication that trade-related uncertainties might alter the Fed’s rate outlook.

    US CPI and retail sales data will also be closely watched. Headline inflation is expected to remain at 2.9% in January, with core CPI easing slightly from 3.2% to 3.1%. Risks remain that inflation could remain sticky as businesses begin adjusting for potential tariff impacts. If inflation prints in line with expectations or surprises to the upside, it would reinforce Fed’s cautious approach and likely prolong the current pause in rate cuts.

    Elsewhere, UK GDP report will be another highlight. The economy is expected to contract by -0.1% in Q4, raising concerns about a potential recession. After last week’s dovish 25bps rate cut by BoE, speculation has increased that another cut could come as early as March. While this is not yet the consensus view, any downside surprise in GDP data could fuel expectations of a back-to-back rate reduction, particularly as known hawk Catherine Mann has already shifted to a more dovish stance.

    Here are some highlights for the week:

    • Monday: Japan bank lending, current account, Eco Watcher sentiment; Eurozone Sentix Investor confidence.
    • Tuesday: Australia Westpac consumer sentiment, NAB business confidence; Canada building permits.
    • Wednesday: Japan machine tool orders; US CPI; BoC summary of deliberations.
    • Thursday: Japan PPI; New Zealand inflation expectations; Germany CPI final; UK GDP, trade balance; Swiss CPI; Eurozone industrial production; US PPI, jobless claims.
    • Friday: New Zealand BNZ manufacturing; Swiss PPI; Eurozone GDP revision; Canada manufacturing sales, wholesales sales; US retail sales, industrial production.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6251; (P) 0.6275; (R1) 0.6296; More…

    AUD/USD dips mildly today but stays above 0.6239 minor support. Intraday bas stays neutral first. With 0.6329 resistance intact, outlook will stay bearish. On the downside, break of 0.6239 minor support will turn bias back to the downside for retesting 0.6087 low. However, firm break of 0.6329 will bring stronger rebound to 38.2% retracement of 0.6941 to 0.6087 at 0.6413, even just as a corrective move.

    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 0.6516) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Bank Lending Y/Y Jan 3.00% 3.10% 3.10% 3.00%
    23:50 JPY Current Account (JPY) Dec 2.73T 2.73T 3.03T
    05:00 JPY Eco Watchers Survey: Current Jan 49.7 49.9
    09:30 EUR Eurozone Sentix Investor Confidence Feb -16.4 -17.7

     



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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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  • 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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  • Dollar Struggles Continue Despite Strong ADP, Caution Prevails

    Dollar Struggles Continue Despite Strong ADP, Caution Prevails


    Dollar remains on the backfoot in early US session, despite the strong ADP private employment report. The data highlights continued resilience in the labor market, with services-driven job growth and sustained wage pressures. While this should theoretically reinforce the case for Fed to maintain its pause in easing for longer, traders appear reluctant to react decisively ahead of Friday’s Non-Farm Payroll report, which will provide a more comprehensive labor market picture.

    Beyond economic data, uncertainty surrounding US-China trade relations is another key factor keeping traders from placing larger bets on the greenback. The additional 10% duties on Chinese goods remain firmly in place. Traders are monitoring the anticipated phone call between US President Donald Trump and Chinese President Xi Jinping, but no official timeline has been set. The lack of diplomatic engagement has kept market caution elevated.

    Adding to the confusion, the US Postal Service reversed its earlier suspension of inbound packages from China and Hong Kong. Instead, it will now work closely with US Customs and Border Protection to enforce the new tariff collection measures more effectively. This aligns with Trump’s decision to close the “de minimis” trade loophole, which previously allowed Chinese e-commerce giants like Temu and Shein to ship goods into the US duty-free in high volumes.

    Overall in the forex markets, Canadian Dollar continues to lead gains this week, supported by the avoidance of US tariffs. Japanese Yen follows closely, buoyed by strong wage growth data, which is raising expectations for further rate hikes from BoC. Australian Dollar has also shown some resilience too. Dollar remains the weakest performer, followed by Euro and New Zealand Dollar. Sterling and Swiss Franc are positioned in the middle of the pack.

    Technically, USD/CAD is now pressing an important cluster support level at 1.4260, with 38.2% retracement of 1.3418 to 1.4791 at 1.4267, and 55 D EMA at 1.4267. Strong support is expected there to complete the pull back from 1.4791 and bring rebound. However, decisive break of 1.4260 will be a sign of broad-based weakness in Dollar for the near term. USD/CAD could dive further to 618% retracement at 1.3942, along with extended selloff in Dollar elsewhere.

    In Europe, at the time of writing, FTSE is up 0.37%. DAX is up 0.15%. CAC is down -0.21%. UK 10-year yield is down -0.061 at 4.464. Germany 10-year yield is down -0.0391 at 2.364. Earlier in Asia,Nikkei rose 0.09%. Hong Kong HSI fell -0.93%. China Shanghai SSE fell -0.65%. Singapore Strait Times fell -0.20%. Japan 10-year JGB yield rose 0.0076 to 1.284.

    US ADP jobs beats expectations with 183k gain, led by services

    US ADP private employment report showed a stronger-than-expected job gain of 183K in January, surpassing market forecasts of 149K.

    Service sector was the clear driver of employment, adding 190K jobs, while goods-producing industries shed -6K positions. By company size, small businesses contributed 39K jobs, medium-sized firms led with 92K, and large corporations added 69K.

    Wage growth remained elevated, with annual pay increases for job-stayers at 4.7% yoy, while job-changers saw an even stronger 6.8% yoy rise.

    According to Nela Richardson, Chief Economist at ADP, the report reveals a “dichotomy” in the labor market, with consumer-facing industries leading the way, while business services and production lag behind.

    Eurozone PPI rises 0.4% in Dec, flat annually

    Eurozone PPI increased by 0.4% mom in December, slightly below market expectations of 0.5% MoM. On a year-over-year basis, PPI was unchanged, above expectations of a -0.1% yoy decline.

    Breaking down the monthly price changes in Eurozone, energy prices saw the biggest increase at 1.4%, followed by durable consumer goods (+0.2%). Capital goods, intermediate goods, and non-durable consumer goods all edged up by 0.1%.

    At the EU level, PPI rose 0.4% mom and 0.1% yoy. The biggest price gains were seen in Bulgaria (+5.1%), Croatia (+2.4%), and Slovakia (+1.5%). On the other hand, Ireland (-1.5%), Romania (-1.3%), and the Netherlands (-0.4%) saw the largest declines.

    Eurozone PMI services finalized at 51.3, no major growth leap expected

    Eurozone Composite PMI was finalized at 50.2 in January, up from 49.6 in December, marking the first month of economic expansion since August. However, PMI Services Index was finalized at 51.3, down from prior month’s1.6, suggesting that while the services sector remains in growth territory, momentum is fading.

    Among individual countries, Spain led the expansion with a Composite PMI of 54.0. Germany’s index climbed to 50.5, hitting an eight-month high, signaling tentative stabilization. Italy remained in contraction at 49.7, while France improved slightly to 47.6.

    According to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, the services sector has been instrumental in preventing a broader economic contraction in the Eurozone. Modest but accelerating new orders and employment offer some optimism that the sector could gain momentum in Q1 2025. However, rising costs in services, particularly due to wage pressures, remain a concern for the ECB.

    The services outlook is “modest”, with business expectations declining slightly and staying below historical averages since mid-2024. Political uncertainties in the Eurozone, including Germany’s upcoming elections and France’s fragile government, continue to weigh on sentiment.

    “No major growth leaps are expected in this sector for now,” de la Rubia added.

    UK PMI services finalized at 15-month low, stagflation concerns rise

    UK PMI Services was finalized at 50.8 in January, slipping from December’s 51.1, marking its joint-lowest level in 15 months. PMI Composite edged up slightly to 50.6, indicating that overall economic activity remains stagnant, with minimal expansion.

    According to Tim Moore, Economics Director at S&P Global Market Intelligence, “stagflation conditions appeared to take a firmer hold”, with weak output growth coupled with persistent cost pressures. Input cost inflation accelerated for the fifth consecutive month, reaching its highest level since April 2024.

    Renewed decline in new business volumes adds to signs that the UK’s economic outlook remains weak, as firms report softening demand conditions. Business confidence has also taken a hit, with expectations for future activity dropping to their lowest level since December 2022.

    The most concerning development is the sharp deterioration in employment trends, as service providers cut jobs at the fastest pace in four years. The “twin perils” of shrinking workloads and rising payroll costs has forced many firms to halt recruitment.

    Japan’s nominal wage growth surges 4.8% yoy in Dec, real wages rise for second month

    Japan’s labor market showed strong wage growth in December, with labor cash earnings surging 4.8% yoy, significantly above expectations of 3.8% yoy and accelerating from 3.9% yoy in the prior month. This marks the 36th consecutive month of annual wage increases.

    Regular pay, which includes base salaries, rose 2.7% yoy, while special cash earnings—mainly reflecting winter bonuses—jumped 6.8% yoy, providing an additional boost to workers’ disposable income.

    Real wages, which adjust for inflation, climbed 0.6% yoy, marking the second straight month of positive growth. This improvement comes despite a notable acceleration in consumer inflation, with the price index used to calculate real wages—excluding rent but including fresh food—rising 4.2% yoy, up from 3.4% yoy in November and reaching the highest level since January 2023.

    China’s Caixin PMI services PMI drops to 51.0

    China’s Caixin Services PMI slipped to 51.0 in January, down from 52.2 and below expectations of 52.3. PMI Composite also edged lower from 51.4 to 51.1, marking a four-month low, as both manufacturing and services sectors struggled to gain momentum.

    According to Caixin Insight Group, while supply and demand conditions showed improvement, services growth lagged behind, pointing to weaker consumer activity.

    Wang Zhe, Senior Economist added, “Employment in both sectors fell significantly, and overall price levels remained subdued, particularly factory-gate prices in manufacturing.”

    New Zealand’s unemployment rate rises to 5.1%

    New Zealand’s labor market softened further in Q4, with unemployment rate climbing from 4.8% to 5.1%, in line with expectations and marking the highest level since 2016, excluding the brief spike following the 2020 Covid lockdown.

    Employment fell by -0.1% in the quarter, slightly better than the expected -0.2% decline, but still reflecting ongoing weakness in job creation. Meanwhile, wage growth continued to moderate, with the labor cost index rising 0.6% qoq, bringing the annual rate down to 3.3% from 3.8%.

    The latest data supports the case for further monetary easing by RBNZ, which remains committed to swiftly bringing the OCR down from the current 4.25% toward neutral level. A 50bps rate cut is still widely anticipated at the upcoming policy meeting this month.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0305; (P) 1.0346; (R1) 1.0421; More…

    While EUR/USD’s recovery from 1.0210 continues today, upside is still limited below 1.0531 resistance. Intraday bias remains neutral and further decline is expected. 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
    21:45 NZD Employment Change Q4 -0.10% -0.20% -0.50% -0.60%
    21:45 NZD Unemployment Rate Q4 5.10% 5.10% 4.80%
    21:45 NZD Labour Cost Index Q/Q Q4 0.60% 0.60% 0.60%
    23:30 JPY Labor Cash Earnings Y/Y Dec 4.80% 3.80% 3.00% 3.90%
    00:30 JPY Services PMI Jan F 53 52.7 52.7
    01:45 CNY Caixin Services PMI Jan 51 52.3 52.2
    07:45 EUR France Industrial Output M/M Dec -0.40% -0.10% 0.20% 0.10%
    08:50 EUR France Services PMI Jan F 48.2 48.9 48.9
    08:55 EUR Germany Services PMI Jan F 52.5 52.5 52.5
    09:00 EUR Eurozone Services PMI Jan F 51.3 51.4 51.4
    09:30 GBP Services PMI Jan F 50.8 51.2 51.2
    10:00 EUR Eurozone PPI M/M Dec 0.40% 0.50% 1.60% 1.70%
    10:00 EUR Eurozone PPI Y/Y Dec 0.00% -0.10% -1.20%
    13:15 USD ADP Employment Change Jan 183K 149K 122K 176K
    13:30 USD Trade Balance (USD) Dec -98.4B -97.1B -78.2B -78.9B
    13:30 CAD Trade Balance (CAD) Dec 0.7B 0.4B -0.3B -1.0B
    14:45 USD Services PMI Jan F 52.8 52.8
    15:00 USD ISM Services PMI Jan 54.2 54.1
    15:30 USD Crude Oil Inventories 2.4M 3.5M

     



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