Daily Market Outlook by Trader's Way

[katetrades]

Forex Major Currencies Outlook (Dec 9 – Dec 13)

ECB, RBA, BoC and SNB meetings will highlight the week as we quickly approach end of the year. Additional data that will be closely monitored includes inflation from the US and China as well as emphasized report from Australia.

USD

ISM manufacturing PMI improved to 48.4 in November, from 46.5 in October, better than 47.5 as was expected. Positive stories are coming from new orders which returned into expansion with above 50 reading. Prices paid component declined to 50.3 from 54.8 the previous month indicating that price pressures are easing in manufacturing sector. On the weak side, we had soft production index reading and employment component remaining below the 50 level.

Fed Governor Waller, most hawkish member of the FOMC, stated that despite Fed delivering 75bp of rate cuts he still sees rates as restrictive. Incoming data will play a major role in Fed’s decision and he stated five indicators that will have the most impact: 1. JOLTS report, 2. NFP, 3. CPI, 4. PPI and 5. Retail sales data. NY Fed President Williams expects more cuts to come as Fed’s trajectory on rates is down. He also stated that monetary policy remains restrictive and emphasized that Fed’s decision will depend on incoming data.

Fed Chairman Powell emphasized strength of the US economy stating it is stronger than in September. He added that he is hoping for a good working relationship with President Trump and suggested that it is too early to evaluate effects of Trump policies on the economy.

ISM services PMI for the month of November came in at 52.1, a big miss from 55.5 as expected and down from 56 seen in October. Business activity and new orders had sharp declines, but are still above the 50 level. New export orders, on the other hand, dropped into contraction indicating weaker international demand, most likely dampened by the strong USD. Employment index also declined but remained above 50 while prices paid component remained basically unchanged at 58.2 suggesting that inflation is not declining in the services sector.

NFP printed 227k jobs in the month of November vs 200k as expected. The unemployment rate came in at 4.2% as expected, up from 4.1% in October while participation rate ticked down to 62.5%. There was also an up tick in U6 unemployment to 7.8% but also in hours worked which now show 34.3. Wage growth was unchanged at 0.4% m/m and 4% y/y. Headline number suggest healthy growth but the unemployment rate, unrounded at 4.246%, causes concern and markets think it will lead to more cuts by Fed with odds of a December rate cut surging.

The yield on a 10y Treasury started the week at 4.18%, rose to 4.27% and finished the week at around 4.15%. The yield on 2y Treasury started the week at 4.16% and reached the high of 4.24%. Spread between 2y and 10y Treasuries started the week at 3bp and finished the week at 5bp as curve steepened further. The 2y10y was inverted for over two years. FedWatchTool sees the probability of a 25bp rate cut at December meeting at around 91%, while probability of a no cut is around 9%. President Trump has nominated Paul Atkins as the new head of SEC. Atkins is seen as anti-regulatory and pro-crypto by the markets. Additionally, Fed Chairman Powell called bitcoin “digital gold” and in combination with Atkins being put in charge of SEC bitcoin has breached $100 000 level.

This week we will have inflation data. Headline is expected to tick up while core is seen coming in unchanged.

Important news for USD:

Wednesday:​

• CPI​

EUR

Final manufacturing PMI print for the month of November was unchanged at 45.2. German and French readings were revised down. The report shows that new orders continued to plunge down at an accelerated pace. Services PMI was revised up to 49.5 from 49.2 as preliminary reported, most notably due to positive revisions to French reading, which pushed composite to 48.3 from 48.1 as preliminary reported.

French government has lost a no-confidence vote. MPs from both left and right united and with 331 votes brought down the government. July 2025 is the earliest date for new elections. President Macron will be tasked with selecting a new Prime Minister but with Parliament being so heavily divided the new Prime Minister will have very hard time and most likely face the vote of no-confidence very soon after stepping into the position. There will be no new budget for 2025 as most likely MPs will vote for a 2024 budget to be extended into 2025.

This week we will have ECB meeting. With a recent string of abysmal economic data markets are pricing in a 25bp rate cut with probability of a 50bp rate cut being low. We will also get new economic projections which are expected to show downgrades to growth in 2025.

Important news for EUR:

Thursday:​

• ECB Interest Rate Decision​

GBP

Final November manufacturing PMI was revised down to 48 from 48.6 as preliminary reported and showed a further drop from 49.9 seen in October. The report showed new orders plunging due to both low domestic and international demand and dragging the output with it as well increasing concerns regarding rising costs which led to job cuts. Final services PMI was revised up to 50.8 from 50 as preliminary reported but still down from 52 in October. Nevertheless, it managed to help prop composite back to expansion with a 50.5 reading vs 49.9 as preliminary reported. The report paints a grim picture as activity is almost at a standstill, business optimism is falling fast and higher wages causing input prices to increase thus putting pressure on profit margins.

BoE Governor Bailey stated that if economic outlook comes in as expected they project four cuts in 2025. They see inflation as falling faster than expected, therefore there is no need for monetary policy to remain this restrictive. Their base case is to proceed with “gradual” approach to rate cutting.

AUD

Q3 GDP came in at 0.3% q/q vs 0.4% q/q as expected, but an improvement from 0.2% q/q growth seen in the previous quarter. However, the picture is much more worrying when we dig deeper into the details. Household consumption, which account for almost half of the GDP, was flat on the quarter showing no growth. The same was with business investment. Government consumption and public investment were the main contributors to the growth. Net trade positively contributed while inventories were a drag. AUD was hit hard as it is unsustainable for economy to grow only on the back of government spending.

This week we will have RBA meeting and employment data from Australia along with inflation data from China. RBA is expected to keep rates unchanged at 4.35% as members have sent hawkish sounding messages in their latest speeches.

Important news for AUD:

Monday:​

• CPI (China)​

Tuesday:​

• RBA Interest Rate Decision​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

Q3 terms of trade saw a nice jump of 2.4% q/q vs 1.8% q/q as expected as export prices rose by 0.7% q/q and import prices fell by -1.7% q/q. Improving terms of trade conditions is positive for economic growth and for currency as such and we saw kiwi gain ground against USD and other non-major currencies.

CAD

November employment report showed economy adding 50.5k jobs, doubling the amount of 25k as was expected. The unemployment rate surged to 6.8% from 6.5% but it was due to a jump in participation rate which rose to 65.1% from 64.8% in October. Composition of jobs was very favorable as all of the jobs created were full-time jobs (54.2k) while part-time jobs contracted (-3.6k), Wage growth slowed down to 4.1% y/y from 4.9% y/y which will give BoC more confidence that inflation is not returning.

This week we will have BoC meeting where another rate cut is expected. Markets are leaning more towards a 50bp rate cut, but a 25bp rate cut cannot be ruled out.

Important news for CAD:

Wednesday:​

• BoC Interest Rate Decision​

JPY

Q3 CAPEX spending rose by 8.1% after a 7.4% increase seen in the previous quarter. Final manufacturing print for November saw it unchanged at 49. The report shows that manufacturing sector is encountering slowing demand both domestically and internationally which leads to lower production (both new orders and new export orders component slipped deeper into contraction). Input prices are continuing to increase which in turn leads firm to pass those costs to consumers and increase output prices thus pushing inflation pressures up. Services were upwardly revised to 50.5 which helped push composite back into expansion with a 50.1 print. October wages saw increase of 2.6% y/y after rising 2.8% y/y in September with real wages, wages adjusted for inflation, coming in flat after declining in previous two months. Household consumption was boosted by rising nominal wages and showed a 2.9% m/m increase, although it fell -1.3% y/y after a -1.1% y/y print in September.

We are putting this part here due to geographical proximity, not due to potential economic impact on JPY. During the week the president of South Korea declared martial law. He claimed he had to enforce martial law to suppress North Korean forces infiltrating the South but there is no evidence of any North Korean involvement in South Korea’s politics. Korean MPs managed to enter parliament and voted to lift the martial law and all restrictions imposed by the President. The President then issued a decree to end the martial law that he had imposed only a few hours earlier. After all this, the chances of President being impeached have skyrocketed.

CHF

SNB total sight deposits for the week ending November 29 came in at CHF458.9bn vs CHF459.4bn the previous week. Again negligible changes as SNB lets market dictate Swissy strength. November CPI data showed a small up tick in data as headline number printed 0.7% y/y vs 0.6% y/y in October and core number inched to 0.9% y/y from 0.8% y/y the previous month. Inflation is running well below their 2% target and next week’s cut is market’s main scenario.

This week we will have SNB meeting. Investors seem split between another 25bp rate cut coming or a 50bp rate cut coming.

Important news for CHF:

Thursday:​

• SNB Interest Rate Decision​

 

[katetrades]

Forex Major Currencies Outlook (Dec 16 – Dec 20)

Fed, BoE and BoJ meetings coupled with preliminary December PMI from the Eurozone and the UK as well as inflation from the US, the UK and Canada will highlight the week ahead as we slowly wind down the year.

USD

November CPI data came in line with expectations with headline at 2.7% y/y and core at 3.3% y/y. Monthly figures showed increase of 0.3% for both core and headline with both numbers running above 0.3% when unrounded (0.313% for headline and 0.308% for core). This is a fourth consecutive month of 0.3% m/m print. Core services ex shelter eased to 4.2% y/y from 4.4% y/y in October. Powell was saying, during the last press conference, that inflation is high due to shelter component and that shelter is lagging. Considering there are declines in non-housing services inflation Fed can be satisfied with this report.

The yield on a 10y Treasury started the week at 4.17%, rose to 4.41% and finished the week at around 4.40%. The yield on 2y Treasury started the week at 4.11% and reached the high of 4.25%. Spread between 2y and 10y Treasuries started the week at 4bp and finished the week at 18bp as curve steepened further. The 2y10y was inverted for over two years. The money market-capital market curve (3m10y) has become upward slopping after 776 days with a 6bp spread. FedWatchTool sees the probability of a 25bp rate cut at December meeting at around 98%, while probability of a no cut is around 2%.

This week we will have retail sales, FOMC meeting and Fed’s preferred inflation metric PCE. Markets have fully priced in a 25bp rate cut so the attention will be on new Summary of Economic Projections as well as Powell’s tone during press conference. Additionally, technical adjustment to the Fed’s reverse repo rate is also expected.

Important news for USD:

Tuesday:​

• Retail Sales​

Wednesday:​

• Fed Interest Rate Decision​

Friday:​

• PCE​

EUR

ECB has lowered rate by 25bp, as was widely expected, to 3%. The statement shows that domestic inflation edged down but is still high due to wages and prices in certain sectors, namely services. The most important part is that ECB removed their pledge to keep monetary policy restrictive. They will stop reinvestment of PEPP proceeds by the end of 2024. They are not pre-comitting to a rate cut path, instead they remain data dependent with a meeting-by-meeting approach. Three main factors they will follow when deciding on future monetary policy moves are 1. inflation outlook, 2. underlying inflation and 3. strength of monetary policy transmission. New projections see growth lowered to 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and first projection of 2027 growth seen at 1.3%. Headline inflation was also lowered and is now seen at 2.4% y/y in 2024, 2.1% y/y in 2025, 1.9% y/y in 2026 and 2.1% y/ in 2027. Core was unchanged and is seen at 2.9% y/y in 2024, 2.3% y/y in 2025, 1.9% y/y in 2026 and 2.1% y/ in 2027.

At the press conference President Lagarde stated that the risks to inflation were two-sided, adding that with four cuts they had already covered a lot of ground in terms of easing. Lagarde mentioned that there was talk about a 50bp rate cut. She added that economy is losing momentum as manufacturing is sliding down further and services sector starts to ease.

This week we will have preliminary December PMI data expected to show mild improvements with services returning back into expansion.

Important news for EUR:

Monday:​

• Manufacturing PMI (EU, Germany, France)​
• Services PMI (EU, Germany, France)​
• Composite PMI (EU, Germany, France)​

GBP

October GDP data showed economy contract by -0.1% m/m while expectations were for a 0.1% m/m increase. Services sector was flat while drops were seen in production and construction sectors. This is a weak start to the Q4 and although downsides are more pronounced stimulus from budget should help economy grow faster in 2025.

This week we will have preliminary December PMI data, employment and inflation data as well as BoE meeting. The rate should remain the same as Governor Bailey already announced that they will cut four times in 2025 if economy outlook continues developing as projected.

Important news for GBP:

Monday:​

• Manufacturing PMI​
• Services PMI​
• Composite PMI​

Tuesday:​

• Payrolls Change​
• Unemployment Rate​

Wednesday:​

• CPI​

Thursday:​

• BoE Interest Rate Decision​

AUD

RBA has decided to leave their cash rate unchanged at 4.35% as was widely expected. The accompanying statement emphasizes that although inflation has fallen substantially from its peak it is still too high and it is expected to come into bank’s targeted range by 2026. “The Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts, but risks remain.” Uncertainties regarding growth prevail. Labour market remains tight although it has been easing recently. Wage growth has eased by more than expected. Monetary policy remains restrictive and is working as intended.

RBA Governor Bullock stated in the press conference that recent economic data have been mixed. She added that they have deliberately made changes to the wording of their statement due to some softer than expected data. That change in wording refers to RBA gaining more confidence on inflation moving down. Governor clarified that they have not explicitly talked about rate cuts at December meeting and that it is not clear that cut will be coming in February. Overall, a more dovish/less hawkish statement and press conference as RBA is mulling the prospect of rate cuts due to last week’s terrible GDP print. We will get quarterly inflation print before the February meeting and it will be the most important data point for their decision on rates.

November employment report provided us with some stunning figures. The economy added 35.6k jobs vs 25k as expected. The unemployment rate dropped to 3.9% from 4.1% in October while an increase to 4.2% was expected. Participation rate ticked down to 67% from 67.1% the previous month. All of the jobs added were full-time (52.6k) while part-time jobs saw decline (-17k). Tightness in the labor market should give RBA more room and should deliver another pause in February.

November inflation data from China saw CPI come in at 0.2% y/y vs 0.5% y/y as expected due to a drop in food prices. Non-food inflation was flat m/m after being in deflation for the previous two months. PPI printed -2.5% y/y, an improvement from -2.9% y/y in October. It is in deflation for 26 consecutive months. With inflation data so low, PBOC has more room to ramp up its stimulus program. Politburo decided to step in and announced that for 2025 more proactive fiscal policy and moderately loose monetary policy will be implemented. Unconventional counter-cyclical measures are touted as main goal is to increase domestic demand. No concrete details were given but a commitment to “moderately loose” monetary policy made Chinese stocks surge and AUD to start gaining strength.

This week we will have economic activity data from China.

Important news for AUD:

Monday:​

• Industrial Production (China)​
• Retail Sales (China)​

NZD

November electronic card retail sales came in flat m/m and -2.3% y/y. Further declines in data point that consists of around 70% of total retail sales speaks that consumer is still struggling with high prices indicating weakness in Q4 retail sales.

This week we will have Q3 GDP data.​

Important news for NZD:

Wednesday:​

• GDP​

CAD

BoC has delivered another 50bp rate cut bringing rate down to 3.25%. The statement shows that economy has developed in line with expectations from the October meeting. Further down the statement there is a sentence "Going forward, we will be evaluating the need for further reductions in the policy rate one decision at a time" indicating that it is time for gradual approach to monetary policy. Q3 GDP came in below expectations and it is likely that Q4 will also miss expectations. Jobs market is still softening as indicated by increasing unemployment rate. Economy is in state of excess supply.

Governor Macklem stated at the press conference that they have debated whether to cut by 25 or 50bp and ultimately deciding on a 50bp cut due to no need for restrictive monetary policy and declining GDP data. He stated that recent data has been mixed and on the currency front stated that weakness in CAD is due to appreciation in USD. He reiterated that economy is in excess supply but he does not see recession on horizon. They will be considering further rate cuts in the future but there was no clear stance as BoC is expected to take "more gradual approach" to monetary policy.

This week we will have inflation data.

Important news for CAD:

Tuesday:​

• CPI​

JPY

Final Q3 GDP was revised up to 0.3% q/q from 0.2% q/q as preliminary reported and 1.2% annualized vs 0.9% annualized as preliminary reported. Private consumption was revised down to 0.7% from 0.9% while capital expenditure was revised up to -0.1% from -0.2%. Net trade was also revised up and showed -0.2% vs -0.4% as preliminary reported.

This week we will have BoJ meeting. During the week there was a leak that BoJ members do not see high cost in waiting to raise rates, therefore we expect no change at this meeting and further rate hikes to come in 2025.​

Important news for JPY:

Thursday:​

• BoJ Interest Rate Decision​

CHF

SNB total sight deposits for the week ending December 6 came in at CHF458.8bn vs CHF458.9bn the previous week. Another week of virtually no change to deposits as SNB stands on the sidelines and lets market determine Swissy strength.

SNB has surprised markets and delivered a 50bp rate cut thus lowering its policy rate to 0.50%. The statement shows their readiness to intervene in the FX markets and their view that uncertainty around economic outlook has increased since September meeting. New projections see GDP unchanged at 1% in 2024 and 1.5% in 2025. Inflation projection has been lowered for 2024 and 2025 to 1.1% and 0.3% (on the brink of deflation) respectively while 2026 was revised up to 0.8% from 0.7% as previously seen. The statement concludes with "The SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term." indicating that they are not in a rush to continue with rate cuts.

SNB Chairmen Schlegel commented that inflation decreased significantly in the mid-term and that without today’s cut inflation projections would be even lower. Rate cuts will remain the primary instrument when conducting monetary policy and there is still room for further rate cuts to ensure price stability. He added that although they are not fans of negative rates, negative rates are working and SNB will use them if the need arises.​

 

[katetrades]

Fed delivered a hawkish cut with a dot plot showing 2 less cuts in 2025 than in September projection with long-term rate revised up to 3%. PCE came in weaker than expected. January 21 is the first day Trump steps into the office and markets will be on edge waiting to see what his policies will be. January 31 next FOMC meeting, only 10 days after Trump settles in the White House, too little time to have any significant impact on FOMC decision so we expect no change to rate.
ECB is on a rate cutting path with political instability mounting in two main economies, Germany and France
BoE kept rates unchanged but took a rather dovish turn as the decision was made with a 6-3 vote (Dhingra, Ramsden and Taylor voted for a 25bp cut)
RBA remains on hold, inflation rate on January 29 is paramount for their next move, China stimulus is not providing desired results
RBNZ is on a rate cutting path in order to prop up the economy
BoC delivered 175bp or rate cuts and is expected to deliver more in order to spur the economy
BoJ decided to leave rates unchanged and signaled that they are in no hurry to hike in January thus weakening JPY
SNB mentioned that although they are not proponents of negative rates it has been shown that negative rates produce desired results and thus opened the door for further cuts in 2025

TradersWay team wishes you Happy New Year and good luck with your trading in 2025!

 

[katetrades]

Forex Major Currencies Outlook (Jan 6 – Jan 10)

Inflation data from the US and the UK coupled with Q4 GDP from China and retail sales from the US as well as employment data from Australia will highlight the week ahead of us.

USD

An article in the Washington Post stating that tariffs will be selective, targeting only certain strategically important industries rather than all imports, caused stir in markets on Monday as USD lost around 1% against other currencies. President Trump later called the article “fake news” but USD did not manage to regain all of its loses. The new presidential term shapes up to be a very volatile one driven by the news and tweets.

ISM services PMI for the month of December printed 54.1 vs 53.3 as expected and up from 52.1 in November. Unfortunately when we dig deeper into the report we find dissatisfying picture. The main reason services PMI rose was due to a jump in prices paid component which printed 64.4, the highest reading in almost two years, after a 58.2 reading the previous month. This indicates that price pressures are increasing in the services sector and that services inflation will be a hard nut to crack and bring down. As a result Fed could postpone planned rate cuts and USD strengthened. The report also shows positive signs such as jump in business activity and an increase in new orders component.

FOMC minutes from the December meeting saw participants agree that if data comes in as expected that the right path will be gradual decrease of rates towards a more neutral stance. Risks to employment and inflation goals are seen as “roughly balanced” by the majority of participants while “almost all” participants see increased upside risks to the inflation outlook. Additionally, some members think that it would be prudent to keep rates unchanged due to persistent inflation pressures.

Employment report for December was a strong one. Headline number came in at 256k vs 160k as expected. The unemployment rate ticked down to 4.1% from 4.2% in November while participation rate remained at 62.5%. The underemployment fell to 7.5% from 7.7% the previous month. There was some slowdown in wages as they rose by 0.3% m/m and 3.9% y/y compared to 0.4% m/m and 4% y/y increases in November. Private education and healthcare services added 80k jobs, leisure and hospitality 43k, retail trade also 43k while government added 33k jobs.

The yield on a 10y Treasury started the week at 4.60%, rose to 4.79% after employment report and finished the week at around 4.77%. The yield on 2y Treasury started the week at 4.28% and reached the high of 4.38% while yield on a 30y Treasury almost reached 5%. Spread between 2y and 10y Treasuries started the week at 33bp and finished the week at 37bp as curve steepened further. The 2y10y was inverted for over two years. FedWatchTool sees the probability of a 25bp rate cut at January meeting plummet post NFP to around 3%, while probability of a no cut is around 97%. June is now the first meeting that sees above 50% probability of a rate cut.

This week we will have PPI, CPI, headline expected to rise while core is seen coming in unchanged and retail sales data.

Important news for USD:

Tuesday:​

• PPI​

Wednesday:​

• CPI​

Thursday:​

• Retail Sales​

EUR

Final services PMI reading for December was revised up to 51.6 from 51.4 as preliminary reported. Positive revision came in from both Germany and France while Spain services PMI jumped to 57.3 from 54.1 the previous month. The report shows growing concerns regarding inflation pressures as costs continued to increase. Composite was also slightly revised up to 49.6 from 49.5 as preliminary reported. Eurozone economic confidence in December dropped to 93.7 which is a level not seen since November of 2020. The amount of pessimism surrounding Eurozone reached levels reached around pandemic.

Preliminary December CPI reading saw both readings come in as expected with headline at 2.4% y/y and core at 2.7% y/y. Headline reading rose from 2.2% y/y in November, for the third straight month of increases, while core reading was unchanged for the fourth straight month. Services inflation ticked up to 4% y/y and monthly reading saw an increase of 0.4%. German CPI came in at 2.6% y/y vs 2.4% y/y as expected and up from 2.2% y/y in November. French CPI came in unchanged at 1.3% y/y while markets were expecting a tick up to 1.4% y/y. Increase in overall inflation led to increase in expected terminal rate and thus helped EUR gain some strength.

GBP

December saw final services PMI revised down to 51.1 from 51.4 as preliminary reported but still up from 50.8 in November. Similar to the Eurozone reading there was a sharp increase in input costs as they printed a new 8-month high. The report showed worrisome picture on the employment front as “Nearly one-in-four survey respondents saw an overall decline in their payroll numbers. Excluding the pandemic, this represented the steepest pace of job shedding for more than 15 years." Composite ticked down to 50.4 from 50.5 as preliminary reported.

The 30y Gilts, UK bonds, rose to 5.30%, the highest level since 1998 while 10y reached levels not seen since mid 2000s. Bond markets are pressuring Chancellor of Exchequer to slow down public spending.

This week we will have inflation data where headline is expected to remain unchanged while core is expected to show a notable decline.

Important news for GBP:

Wednesday:​

• CPI​

AUD

Caixin services for December printed new 7-month high at 52.2, up from 51.5 in November. Activity was driven by strong domestic demand while international demand declined indicating that global growth weakness will pose challenges. Composite printed 51.4, down from 52.3 the previous month due to weakening manufacturing sector. The economy is still growing but at a slower pace. December CPI data saw increase of 0.1% y/y after a 0.2% y/y in November. Lower food prices were the main culprit for the PPI continued to decline but with a -2.3% y/y print the decline has been slowed down as compared to a -2.5% y/y drop the previous month.

This week we will have employment data from Australia as well as economic activity data from China.

Important news for AUD:

Thursday:​

• Employment Change​
• Unemployment Rate​

Friday:​

• GDP (China)​
• Industrial Production (China)​
• Retail Sales (China)​

NZD

First dairy auction of 2025 saw prices decline by 1.4% led by a drop in lactose prices. Butter prices showed the biggest increase. Kiwi has spent the week pressured down by USD strength and that pressure was exacerbated after strong employment report.​

CAD

Long time Prime Minister Justin Trudeau resigned on Monday. His popularity fell to the lowest levels and his Liberal party will have hard time remaining in power. Conservative party is gaining ground in the polls and it is almost certain that Pierre Poilievre is seen as the next Prime Minister. Former BoC and BoE governor Mark Carney is seen potentially taking the roles as the new leader of Liberal Party. He is seen as a market-friendly candidate which led to CAD gaining strength.

December employment report showed economy add 90.9k jobs vs 25k as expected. The underemployment rate ticked down to 6.7% while expectations were for it to tick up to 6.9%. Participation rate was unchanged at 65.1%. Majority of jobs, 57.5k were full-time jobs, while part-time jobs rose by 33.5k. Wages growth eased to 3.7% y/y from 3.9% y/y seen the previous month. The economy has added jobs in three out of four last months with last two months showing gains of around 141k jobs.

JPY

Final December services PMI printed 50.9, down from 51.4 as preliminary reported but still up from 50.5 reading from November. The report showed increase in new orders supported by domestic demand. Both input and output prices remain high but stable indicating that inflation pressures are not going anywhere. Composite rose to 50.5 from 50.1 the previous month.

Labor cash earnings for the month of November rose 3% y/y after a 2.6% y/y increase in October. This marks the highest wage increase since 1992! However, when inflation is taken into account, we get real wage growth at -0.3% y/y for a fourth straight month of declines. Household spending for the same month rose 0.4% m/m but on the year it continued to decline and printed -0.4%.

CHF

SNB total sight deposits for the week ending January 3 came in at CHF439.6bn vs CHF445.7bn the previous week. Sight deposits have broken the range to the downside and have now fallen to the lowest levels since 2015. With SNB aggressively cutting interest rates these changes are reflecting commercial banks moving funds out of the Swissy. December inflation came in at 0.6% y/y as expected while core reading declined to 0.7% y/y from 0.9% y/y in November.​

 

[katetrades]

Forex Major Currencies Outlook (Jan 20 – Jan 24)

BoJ meeting expected to deliver rate hike coupled with preliminary PMI data from Eurozone and the UK as well as inflation data from Canada and New Zealand will highlight the week ahead of us.

USD

December CPI report saw headline number increase to 2.9% y/y, as expected, from 2.7% y/y in November with a 0.4% m/m increase compared to 0.3% m/m as expected. The main culprit for increase in headline number were energy prices as gasoline and fuel oil both rose by 4.4% m/m. Core CPI is where the report shone as it showed a tick down to 3.2% y/y from 3.3% y/y the previous month with a 0.2% m/m increase. Core CPI has increased by 0.3% m/m for the previous four months so the 0.2% m/m increase brought risk on to the markets. Shelter rose by 0.3% m/m, same as in November and 4.6% y/y. Services less energy services rose 4.4% y/y with transportation services increasing 0.5% m/m after being flat the previous month. Markets are now pricing more rate cuts for 2025. PPI came in at 0.2% m/m and 3.3% y/y vs 0.3% m/m and 3.4% y/y as expected. PPI rose from 3% y/y in November. Core PPI came in flat on the month.

Retail sales for the month of December rose by 0.4% m/m vs 0.6% m/m as expected. Control group, it excludes volatile components and is a better predictor of consumption, rose by 0.7% m/m. Ex autos and ex autos and gas categories increased by 0.4% m/m and 0.3% m/m respectively. Miss on headline number raises small concern but strong control group reading and beats on ex autos categories indicates that consumer is still going strong.

Incoming Treasury Secretary Scott Bessent spoke in front of the US Senate confirmation panel and stated that US Government has no issues with revenues, but that it has a spending problem. He pledged to revive economy with pro growth policies and tax reductions. Additionally, he warned that if tax cuts imposed by President Trump in 2017 are not renewed there will be economic calamity as there will be gigantic middle-class tax increases. He stated that President Trump will not make cuts to Medicare and Social Security and added that Fed should remain independent. He is certainly using similar expressions and tone of voice as his boss using expressions such as "gigantic" and "calamity".

The yield on a 10y Treasury started the week at 4.75%, rose to 4.81% and finished the week at around 4.61%. The yield on 2y Treasury started the week at 4.39% and reached the high of 4.42%. Spread between 2y and 10y Treasuries started the week at 37bp and finished the week at 34bp as curve bull flattened. The 2y10y was inverted for over two years. FedWatchTool sees the probability of a 25bp rate cut at January meeting at around 3%, while probability of a no cut is around 97%. May is now the first meeting that sees above 50% probability of a rate cut.

Important news for USD:

Monday:​

• Trump inauguration​

EUR

Preliminary reading of German 2024 GDP saw economy shrink by 0.2%. In 2023 economy shrank by 0.3% thus making it first time since the early 2000s that Germany posted two consecutive years of negative growth. Be mindful that this GDP projection was made without any hard data for the month of December so negative revisions to the print are likely.

Minutes from the December ECB meeting showed that members took easing bias. Members discussed whether to go for a 25 or a 50bp rate cut and agreed on the former. Members also expressed their doubts regarding growth projections, calling it “probably too optimistic” and increasing risks of overshooting inflation.

This week we will have preliminary January PMI data expected to show some pullbacks.

Important news for EUR:

Friday:​

• Manufacturing PMI (EU, Germany, France)​
• Services PMI (EU, Germany, France)​
• Composite PMI (EU, Germany, France)​

GBP

December inflation report saw headline CPI tick down to 2.5% y/y from 2.6% y/y in November while markets were expecting no change. Core CPI declined to 3.2% y/y from 3.5% y/y the previous month while markets were expecting a smaller decline to 3.4% y/y. Services inflation dropped to 4.4% y/y from 5% y/y in November. BoE was looking for reasons to justify rate cuts and this will provide them with the perfect one for their February meeting.

This week we will have employment and preliminary January PMI data.

Important news for GBP:

Tuesday:​

• Payrolls Change​
• Unemployment Rate​

Friday:​

• Manufacturing PMI​
• Services PMI​
• Composite PMI​

AUD

Employment report for the month of December saw 56.3k jobs added, almost doubling 28.2k jobs added in November and almost four times higher than 15k as expected. The unemployment rate ticked up to 4% due to increase in participation rate to 67.1% from 67% the previous month. Composition of jobs put a downer on the report as all of the jobs created were part-time (80k) while better-paying full-time jobs saw a drop of 23.7k. Markets are pricing in greater chances of a rate cut at the February meeting.

China Q4 GDP showed growth of 1.6% q/q and 5.4% y/y thus helping GDP for 2024 reach targeted 5%. December Industrial production rose by 6.2% y/y, beating expectations, after a 5.4% y/y print in November. Semiconductors and hi-tech manufacturing showed biggest increases. Retail sales rose by 3.7% y/y, also beating expectations, after a 3% y/y increase the previous month. Catering, alcohol and recreation were the biggest contributing categories. December trade surplus surged to $104.84bn as exports jumped 10.7% y/y while imports increased by 1% y/y. Frontrunning potential tariffs is the main reason for big increase in exports and trade surplus.

NZD

Kiwi had an up and down week as it started strong gaining almost 100 pips against USD, then returning almost all of it by the week end only to regain some of that strength as the week wound down. RBNZ is seen cutting by 50bp at their next meeting but Kiwi is influenced more by USD and overall risk appetite in the markets.

This week we will get inflation data for the Q4.

Important news for NZD:

Tuesday:​

• CPI​

CAD

Manufacturing sales continued to grow and rose by 0.8% m/m in November after a 2.1% m/m increase in October while wholesale trade declined by 0.2% m/m after a 1% m/m increase the previous month. BoC member Gravelle stated that BoC is expected to announce end to their Quantitative Tightening program in the first half of 2025.

This week we will have inflation data.

Important news for CAD:

Tuesday:​

• CPI​

JPY

The biggest benefit of a weak JPY has been seen in the tourist industry. New data showed that record number of foreigners visited Japan. The number of foreign visitors is little less than 40 million.

This week we will have BoJ meeting. Governor Ueda’s recent hawkish comments caused markets to almost fully price in a rate hike at the January meeting.

Important news for JPY:

Friday:​

• BoJ Interest Rate Decision​

CHF

SNB total sight deposits for the week ending January 10 came in at CHF445.1bn vs CHF439.6bn the previous week. A small increase in deposits after declines seen in the couple previous weeks.​

 

[katetrades]

Forex Major Currencies Outlook (Jan 27 – Jan 31)

Fed, ECB and BoC meetings coupled with inflation from Australia and the US as well as GDP from the US and Eurozone will dominate this event packed week ahead of us.

USD

Donald J Trump was sworn in as 47th president of the United States on Monday. President Trump emphasized importance of border control and energy dominance. He will sign executive orders declaring national emergency on both border and energy in order to build critical infrastructure as well as sign out of some green policies signed by former president Biden. He will also establish External Revenue Service that will be tasked with collecting tariffs and duties with intention to tax foreign countries and enrich American citizens.

Monday saw a big volatility in the markets as report, later confirmed by Trump official, stated that there will be no tariffs imposed on the Day 1. CAD, MXN and CNY were the biggest beneficiaries as USD longs unwound pushing dollar down. Later on during the evening, Trump mentioned that he is thinking about 25% tariffs on Canada and Mexico by February 1 and those currencies did a 180 turn and fell to new lows. On Tuesday night Trump mentioned tariffs on China and EU.

President Trump spoke at the conference in Davos and stated that US will be the world capital of AI and crypto. He clarified that if products are not made in America they will be susceptible to tariffs. He pledged to ask Saudi Arabia and OPEC to bring prices of oil down and low oil prices will lead to end of war between Russia and Ukraine. Additionally, after oil prices come down Trump will be asking for interest rates to go down. We can expect him to keep the pressure on Fed to lower rates in the future. Later on in an interview he stated that he would rather not use tariffs on China as he thinks he can make deal with them. USD continued to decline as the week went on and tariff threats abated.

The yield on a 10y Treasury started the week at 4.64%, rose to 4.65% and finished the week at around 4.63%. The yield on 2y Treasury started the week at 4.29% and reached the high of 4.31%. Spread between 2y and 10y Treasuries started the week at 33bp and finished the week at 36bp as curve steepened further. The 2y10y was inverted for over two years. FedWatchTool sees the probability of a 25bp rate cut at January meeting at around 1%, while probability of a no cut is around 99%. June is now the first meeting that sees above 50% probability of a rate cut.

This week we will have Fed meeting, preliminary Q4 GDP reading as well as Fed’s preferred inflation metric PCE. Fed is expected to leave rates unchanged while investors will be on guard for any mention of changes to their QT program.​

Important news for USD:

Wednesday:​

• Fed Interest Rate Decision​

Thursday:​

• GDP​

Friday:​

• PCE​

EUR

World Economic Forum held in Davos Switzerland saw a slew of ECB members speaking and all of them basically advocating for another rate cut. Bundesbank president Nagel expressed his confidence that inflation will fall down to the 2% target by middle of this year. Markets are pricing around 100bp of rate cuts with Villeroy, Kazimir and Vujcic hinting that they are ok with that while Knot stated that he is ok with pricing for the next two meetings but needs to see more data in order to make decisions for the future.

Preliminary PMI data for the month of January saw improvements in manufacturing (46.1 vs 45.1 the previous month) and composite (returning to expansion with a 50.2 vs 49.6) while services ticked down to 51.4 from 51.5 in December. Manufacturing improved in both Germany and France and with services sector holding on it makes for an encouraging start of 2025. Inflation pressures increased in both sectors and that is a cause for concern.

This week we will have preliminary Q4 GDP reading and ECB meeting. Another 25bp rate cut, bringing rate down to 2.75%, is expected with focus remaining on inflation outlook, underlying inflation and strength of monetary policy transmission as well as data dependence.

Important news for EUR:

Thursday:​

• ECB Interest Rate Decision​
• GDP​

GBP

December payroll change saw economy lose 47k jobs after a drop of 32k jobs the previous month. November ILO unemployment rate came in at 4.4% as expected while wages surged with both average wages and ex bonus printing 5.6% 3m/y after a 5.2% 3m/y print in October. While there are still issues with data quality, as noted by ONS, falling jobs and rising wages are painting a picture of softening jobs market are not something BoE wishes to see.

January saw improvements in preliminary PMI data across the sectors. Manufacturing printed 48.2 after 47 in December while services printed 51.2 after 51.1 the previous month. Combined they lifted composite to 50.9 from 50.4 in December. Inflation pressures are seen intensifying in both manufacturing and services.

AUD

PBOC has expanded its gold reserves in 2024 by 44.17 tons and total gold reserves now stand at record high 2279.57 tons. This putss China in sixth place in the list of countries with highest gold reserves. With tariff threats abating Yuan has had a great week strengthening to 7.24 against the USD.

This week we will get very important Q4 inflation reading that will be used as a main input into RBA’s decision in February. Additionally, we will get official PMI data from China.

Important news for AUD:

Monday:​

• Manufacturing PMI (China)​
• Services PMI (China)​
• Composite PMI (China)​

Wednesday:​

• CPI​

NZD

Q4 inflation data saw headline number rise 0.5% q/q as expected and ease from 0.6% q/q in Q3 and 2.2% y/y, same as in the previous quarter. Tradable inflation, influenced by factors from outside of the country, rose by 0.3% q/q higher than 0.2% q/q in Q3 while non-tradable inflation, influenced by domestic conditions and policies, increased by 0.7% q/q easing from 1.3% q/q in the previous quarter. Sectoral factor model inflation, RBNZ’s preferred inflation measure, rose 3.1% y/y, down from 3.4% y/y increase seen in the previous quarter. RBNZ is targeting range of 1-3% so it is almost on the top of the range which combined with quarterly and yearly headline measures leads markets to print around 67% chance of another 50bp rate cut in February.

CAD

CPI data for the month of December saw headline tick down to 1.8% y/y from 1.9% y/y in November while markets expected it to remain unchanged. Median and trim measures both declined to 2.4% y/y and 2.5% y/y respectively while common measure remained at 2% y/y. With inflation coming down and growth stalling BoC will continue with rate cuts at their incoming meeting.

This week we will have a BoC meeting where a 25bp rate cut is fully expected. Canada is facing a deadly combination of falling growth and inflation and rising unemployment. Another 25bp rate cut would bring the rate to 3% and make it a total of 200bp rate cuts since the early summer.

Important news for CAD:

Wednesday:​

• BoC Interest Rate Decision​

JPY

BoJ delivered a full 25bp rate hike, the highest rate hike since February of 2007 and thus brought the rate to 0.50%, highest since 2008. The vote was 8-1 in favour of a hike with Nakamura being the only dissenter. BoJ has indicated they plan to deliver more hikes if economy continues to move with forecasts. They now see underlying inflation gradually moving towards the target. New projections see core CPI higher with 2024 seen at 2.5% y/y vs 2.4% y/y in October, 2025 at 2.4% y/y vs 1.9% y/y in October and 2026 at 2% y/y vs 1.9% y/y in October. Real GDP is seen ticking down for 2024 to 0.5% from 0.6% in October while for 2025 and 2026 it was unchanged at 1.1% and 1% respectively. We got a hawkish statement and projections from BoJ.

Governor Ueda stroke a more balanced tone during his press conference stating that there is no set path for future rate adjustments. He clarified that projected higher inflation should materialize by the middle of the year and after that they expect it to start dropping. Inflation is seen higher due to cost-push factors, that is due to rising input prices caused by weak JPY. Ueda clarified that they are still far away from neutral rates, although there is no exact level where they are as they are in a wide range. The board assessed that spring wage negotiations will lead to another year of strong rate hikes. Ueda concluded that next move in rates will depend more on price action.

Preliminary January PMI saw further divide between sectors as manufacturing declined to 48.8 from 49.6 in December while services jumped to 52.7 from 50.9 the previous month and thus lifted composite to 51.1 from 50.5 in December. Output and new orders see stronger growth in services while stronger decline in manufacturing sector. Inflation pressures are persisting in services sector as both input and output prices showed stronger inflation. December CPI for the country of Japan saw headline number surging to 3.6% y/y from 2.9% y/y in November while a print of 3.4% y/y was expected. Ex energy category jumped to 3% y/y from 2.7% y/y the previous month.

CHF

SNB total sight deposits for the week ending January 17 came in at CHF445.3bn vs CHF445.1bn the previous week. Virtually unchanged as SNB looks content with Swissy’s place in the markets for the time being. SNB Chairman Schlegel spoke at the conference in Davos and stated that they cannot rule out possibility of negative rates and that if they have to do it they are prepared to go that route. He added that inflation is well within their target range and reiterated their willingness to intervene in the FX market if necessary.​

 

[katetrades]

Forex Major Currencies Outlook (Feb 3 – Feb 7)

BoE meeting, employment data from the US, Canada and New Zealand as well as preliminary January CPI data for the Eurozone will highlight the week ahead of us.

USD

President Trump put a 25% tariffs on Colombian imports which will be rising to 50% in a week. Additionally, he has revoked Visas for Colombian officials and imposed financial restrictions. The cause for this outburst was that Colombia did not want to accept US military deportation flights carrying migrants. In a retaliatory move President of Colombia ordered increase of tariffs on US imported goods to 25% but later on backtracked and accepted migrants.

Financial Times article stated that Treasury Secretary Bessent wants US to start with universal tariffs on imports to the US of 2.5%. His reasoning is that this would give companies more time to adjust. Additionally, tariffs would go up by 2.5% each month and they could reach as high as 20%. President Trump stated that he wants much bigger tariffs than 2.5% and added that he is not yet set on the exact number.

Monday saw a huge sell off in the markets as S&P dropped almost 2% with NASDAQ dropping almost 4%. The main culprit, as stated by many market participants, was release of Chinese AI DeepSeek which managed to generate same results as ChatGPT by using older version of Nvidia chips and much less funds. NVIDIA shares were down over 11% only to rebound tomorrow by 5%. Alibaba has released its AI model and it claims that model has shown better performance compared to DeepSeek and ChatGPT 4.0 on key metrics.

Fed has left rates unchanged in 4.25-4.50% range as was expected by entire market. Risks to inflation and employment are seen as "roughly in balance". The part about inflation making progress towards 2% target has been removed. Fed remains data dependent. The statement concludes with "The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."

During the press conference chairman Powell stated that labour market is not a source of inflation. Inflation is coming down, but is still elevated while long-term inflation expectations remain well-anchored. He clarified the removal of “progress towards 2%” was due to editing of the sentence and that they are satisfied with process on inflation. With economy staying strong Fed is not in a hurry to lower interest rates. Policy in good place to achieve both mandates. When asked about Trumps remarks that he wishes interest rates down immediately Powell stated that he did not have any contact with president and that Fed will continue to conduct policy in the best interest of public. Labor market has been characterized as going strong and QT will continue as planned, no need for changes as there are still ample excess reserves in the system. Powell sounded balanced with Fed keeping bias towards rate cuts.

Advanced Q4 GDP at 2.3% annualised vs 2.6% annualised and down from 3.1% annualised seen in Q3. Consumer spending surged 4.2% compared to 2.8% seen in the previous quarter and contributed with 2.82pp vs 2.48pp in Q3. Business investment plunged and declined 2.2% after rising 4% in the previous quarter. Inventories were also a big drag on the reading. GDP deflator declined to 2.2% from 2.4% in Q3 indicating lower inflation. It is a case of disappointing headline number but good details under the hood.

December PCE report saw headline number print 2.6% y/y as expected with a 0.3% m/m growth or 0.255% when taken to the third decimal. Core PCE printed 2.8% y/y for the third month straight with a 0.2% m/m and 0.156% unrounded. Unrounded numbers make headline rising at almost 0.2% m/m while core rises at 0.1% m/m which will make Fed happy with progress on bringing down inflation and USD gained some strength on the back of the report considering that personal spending rose 0.7% m/m and November reading being revised up to show a 0.6% m/m increase.

President Trump signed executive order hitting Mexico with 25% tariffs, Canada with 25% tariffs, with 10% tariffs on energy exports and China with 10% tariffs. Tariffs will be effective from Tuesday February 4. Markets have reacted by punishing MXN and CAD on the market open while rewarding USD, JPY and CHF, effectively risk off mode.

The yield on a 10y Treasury started the week at 4.63%, rose to 4.64% and finished the week at around 4.58%. The yield on 2y Treasury started the week at 4.28% and reached the high of 4.29%. Spread between 2y and 10y Treasuries started the week at 33bp and finished the week at 36bp as curve steepened further. The 2y10y was inverted for over two years. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 12%, while probability of a no cut is around 82%. June is now the first meeting that sees above 50% probability of a rate cut. Gold reached a new all time high, rising above $2800 but finish week below it.

This week we will have ISM PMI data as well as NFP on Friday. Headline number is seen around 205k while the unemployment rate is expected to remain steady at 4.1%.

Important news for USD:

Monday:​

• ISM Manufacturing PMI​

Wednesday:​

• ISM Services PMI​

Friday:​

• NFP​
• Unemployment Rate​

EUR

ECB has cut key policy rates by 25bp as was widely expected by markets so the new deposit rate is 2.75%. The decision made by the Governing Council “is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission“. The statement shows that disinflation process is continuing to develop as projected with inflation expected to fall to 2% target during this year. Members expect that lower borrowing costs and rising real wages contribute to increase in demand. The Governing Council continues to be data-dependent and maintains meeting-by-meeting approach.

ECB president Lagarde stated in the press conference that decision to cut by 25bp was unanimous and there was no debate about 50bp rate cut. She emphasized the staff report, to be published on February 7, which will contain more information regarding neutral rate. Additionally, she mentioned exports as main driver of economic recovery and reiterated stance that monetary policy remains restrictive.

Preliminary Eurozone Q4 GDP came in flat q/q while markets were expecting a 0.1% q/q increase. German Q4 GDP declined by 0.2% y/y while a 0.1% q/q decline was expected. French Q4 GDP declined by 0.1% q/q while a flat reading was expected. Household consumption was strong but was overshadowed by drops in net trade, inventories and investment. Growth was coming from Portugal and Lithuania. Preliminary January inflation numbers saw both Germany and France undershoot expectations with 2.3% y/y and 1.4% y/y vs 2.6% y/y and 1.5% y/y respectively. Disappointing growth numbers combined with declining inflation just add more certainty to another rate cut coming in March.

This week we will have preliminary CPI for the month of January with expectations for further ticks up in both headline and core number.

Important news for EUR:

Monday:​

• CPI​

GBP

UK Chancellor of the Exchequer Reeves stated that things have started to turn around in the economy. She added that barriers and regulations are having stifling effect on the economy and that solution is systematic removal of those barriers by the government. She also expressed that she is looking forward to work and deepen relationships with US Treasury Secretary.

This week we will have a BoE meeting where a 25bp rate cut is almost certain.

Important news for GBP:

Thursday:​

• BoE Interest Rate Decision​

AUD

Q4 inflation data printed 0.2% q/q, unchanged from Q3 with 2.4% y/y compared to 2.5% y/y as expected and 2.8% y/y in the previous quarter. Additionally, trimmed mean, core inflation measure, printed 0.5% q/q and 3.2% y/y both numbers lower than expected and lower than 0.8% q/q and 3.5% y/y seen in the Q3. RBA sees inflation as the most important factor influencing their decisions on monetary policy so with inflation coming down markets are pricing in higher probability of a rate cut at their February meeting.

Official PMI data from China for the month of January showed economy that is slowing down upon entering the new year. Manufacturing printed 49.1 while expectations were for it to come in unchanged from December reading of 50.1. Services dropped to 50.2 from 52.2 the previous month and composite barely hang in expansion with a 50.1 reading.

NZD

RBNZ chief economist Conway stated that committee has a high degree of confidence that inflation will abate which will help lead Official Cash Rate down to the neutral level. Long-term neutral rate is seen somewhere in the range from 2.5 to 3.5%. Business confidence declined in January to 54.4 from 62.3 in December. The number is still very high indicating overall positive confidence in the economy as employment conditions and wage expectations are improving according to the survey. On the other hand, drops in profit expectations and increases in pricing intentions and inflation expectations are a cause for concern.

This week we will have employment data.

Important news for NZD:

Tuesday:​

• Employment Change​
• Unemployment Rate​

CAD

BoC has delivered a 25bp rate cut as expected and brought the rate down to 3%. This totals 200bp of rate cuts since middle of 2024 and according to BoC it has started to boost the economy through consumption and housing activity. Business investment and labour market, however, remain week. The statement shows that bank will stop its QT program and restart asset purchases in early March. New projections see GDP at 1.8% for both 2025 and 2026, previously it was 2.1% for 2025, while CPI will be around 2% for that same period, 2.3% for 2025. The main push for GDP is expected to come from consumer as consumption growth is projected at 1.3% vs 0.7% previously. Risks to the outlook are seen as “reasonably balanced”. BoC Governor warned that tariff threats are putting downward pressure on CAD. He proudly stated that low inflation has been restored and focused on dealing with threat of tariffs.

This week we will have employment data.

Important news for CAD:

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

January inflation data for the Tokyo area saw headline number jump to 3.4% y/y from 3% y/y in December. Both core measures, ex fresh food and ex fresh food, energy, ticked up to 2.5% y/y from 2.4% y/y the previous month. All three data points are well above 2% target thus increasing chances of another rate hike in March, however, governor Ueda downplayed that stating that underlying inflation is still below 2% and that this inflation increase is driven by cost-push factors.

CHF

SNB total sight deposits for the week ending January 24 came in at CHF441.3bn vs CHF445.3bn the previous week. Another leg down as funds are moving out of the Swissy. SNB Chairman reiterated bank’s reluctance to go for negative interest rates, but stated that they are prepared to go down that path if need arises.​

 

[katetrades]

Forex Major Currencies Outlook (Feb 10 – Feb 14)

We are up for a slow week from the economic data standpoint as we will get inflation data from the US and Switzerland, Q4 GDP from the UK as well as retail sales data from the US.

USD

Monday open saw markets punish CAD and MXN on the threat of tariffs and then the rollercoaster began. First Mexican president Shainbaum stated that she had a good and long conversation with president Trump which resulted in delay of tariffs for 30 days. MXN has surged on the news. Mexico will deploy 10 000 national guard to the border to secure it and prevent drug trafficking into the US. Later on that same day, president Trump had a lengthy conversation with prime minister Trudeau of Canada and as a result tariffs on Canada were delayed for 30 days. Canada will also deploy 10 000 troops to secure the border. Both CAD and MXN made an 180 turn and finished the day much higher than they started. Only additional 10% tariffs on goods from China were left on. China retaliated with 15% tariffs on coal and LNG as well as limiting exports of some rare earth materials. There is also a threat of 10% tariffs on the Eurozone. Treasury secretary Bessent stated that he favors strong USD and that his focus will be on a 10y. The intention is to bring the yield on a 10y down and thus make it easier for economy to borrow funds without lowering Fed rate. There was no change in the QRA regarding debt issuance for 2025.

ISM January manufacturing PMI returned to expansion with a 50.9 print, up from 49.2 seen in December. Manufacturing returns to expansion for the first time since March of 2024. Details of report show employment and production also returning to expansion with 50.3 and 52.5 prints respectively as well as new orders posting a strong 55.1 print. On the other hand, prices paid index jumped to 54.9 from 52.2 in December while an increase to 53.8 was expected indicating that inflation pressures are gaining strength.

ISM services for the month of January declined to 52.8 from 54.1 in December while markets were expecting an increase to 54.3. Positives can be seen in increase in employment, moving further into expansion and in decrease in prices paid component, which will be warmly accepted by the Fed as it indicates that inflation pressures are subsiding in the services sector. On the other hand, causes for concern can be seen in the drop in new orders and overall business activity.

Headline NFP number in January missed expectations and came in at 143k s 170k as expected. Other information from the employment report were much more positive. The unemployment rate has ticked down to 4% while participation rate ticked up to 62.6%. Average wages rose 0.5% m/m and 4.1% y/y up from 0.3% m/m and 3.9% y/y seen in December while number of hours per week declined to 34.1. Additionally, two-month revision saw another 100k jobs added. Private sector added 111k jobs while government added 32k jobs.

The yield on a 10y Treasury started the week at 4.54%, rose to 4.58% and finished the week at around 4.49%. The yield on 2y Treasury started the week at 4.22% and reached the high of 4.29%. Spread between 2y and 10y Treasuries started the week at 28bp and finished the week at 20bp as curve started to bull flatten. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 8%, while probability of a no cut is around 92%. June is now the first meeting that sees above 50% probability of a rate cut.

This week we will have chairman Powell testifying in front of the Senate, January inflation data expected to stay unchanged and retail sales data.

Important news for USD:

Tuesday:​

• Fed Chair Testimony​

Wednesday:​

• CPI​

Friday:​

• Retail Sales​

EUR

Final January manufacturing PMI for Eurozone was revised up to 46.6 from 46.1 as preliminary reported primarily on the back of positive German revision (45 vs 44.1 preliminary). The accompanying report warns about jumping to conclusions but states that positives start to appear. Additionally, the report states that rising input costs present a headwind for the sector but despite that optimism among companies has increased noticeably. Final services reading was revised down to 51.3 from 51.4 due to a negative revision in French reading. The report mentions sluggish but slowly accelerating growth in new orders and employment. Costs in services sector are rising at a fast pace which will worry ECB as they are paying close attention to services inflation. Composite reading was unchanged at 50.2

Preliminary January CPI report saw headline number tick up to 2.5% y/y from 2.4% y/y in December due to increase in energy prices. Core reading remained at 2.7% y/y for the fourth consecutive month, although markets were expecting a tick down to 2.6% y/y. Inflation was down 0.3% m/m which will be welcomed by the ECB.

GBP

Final manufacturing PMI for the month of January ticked up to 48.3 from 48.2 as preliminary reported. Details are concerning as output, new orders and employment all showed further declines while input prices reached new highs not seen since start of 2023. Unlike in Eurozone and in Japan business confidence is near the lows seen in December. Final services was revised down to 50.8 from 51.2 as preliminary reported and is down from 51.1 in December. The report shows a worrying picture of output increasing modestly while input costs accelerated. New orders turned down while employment declined to the greatest extent for four years. Composite was also revised down to 50.6 from 50.9 as preliminary reported.

BoE has delivered 25bp rate cut and brought rate to 4.50% as was widely expected. The important part was the vote which was unanimous (9-0 vs 8-1) as expected with even arch-hawk Catherine Mann voting for a rate cut. Not only did she change her tune but she along with Swati Dhingra, the most dovish member, voted for a 50bp rate cut. The statement emphasizes the disinflationary process in the past years as well as that domestic pressures are seen moderating but inflation remains elevated. GDP growth has been weaker than previously projected but it is expected to pick up in H2 of 2025. On future rate moves statement shows that “a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate.” Members will continue to monitor inflation expectations when making decisions on monetary policy. CPI projections have been revised higher and are now at 3% in one year’s time, 2.3% in two years’ time and 1.9% at three years’ time. With decision being unanimous we now expect another rate cut to come in May.

This week we will have preliminary Q4 GDP reading expected to print flat q/q.

Important news for GBP:

Thursday:​

• GDP​

AUD

Caixin manufacturing PMI for the month of January came in at 50.1, down from 50.5 in December. Barely keeping in expansion as new export orders continue to decline. Most concerning factor is a big drop in employment index which reached lowest levels since 2020. Caixin PMI survey focuses on export-oriented and technology-driven firms. Caixin services declined to 51 from 52.2 the previous month. The report shows continuation of growth in business activity and new orders with rebound in external demand. Business expectations jumped indicating improvement in optimism, but sentiment is still below historical average.

NZD

Q4 employment report saw employment change decline by 0.1% q/q while the unemployment rate rose to 5.1% which is a new four year-high (it was 5.3% in Q3 of 2020). Participation rate dropped to 71% from 71.2% in Q3. Average hourly earnings rose by 4.2% y/y. Big increase in the unemployment rate is seen as a consequence of a very aggressive rate hiking cycle by the RBNZ. We expect them to deliver a 50bp rate cut at their February meeting.​

CAD

January employment report saw economy add 76k jobs vs 25k as expected. Additionally, previous month’s reading was revised up to 179.1k from 90.9k with 171.8k jobs added being full-time! January saw unemployment rate tick down to 6.6% while participation rate ticked up to 65.5%. Wages rose at the rate of 3.5% y/y after 3.8% y/y increase in December. Job composition saw 35.2k of the jobs added being full-time while 40.9k were part-time jobs. The economy has been adding jobs for the sixth straight months. Canada posted first trade surplus in December since the start of the year as net exports grew by CAD0.71bn as there was frontloading of export because of the threat of tariffs.

JPY

Summary of opinions from January meeting shows that underlying inflation is expected to continue rising gradually and reach the 2% target. Risks to inflation are seen as balanced but they could be tilted to the upside if the trade frictions persist. Real rates remain deeply negative even after the hike with high uncertainties warranting cautious communication on future path of rate hikes.

Final manufacturing PMI for the month of January was revised down to 48.7 from 48.8 as preliminary reported and down from 49.6 in December. New orders and production continued to decline while business optimism remained high. Final services were revised up to 53 from 52.7 and thus surged nicely from 50.9 in December on the back of rising external demand, employment and input costs. Composite remained at 51.1.

Labor cash earnings rose by 4.8% y/y in December vs 3.6% y/y as expected while November reading was revised up to 3.9% y/y. Real wages rose 0.6% y/y while they were revised up for November to 0.5% y/y thus making it two consecutive monthly increases. Household consumption rose 2.7% y/y indicating that higher wages are transferring into spending. Rising real wages, with a real probability that Shunto negotiations bring new wage increases, as well as wage transfers to consumption in the months ahead which in turn should lead BoJ to deliver more rate hikes.

CHF

SNB total sight deposits for the week ending January 24 came in at CHF441.9bn vs CHF441.3bn the previous week. Just a small tick up as SNB lets market determine Swissy’s value.

This week we will have inflation data.

Important news for CHF:

Thursday:​

• CPI​

 

[katetrades]

Forex Major Currencies Outlook (Feb 17 – Feb 21)

RBA and RBNZ meeting, both expected to deliver rate cuts, inflation data from the UK and Canada, preliminary PMI data from the Eurozone and UK, employment data from the UK and Australia, FOMC minutes as well as first look at Q4 GDP from Japan will highlight this event packed week ahead of us. Monday is a holiday in the US, markets will be closed so liquidity will be thing and there could be increased volatility so caution is advised.

USD

President Trump has announced a 25% tariffs on imports of steel and aluminum that took effect on Monday February 10. These tariffs will be applied on all countries with no exceptions or exemptions. The rates will go in full effect on March 12. Talks about reciprocal tariffs that could be administered from April 1 are mounting. Trump signing executive order that will allow implementation of tariffs on a country-by-country basis adds more uncertainty into the markets. New tariffs may be imposed also on national subsidies or VAT.

Fed Chairman Powell testified in front of the Congress and stated that Fed is in no hurry to change rates. After 100bp of rate cuts they see monetary policy as restrictive still but much less so than it was before. He added that the economy is strong and that labor market remains solid but that it is “not a source of significant inflation pressures”. Inflation is coming down but it is still somewhat elevated. Powell removed any ideas about potential rate hikes and considering his tone we see June meeting as the most likely date for the next cut.

January CPI report ticked up to 3% y/y from 2.9% y/y in December and markets were expecting it to come unchanged. Inflation jumped 0.5% m/m in January after printing 0.3% m/m the previous month. Core CPI came in at 3.3% y/y vs 3.1% y/y as expected with monthly reading coming in at 0.4% m/m and 0.446% m/m unrounded, almost 0.5% m/m. Looking into the details of the report we see that shelter index rose by 0.4% m/m and contributed almost 30% to the total increase. Used cars and trucks as well as motor insurance were also big contributors. Apparel prices recorded the biggest drop. Markets were pricing in with over 90% probability a 3.1% or 3.2% y/y reading on core thus the USD gained strength on stronger than expected reading but it quickly gave all back and declined further as markets are not putting as much significance to inflation as before.

Retail sales report for the month of January showed declines across all categories. Headline number fell -0.9% m/m while a -0.1% m/m decline was expected. Control group, excluding volatile categories, plunged -0.8% m/m while ex autos and ex autos and gas categories dropped by 0.4% m/m and 0.5% m/m respectively. One positive in the report is upward revisions to December readings in all categories, but still this report undoubtedly shows that consumer is struggling. Sporting goods sales dropped the most (4.6% m/m) followed by motor vehicle and parts sales (2.8% m/m) and non-store (online) retail stores (1.9% m/m). We can see talks about cold weather and fires in Los Angeles as detriment to the retail sales, combined with potential increased of buying in December as a way to get-things-cheaper-before-the-tariffs-kick-in but we feel there is a potentially deeper problem with consumer brewing.

The yield on a 10y Treasury started the week at 4.50%, rose to 4.63% and finished the week at around 4.47%. The yield on 2y Treasury started the week at 4.30% and reached the high of 4.36%. Spread between 2y and 10y Treasuries started the week at 20bp and finished the week at 21bp as curve returned to bear steepening. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 2%, while probability of a no cut is around 98%. After the stronger than expected CPI reading, September is now the first meeting that sees above 50% probability of a rate cut.

This week we will have minutes from the January FOMC meeting.

Important news for USD:

Wednesday:​

• FOMC Minutes​

EUR

December industrial production declined by 1.1% m/m and 2% y/y. The decline was due to drop in capital goods production as well as intermediate and durable consumer goods. EUR had a great week, strengthening against the USD on the back of talks about potential Russia-Ukraine peace deal. Additionally, German DAX continues to be on a tear that lasts for around month and a half and keeps reaching new all time highs. Second reading of Q4 GDP for the Eurozone was revised up to show a 0.1% q/q growth instead of economy being flat as was reported in the preliminary reading.

This week we will have preliminary PMI data for February and expectations are for them to decline.

Important news for EUR:

Friday:​

• S&P Manufacturing PMI (Eurozone, Germany, France)​
• S&P Services PMI (Eurozone, Germany, France)​
• S&P Composite PMI (Eurozone, Germany, France)​

GBP

BoE member Catherine Mann stated that inflation is the main reason for her shift in policy stance which led to a vote for a 50bp rate cut. She now sees inflation as a less of a threat as corporate pricing power is weakening and sees prices coming down close to the 2% target. She added that demand is now a bit weaker than previously and that played a big input in her policy change. Later on she added that she voted for a 50bp rate cut but still wants rates to remain restrictive in the future and higher long-term in order to “cut through the noise”. She tried to portrait that she is still very much a hawk but that 50bp rate cut vote is telling a different story.

Preliminary Q4 GDP came in at 0.1% q/q vs -0.1% q/q as expected. December GDP printed 0.4% m/m and helped push Q4 GDP into positive territory. The biggest contributor to the reading was government spending which rose 0.8%. The biggest drop was seen in business investment which plunged 3.2% followed by a drop in exports of 2.5%.

This week we will have employment and inflation data as well as preliminary PMI data for February that are expected to improve slightly.

Important news for GBP:

Tuesday:​

• Payrolls Change​
• Unemployment Rate​

Wednesday:​

• CPI​

Friday:​

• S&P Manufacturing PMI​
• S&P Services PMI​
• S&P Composite PMI​

AUD

January inflation data from China saw CPI increase to 0.5% y/y from 0.1% y/y in December while markets were expecting a 0.4% y/y print. Airfare price, tourism and recreation categories were the biggest contributors. Government is targeting 3% inflation and growth targets for 2025 are based on inflation coming in below 3%. PPI continued to decline and printed -2.3% y/y unchanged from previous month.

This week we will have RBA meeting and employment data. After the last hike in November of 2023 which was followed by a long number of meetings where cash rate was left unchanged we expect RBA to deliver a 25bp cut at their February meeting.

Important news for AUD:

Tuesday:​

• RBA Interest Rate Decision​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

Electronic card retail sales, comprising around 70% of total retail sales, came in January at -1.6% m/m and -0.5% y/y. RBNZ inflation expectations survey saw 1 year rise to 2.15% from 2.05% seen in December while 2 year declined to 2.06% form 2.12% as previously surveyed. The bank focuses more on 2 year when making policy decisions so they will be satisfied with inflation coming down.

This week we will have RBNZ meeting. Majority of analysts see a 50bp rate cut but markets are not fully pricing it in. We are expecting one final 50bp rate cut.

Important news for NZD:

Wednesday:​

• RBNZ Interest Rate Decision​

CAD

Final manufacturing and wholesales data for the month of December saw former rise 0.3% m/m and latter fall 0.2% m/m. CAD has enjoyed a good week against the USD, taking advantage of dollar’s weakness. But it has lost ground against other major currencies.

This week we will have inflation data.

Important news for CAD:

Tuesday:​

• CPI​

JPY

January PPI numbers continued to rise as they printed 4.2% y/y increase after a 3.8% y/y increase in December, Markets were expecting a 4% y/y print so higher than expected reading will fire up more talks about incoming rate hikes. Markets were merciless towards JPY though starting from Tuesday it has lost a lot of ground.

This week we will have first look at Q4 GDP.​

Important news for JPY:

Monday:​

• GDP​

CHF

SNB total sight deposits for the week ending February 6 came in at CHF441.9bn vs CHF438.1bn the previous week. SNB is still staying on the sidelines and letting market dictate Swissy’s strength. January inflation report saw headline number decline further to 0.4% y/y as expected from 0.6% y/y in December while core inflation surged to 1.2% y/y from 0.7% y/y.​

 

[katetrades]

Forex Major Currencies Outlook (Feb 24 – Feb 28)

PCE and GDP from the US and Canada will highlight the rather barren week, from the economic news standpoint, ahead of us.

USD

Talks regarding ending of war in Ukraine were held in Saudi Arabia but they included only Russia and United States as no representatives of Ukraine were present. US Secretary of Stated Rubio stated that these talks were just a beginning to determine how serious Russia is about a deal and that when situation progresses both Ukraine and Europe will be a part of “real negotiations”.

President Trump announced that he will be implementing tariffs on semiconductors, cars, lumber and pharma. He also pledged to refill SPR and cut taxes on domestic producers of oil and gas. In his post on Truth Social Trump called Ukraine president Zelensky “a modestly successful comedian” and a “dictator”.

The yield on a 10y Treasury started the week at 4.48%, rose to 4.57% and finished the week at around 4.42%. The yield on 2y Treasury started the week at 4.27% and reached the high of 4.32%. Spread between 2y and 10y Treasuries started the week at 22bp and finished the week at 23bp as curve returned to bear steepening. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 3%, while probability of a no cut is around 97%. June is the first meeting that sees above 50% probability of a rate cut.

This week we will have second reading of Q4 GDP and Fed’s preferred inflation measure PCE which is expected to tick down.

Important news for USD:

Thursday:​

• GDP​

Friday:​

• PCE​

EUR

ECB Executive Board member Panetta warned that signs of weakness in the economy are more persistent than projected. The bank was hoping for a consumer driven recovery but that simply did not materialize. Executive Board member Schnabel stated that concept of neutral rate cannot be a reliable guide for monetary policy in real time. She added that both domestic inflation and wage growth are still high but both should start to decelerate. She warned that risks to inflation are still skewed to the upside.

Preliminary PMI data for the month of February painted an interesting picture. Manufacturing improved to 47.3 from 46.6 in January while services declined to 50.7 from 51.3 the previous month and 51.5 as was expected. On the back of a big drop in French reading. Services remain in expansion but are slowing down while manufacturing is slowly picking up and after a long time hints at a brighter future. Composite was unchanged at 50.2. There was a stronger division between German and French readings as latter fell off the cliff as we move further away from boost to growth provided by Summer Olympic Games. PMIs showed increasing input costs that are in part being transferred onto consumer.

GBP

January saw payroll change increase 21k after falling 14k in December. The unemployment rate for December stayed at 4.4% while markets were seeing a tick up to 4.5%. Wages continued to surge and are now at 6% 3m/y for average weekly earnings and 5.9% 3m/y for average weekly earnings ex bonus. They were both at 5.6% 3m/y in November. ONS is still declaring issues with data, but the jump in wages looks very concerning for future inflation.

Inflation report of the month of January saw headline number print 3% y/y vs 2.8% y/y as expected and up from 2.5% y/y in December. Higher food and airfare prices led to increase in inflation. Core CPI printed 3.7% y/y as expected and up from 3.2% y/y the previous month. Services inflation surged to 5% y/y from 4.4% y/y in December and although this number looks worrying expectations were for even a bigger surge. BoE will proceed cautiously with future rate cuts.

Preliminary February PMI data point to a growing divide between sectors in the UK economy. Manufacturing slumped to 46.4 from 48.3 in January while services improved to 51.1 from 50.8 the previous month. Manufacturing output index continued to slump while services recorded a slowdown in business activity. On top of that, there are rising inflation pressures coming from the rising staff costs which in turn would force companies to raise output prices and thus transfer some of the increased costs directly onto consumers. Low growth and higher inflation prospects will cause a lot of concern for the BoE. Composite ticked down to 50.5 as expected from 50.6 in January.

AUD

RBA delivered a widely expected 25bp rate cut and brought the rate down to 4.1%. The statement started with remarks about underlying inflation moderating but warned that upside risks remain and that outlook is uncertain. There were also declines in growth but labor market is tighter than expected. The board assessed that monetary policy was restrictive and will still stay restrictive even after the cut with warning that “if monetary policy is eased too much too soon, disinflation could stall, and inflation would settle above the midpoint of the target range.” The board remains data dependent. This statement shows that they are in no hurry to cut rates further and the text can be interpreted as hawkish leaning, thus a “hawkish cut”.

New forecasts see GDP lower at 2% in June 2025, 2.3% in June 2026 and 2.2% in June 2027. The unemployment rate is also seen lower at 4.2% in June 2025, 4.2% in June 2026 and 4.2% in June 2027. Headline inflation (CPI) is projected to be at 2.4% in June 2025, 3.2% in June 2026 and 2.7% in June 2027. Trimmed mean inflation (core CPI) is seen at 2.7% in June 2025, 2.7% in June 2026 and 2.7% June 2027. All of these forecasts are based on technical assumption that cash rate will be at 4% in June 2025, 3.4% in June 2026 and 3.5% in June 2027.

RBA governor Bullock stated at the press conference that there was an active debate whether to ease or leave rate unchanged. She added that it is clear that higher rates have worked and added that it is premature to declare victory on inflation. The policy will remain restrictive with today’s cut. She also clarified that they cannot guarantee further cuts implied by the market thus adding to the hawkishness of their statement. She warned that cutting rates too quickly could lead to inflation increasing above their 2-3% target range.

January provided us with another stellar employment report. The report saw economy add 44k jobs vs 20k as expected. This makes it a tenth straight month of job gains and twelfth in the last thirteen. The unemployment rate ticked up to 4.1% as expected but it was due to participation rate rising to the highest level ever of 67.3%. All of the jobs added were full-time jobs 54.1k while part-time jobs declined by 10.1k. When we combine the hawkish sounding RBA with strong jobs report we see bank on a hold for the foreseeable future.

NZD

RBNZ has delivered a widely expected 50bp rate cut thus bringing the Official Cash Rate (OCR) to 3.75%. Inflation is seen coming down and that is the main reason for a rate cut and if economy continues Economic growth is subdued but is expected to pick up during the year as lower rates and higher prices of key export commodities lead to higher income from exports. New projections see OCR lower than previously and at 3.45% in June 2025 and 3.1% in March 2026 where it is expected to be in March of 2028. Annual CPI is seen at 2.2% by March of 2026. The statement concludes with “If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” Minutes warned that escalation of trade tensions, tariffs, will have a negative impact on economic activity in New Zealand.

RBNZ governor Orr reiterated dovish stance seen in the statement by saying that rate cuts in April and May seem about right and should be two 25bp cuts. He added that current rate of 3.75% is the high end of the neutral rate range. He sees slower growth as near-term risk while threat of US tariffs are seen as a long-term risk and on the currency front he sees NZD as fairly valued. Additionally, governor Orr ruled out a possibility of further 50bp rate cuts stating that they will go for it only in case of emergency.

CAD

January inflation CPI saw headline number print 1.9% y/y as expected, up from 1.8% y/y seen in December. The increase is entirely due to rise in energy price, natural gas and gasoline, while food prices fell. However, all three core readings increased with common printing 2.7% y/y vs 2.6% y/y the previous month, median rising 2.2% y/y after 2% y/y increase in December and trim at 2.4% y/y vs 2.3% y/y the previous month.

This week we will have Q4 GDP data.

Important news for CAD:

Friday:​

• GDP​

JPY

Q4 GDP smashed expectations as it came in at 2.8% annualised while markets were seeing a 1% increase. The economy grew by 0.7% in Q4 vs 0.3% as was expected. Private consumption rose by 0.1% q/q while markets were seeing it drop by 0.3% q/q. There was a big boost from external demand which added 0.7pp with exports rising 1.1% q/q. GDP deflator printed 2.8% y/y as well indicating strong inflationary pressures. This combination of higher growth and higher inflation should bring rate hikes from BoJ and if Shunto wage negotiations bring strong wage increases we could see next rate hike in May.

Inflation data for the entire country of Japan saw headline number rise 4% y/y after a 3.6% y/y increase in December. Food prices have jumped 21.9%. Excluding fresh food CPI printed 3.2% y/y vs 3.1% y/y as expected and up from 3% the previous month. It has reached a new nineteen month high. Ex fresh food and energy category came in at 2.5% y/y as expected and up from 2.4% y/y in December. Additional increases in inflation just increase chances of future BoJ hikes and first one is now seen in May.

Preliminary February PMI data saw improvements across the board with manufacturing rising to 48.9 from 48.7 in December on the back of increases in new orders. Still, the sector has been in contraction since July and services have to prop up the economy. Services printed 53.1, a tick up from 53 the previous month and thus lifted composite to 51.6 from 51.1 print in December. The yield on 10y JGB reached 1.44% which is the highest level since 2009.

CHF

SNB total sight deposits for the week ending February 14 came in at CHF432.5bn vs CHF438.1bn the previous week. Sight deposits moving to the new lows as new SNB rules made it less attractive for banks to keep money in Swissy.​