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Contact us:
phone: +1 849 9370815
email: sales@tradersway.com
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.
