Highlights:
- Any market reaction to CPI could be muddied by revisions release
- Negative market bias around GBP could provide asymmetric risks around data surprises
- Increased Focus On ECB Projection Meetings Likely In H2 2025
- Treasuries broadly consolidate yesterday’s bear steepening, in a move that was driven by spillover from heavy EGB supply but also what became an inflation expectations move as the 5Y breakeven pushed to a fresh high since Mar 2023 in the second half of the session.
- Today's focus is on the US CPI report for January including annual revisions MNI US CPI Preview before Powell's potential reaction to it.
- Cash yields are 0-1bp higher on the day, with 2s leading the increases.
- 2s10s sits at 24.6bps (-0.6bp) consolidates yesterday’s steepening, within recent ranges.
- TYH5 trades at 108-29+ (-01) on reasonable cumulative volumes of 315k for a pre-CPI overnight session.
- Its earlier low of 108-26+ saw a step closer to support at 108-20+ (Feb 4 low) after which lies 108-06 (Jan 23 low) although a corrective pull phase remains in play with resistance at 110-00 (Feb 7 high).
- Data: CPI Jan (0830ET), Federal budget bal Jan (1400ET)
- Fedspeak: Powell House testimony (1000ET), Bostic on economic outlook (1200ET, Q&A only) and Waller on stablecoins (1705ET, text + Q&A)
- Coupon issuance: US Tsy $42B 10Y Note auction - 91282CMM0 (1300ET)
- Bill issuance: US Tsy $62B 17W bill auction (1130ET)
STIR: Next Fed Cut Seen In Sept With CPI and Powell Response Eyed
- Fed Funds implied rates hold yesterday’s push higher (seen prior to Powell’s Senate appearance with his comments then consolidating the move) ahead of today’s US CPI report and Powell’s turn in the House.
- Cumulative cuts from 4.33% effective: 1bp Mar, 6.5bp May, 14bp Jun, 19bp Jul, 26bp Sep and 36bp Dec.
- CPI headlines today’s macro docket whilst the second day of Powell’s congressional testimony at 1000ET will be watched for any reaction to the data in the Q&A. He characterized the labor market as “very strong” vs “solid” in recent months, and noted the neutral rate has risen meaningfully since before the pandemic.
- MNI US CPI Preview: https://media.marketnews.com/USCPI_Prev_Feb2025_e3ccd233d6.pdf
- Today’s other Fedspeak sees only Bostic as set to talk on mon pol matters. We watch for any further hawkish shift with Hammack and Logan recently very subtly speculating about a possible rate hike as the Fed’s next move (more on that here).
- 1200ET – Bostic (non-voter) on economic outlook (Q&A only). He said earlier this month that he wants to see the impact of past cuts and may wait “for a while” and doesn’t think there will be inflation clarity by the Fed’s next meeting. He sees nominal neutral at 3-3.5%
- 1705ET – Waller (permanent voter) on stablecoins (text + Q&A)
STIR: Increased Focus On ECB Projection Meetings Likely In H2 2025
Those expecting the ECB to cut rates at projection meetings in H2 2025 may still opt to receive the Jul/Sep/Oct and Oct/Dec/Feb ECB-dated OIS fly’s at current levels (-6bps and -4bps respectively at typing).
- Current OIS pricing tilts heavily in favour of a front-loaded easing cycle, with ~57bps of cuts priced through June (i.e. 75% implied probability of 3x25bp cuts). If realised, this would bring the deposit rate to the middle of the ECB’s (heavily caveated) neutral range of 1.75 - 2.25%.
- The median terminal rate view of the analysts we track is 2.00%, but a number of forecasts look for cuts to 1.75% and 1.50% (ABN AMRO expect a terminal of 1.00% by 2026).
- It is not possible to rule out a deposit rate below 2%, given sluggish Eurozone domestic demand, tariff risks and ECB confidence in the disinflation outlook. However, the Governing Council will likely need to adopt a more cautious approach to easing below this level, as it assesses the lagged impact of past cuts on economic activity and inflation.
- This should increase focus on projection meetings in H2 2025, with ECB speakers previously highlighting these gatherings as important milestones in assessing the risks to the inflation target.
- For 'projection meeting spreads' (dark blue bars in the below chart), a negative value indicates that more cuts are priced into the projection meeting than the subsequent interim meeting.
US TSY FUTURES: Mix Of Long Cover & Short Setting On Tuesday
OI data points to a mix of net long cover (FV, TY, UXY & WN) and short setting (TU & US) during yesterday’s sell off in futures, with the former more prominent in DV01 equivalent terms.
| 11-Feb-25 | 10-Feb-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,110,195 | 4,097,523 | +12,672 | +466,076 |
FV | 6,363,633 | 6,400,028 | -36,395 | -1,497,290 |
TY | 4,874,641 | 4,885,820 | -11,179 | -712,661 |
UXY | 2,257,981 | 2,272,622 | -14,641 | -1,276,988 |
US | 2,014,776 | 2,004,320 | +10,456 | +1,313,692 |
WN | 1,794,911 | 1,798,699 | -3,788 | -718,735 |
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| Total | -42,875 | -2,425,907 |
STIR: Short Setting Seen In Most SOFR Futures On Tuesday
OI data suggests that net short setting was seen in most SOFR futures during yesterday’s downtick, with the only notable exception coming via apparent net long cover in SFRH5.
| 11-Feb-25 | 10-Feb-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,023,611 | 1,026,203 | -2,592 | Whites | +5,945 |
SFRH5 | 1,191,152 | 1,212,157 | -21,005 | Reds | +44,977 |
SFRM5 | 1,086,920 | 1,079,888 | +7,032 | Greens | +41,120 |
SFRU5 | 817,360 | 794,850 | +22,510 | Blues | +15,563 |
SFRZ5 | 1,002,603 | 987,000 | +15,603 |
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SFRH6 | 682,250 | 668,867 | +13,383 |
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SFRM6 | 652,168 | 643,269 | +8,899 |
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SFRU6 | 601,683 | 594,591 | +7,092 |
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SFRZ6 | 731,879 | 698,826 | +33,053 |
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SFRH7 | 470,945 | 472,683 | -1,738 |
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SFRM7 | 436,496 | 427,493 | +9,003 |
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SFRU7 | 289,507 | 288,705 | +802 |
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SFRZ7 | 304,234 | 293,677 | +10,557 |
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SFRH8 | 220,655 | 218,741 | +1,914 |
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SFRM8 | 185,686 | 183,654 | +2,032 |
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SFRU8 | 120,027 | 118,967 | +1,060 |
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GBP: Negative Markets Bias May Provide Asymmetric Risks Around UK Data Ahead
GBP/USD's strong rally off yesterday's lows means the pair has now retraced over 50% of the post-BoE decision losses, putting the price within 100 pips of last week's highs.
- This signals that markets are taking Mann's views at face value this week - and that her vote for 50bps last week isn't the beginning of series of votes for aggressive easing given her preference for restrictive policy (we gauge bank rate as being ~100bps above her top estimate of neutral, therefore leaving little room for sizeable cuts).
- More broadly, the negative bias toward GBP/USD persists. Our CFTC positioning dashboard has GBP's 52w Z-score at -1.52, signalling positioning momentum is the second most-negative in G10 after NZD. This is reflected in the bias toward downside protection in GBP/USD this year: the shift lower for 3m risk reversals in January has largely stuck, mirrored in demand for OTM puts - we've tracked near $3bln cumulative notional traded across 1.22 puts in the past month, again cementing the market's concern over GBP downside risks.
- It's these factors that may provide asymmetric upside risks to GBP on strong data releases ahead - particularly data covering consumption, a driver of the weak demand that helped trigger Mann's vote for 50bps last week. Prelim Q4 GDP data crosses tomorrow morning.
FOREX: JPY Weakness Stands Out, as Markets Looks for Inflection Point
- The JPY's overnight step lower stands out among G10 FX Wednesday, headlined by USD/JPY's rally back above Y153.00, closing in on the first major resistance at 154.46. Clearance here would be bullish. Despite pulling back from the morning highs, EURJPY remains 0.8% higher today as the cross extends the rebound from Friday’s low. While the move higher is allowing a recent oversold condition to unwind, the impressive recovery reached as much as 406 pips, perhaps exacerbated by a short-term positioning squeeze ahead of US inflation data. Furthermore, the hawkish ECB repricing and strength for European equities will have provided additional tailwinds.
- Meanwhile, GBP/USD's strong rally off yesterday's lows means the pair has now retraced over 50% of the post-BoE decision losses, putting the price within 100 pips of last week's highs. This signals that markets are taking Mann's views at face value this week - and that her vote for 50bps last week isn't the beginning of series of votes for aggressive easing given her preference for restrictive policy (we gauge bank rate as being ~100bps above her top estimate of neutral, therefore leaving little room for sizeable cuts).
- In contrast with JPY, CHF is firmer against all others in G10 - benefiting from the unwind of the sharp pullback in the CHF/JPY cross over the course of 2025. Moves come ahead of the January Swiss CPI print, at which markets expected the Y/Y inflation release to retreat further - hitting 0.4% and the lowest rate since early 2021.
- The US inflation print takes focus for the rest of the day, with markets anticipating a moderation in inflationary pressures for January - but the release could be muddier than usual due to the concurrent posting of annual revisions for inflation. Central bank speak also comes through thick and fast, as Powell faces a second appearance in front of lawmakers on top of appearances from BoE's Greene, ECB's Nagel and Fed's Bostic.
OPTIONS: Solid Expiry Risk Building Toward End-of-Week
Expiry risk builds into the end of the week - could limit spot vol through CPI, tariff risk
- Decent build of of options expiry risk across G10 FX this week - both for today's expiry and the NY cut on Friday. The pipeline this week looks among the largest of the year so far. Most notable options set to roll-off include:
Today's expiry:
- EUR/USD: $1.0250-70(E2.7bln), $1.0300(E1.9bln), $1.0325(E944mln), $1.0400-05(E1.1bln)
- USD/JPY: Y153.50-70($1.7bln)
- GBP/USD: $1.2450-60(Gbp579mln)
For the Friday cut:
- EUR/USD: E7.0bln set to roll off between $1.0275-25, then a further E3.2bln at $1.0400
- USD/JPY: Y152.00($2.3bln)
- AUD/USD: A$1.3bln at $0.6275-00
- USD/CNY: $2.2bln at Cny7.3000
EQUITIES: Recent Gains for Eurostoxx 50 Futures Confirms Resumption of Uptrend
- Eurostoxx 50 futures traded higher Tuesday and the contract is holding on to its gains. The move higher confirms once again, a resumption of the uptrend that started on Nov 21 ‘24. Moving average studies are in a bull mode set-up too, highlighting a dominant uptrend. The focus is on 5434.10 next, a Fibonacci projection. Initial firm support to watch lies at 5243.32, the 20-day EMA. The 50-day EMA is at 5094.95.
- Price action on Feb 3 in the S&P E-Minis contract continues to highlight a possible short-term reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, a Fibonacci retracement point. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
COMMODITIES: WTI Futures Moving Average Studies Remain in Bull-Mode Position
- WTI futures have recovered from their recent lows. This highlights the fact that the 50-day EMA - at $72.21 - despite being pierced, has provided firm support. Moving average studies remain in a bull mode condition highlighting a dominant uptrend. The latest recovery also signals a stronger reversal of the Jan 15 - Feb 6 bear leg. Sights are on $75.18, the Feb 3 high. Key short-term support and the bear trigger lies at $70.43, the Feb 6 low.
- A bull cycle in Gold remains in play and the yellow metal is trading closer to its recent highs. The continued appreciation once again confirms a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull mode position too, highlighting a dominant uptrend. Sights are on the $2962.2, a Fibonacci projection. The first key support to watch is $2779.3, the 20-day EMA.
| Date | GMT/Local | Impact | Country | Event |
| 12/02/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 12/02/2025 | - | *** |  CN | Money Supply |
| 12/02/2025 | - | *** | CN | New Loans |
| 12/02/2025 | - | *** | CN | Social Financing |
| 12/02/2025 | 1330/0830 | *** | US | CPI |
| 12/02/2025 | 1500/1000 | US | Fed Chair Jerome Powell | |
| 12/02/2025 | 1500/1500 |  GB | BOE's Greene speech at Institute of Directors | |
| 12/02/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 12/02/2025 | 1700/1200 | US | Atlanta Fed's Raphael Bostic | |
| 12/02/2025 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 12/02/2025 | 1830/1330 |  CA | BOC Meeting Minutes | |
| 12/02/2025 | 1900/1400 | ** | US | Treasury Budget |
| 12/02/2025 | 2205/1705 | US | Fed Governor Christopher Waller | |
| 13/02/2025 | 0700/0700 | ** | GB | UK Monthly GDP |
| 13/02/2025 | 0700/0700 | ** | GB | Trade Balance |
| 13/02/2025 | 0700/0700 | ** | GB | Index of Services |
| 13/02/2025 | 0700/0700 | *** | GB | Index of Production |
| 13/02/2025 | 0700/0800 | *** |  DE | HICP (f) |
| 13/02/2025 | 0700/0700 | ** | GB | Output in the Construction Industry |
| 13/02/2025 | 0700/0700 | *** | GB | GDP First Estimate |
| 13/02/2025 | 0730/0830 | *** |  CH | CPI |
| 13/02/2025 | 0840/0940 |  EU | ECB's Cipollone pre-recorded interview at Frankfurt Digital Finance conference | |
| 13/02/2025 | 1000/1100 | ** | EU | Industrial Production |
| 13/02/2025 | 1330/0830 | *** | US | Jobless Claims |
| 13/02/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 13/02/2025 | 1330/0830 | *** | US | PPI |
| 13/02/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 13/02/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 13/02/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 13/02/2025 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
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