Highlights:
- Reciprocal tariffs could come as soon as today, unnerving risk sentiment
- Trump's progress with Putin keeps EUR well bid
- Solid core CPI in Switzerland keeps USD/CHF pinned to key support
- Treasuries have seen a marginal bid on Trump talking about reciprocal tariffs coming today (had already been growing expectation there could be an announcement with Executive Orders at 1pm ET) along with a good possibility of ending the Russia-Ukraine war.
- It’s limited though, with the front-end still within session ranges whilst the longer end briefly pushed to fresh highs to pare around half of yesterday’s CPI-induced losses. Most of the day’s move came earlier in Asia hours.
- Cash yields are 2-3bp lower, with declines led by 30s despite today’s 30Y supply and yesterday’s 10Y seeing a 1bp tail.
- TYH5 has lifted to 108-16+ (08) on modest volumes of 345k, taking it further away from the post-CPI low of 108-04.
- Yesterday’s low cleared support to open 108-00 (Jan 16 low) after which lies the bear trigger 107-06 (Jan 13 low). To the upside, in case of any dovish cues from PPI or jobless claims, resistance at 109-08+ (50-day EMA).
- JPM late yesterday recommended adding tactical longs in 2Y Treasuries, with the front end offering value “especially with 2-year yields now bumping up against the top of what has been a very well entrenched range”. The biggest risk is from labor market strength but the next employment reading is three weeks away.
- Data: PPI Jan, incl annual revisions (0830ET), Weekly jobless claims (0830ET)
- Fedspeak: None scheduled
- Coupon issuance: US Tsy $25B 30Y Bond auction - 912810UH9 (1300ET)
- Bill issuance: US Tsy $90B 4W, $85B 8W Bill auctions (1130ET)
STIR: Fed Rates Off CPI Hawkish Extremes But Next Cut Still Only In Oct
- Fed Funds implied rates hold the bulk of yesterday’s push higher on the strong CPI report, although have pulled back slightly more for meetings later in the year as oil prices have declined further on prospects of a Russia/Ukraine peace deal.
- Cumulative cuts from 4.33% effective: 0.5bp Mar, 4bp May, 10bp Jun, 13.5bp Jul, 21bp Sep, 25bp Oct and 30bp Dec.
- There’s no Fedspeak due for the rest of today. Powell yesterday cautioned against getting "excited" about today's CPI report ahead of PPI (today 0830ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge. That said, "the CPI reading was above almost every forecast.”
- To that point, see more here.
GLOBAL MACRO: EU Response To Steel & Aluminium Tariffs Alone Likely Small [1/2/]
- US-EU trade tensions continue to bubble away even if they clearly haven’t reached the level of friction seen with Canada, Mexico and Canada.
- President Trump said last week that EU tariffs will “definitely happen” and has since announced 25% tariffs on steel & aluminium to be made effective Mar 12, although as we show these should have relatively little macro impact compared to other areas of EU trade.
- Yesterday, EU trade chief Sefcovic spoke with Lutnick, Trump’s pick to become commerce secretary, Jamieson Greer, his pick for US trade representative and NEC Director Hassett according to an EC spokesman. The call was introductory and the two sides agreed to meet soon.
- The EU earlier this week pledged to respond to the 25% tariff threat on steel & aluminium, having prepared multiple options depending on US policy, although there is nothing official yet.
- EU exports of iron/steel and aluminium to the US are small from a macro angle, summing to E16bn over the past twelve months of data for just ~0.1% of EU GDP. Trump has previously targeted the EU due to its trade surplus with the US, although the targeting specifically of iron/steel & aluminium doesn’t do much to change things here considering net exports also just 0.1% GDP.
- This should keep any potential European retaliation on the low side, despite Germany being the most exposed from a pure export of steel volumes angle. Retaliatory powder is more likely saved if greater attention starts to be placed on chemicals and related products (exports 1.1% GDP, net exports 0.6% GDP), broader machinery excluding vehicles and aircraft (exports 0.8% GDP, net exports 0.4% GDP) and vehicles themselves (exports 0.3% GDP, net exports 0.25% GDP) – see chart.
GLOBAL MACRO: But EU Still Exposed To Reciprocal Tariffs, Due Today? [2/2]
- The greater EU sensitivity to US tariffs on items other than iron/steel & aluminium, noted in part one, could well come into play today though.
- There has been no sign of a formal announcement on “reciprocal tariffs” from Trump this week, first touted in media reports late last week before Trump himself noted a desire to push ahead with them, but there is growing expectation of an announcement today (potentially at or before the signing of Executive Orders at 1pm ET).
- Using the below chart from Bloomberg, Asian countries and Brazil have the most to lose from a reciprocal tariff approach although the EU is likely next when it comes to a major trade bloc.
- Average EU tariffs on the US exceed US tariffs on the EU by between 0-2pp in the graphic.
US TSY FUTURES: Long Cover In TY & US Futures Dominated After CPI
OI data points to a mix of net short setting and long cover during yesterday’s CPI-driven sell off.
- Net long cover in TY & US futures provided the most notable DV01 equivalent adjustments, tilting the curve-wide net positioning bias in that direction.
| 12-Feb-25 | 11-Feb-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,084,671 | 4,109,783 | -25,112 | -921,359 |
FV | 6,364,256 | 6,364,442 | -186 | -7,624 |
TY | 4,822,057 | 4,872,897 | -50,840 | -3,225,798 |
UXY | 2,267,182 | 2,257,748 | +9,434 | +818,022 |
US | 1,998,428 | 2,014,515 | -16,087 | -2,002,027 |
WN | 1,794,959 | 1,794,634 | +325 | +60,980 |
|
| Total | -82,466 | -5,277,807 |
STIR: Short Setting Dominated On SOFR Strip Following CPI
OI data points to meaningful net short setting across many SOFR futures following yesterday’s CPI data as markets pushed full discounting of the next Fed rate cut back to December.
- Only two very modest rounds of net long cover were seen across the front 16 contracts (SFRU6 & H8).
| 12-Feb-25 | 11-Feb-25 | Daily OI Change | Daily OI Change In Packs | ||
| SFRZ4 | 1,036,666 | 1,022,041 | +14,625 | Whites | +63,415 |
| SFRH5 | 1,209,125 | 1,192,934 | +16,191 | Reds | +87,030 |
| SFRM5 | 1,114,878 | 1,086,920 | +27,958 | Greens | +54,640 |
| SFRU5 | 822,001 | 817,360 | +4,641 | Blues | +28,266 |
| SFRZ5 | 1,013,020 | 1,002,603 | +10,417 | ||
| SFRH6 | 699,124 | 682,286 | +16,838 | ||
| SFRM6 | 713,185 | 652,168 | +61,017 | ||
| SFRU6 | 600,441 | 601,683 | -1,242 | ||
| SFRZ6 | 743,930 | 731,791 | +12,139 | ||
| SFRH7 | 483,451 | 470,945 | +12,506 | ||
| SFRM7 | 461,042 | 436,496 | +24,546 | ||
| SFRU7 | 294,956 | 289,507 | +5,449 | ||
| SFRZ7 | 328,844 | 304,234 | +24,610 | ||
| SFRH8 | 220,145 | 220,655 | -510 | ||
| SFRM8 | 189,239 | 185,686 | +3,553 | ||
| SFRU8 | 120,640 | 120,027 | +613 |
US: Greenback Gains, Equities Slip on Trump Reciprocal Tariff Post
Trump posts: "THREE GREAT WEEKS, PERHAPS THE BEST EVER, BUT TODAY IS THE BIG ONE: RECIPROCAL TARIFFS!!! MAKE AMERICA GREAT AGAIN!!!"
Greenback tipped higher on the back of Trump's reciprocal tariffs post on Truth Social - another suggestion and hint that reciprocal tariffs are forthcoming after being heavily speculated last week. This isn't too far outside of expectations, but is the latest concrete sign that we could see a further escalation in trade tensions.
- This raises focus on Trump's schedule for today: He is set to sign executive orders from 1800GMT/1300ET before meeting with India's PM Modi - of particular relevance as India are one of the nations that could suffer most sharply from a reciprocal tariff arrangement.
- EUR/USD briefly back below $1.0400 on the post, with equity futures also dipping slightly. Yields far more resilient.
MIDEAST: Hamas To Release 3 Hostages On 15 Feb, Risk Of Truce Ending Reduced
Hamas has confirmed in a statement that it intends to continue with the process of releasing Israeli hostages according to the schedule set out in the phase one ceasefire agreement with Israel. This would see a further three hostages freed on Saturday 15 Feb. Egypt's Al-Qahira Al-Akhbariya reports the Egyptian and Qatari gov'ts as saying that their mediators have 'succeded in bridging the gaps to continue implementing the Gaza ceasefire deal' adding that the 'parties in the deal are committed to continuing implementing it.'
- US President Donald Trump has threatened that if Hamas did not release all hostages on Saturday he would "let hell break out". PM Benjamin Netanyahu has not been as clear. Instead on 11 Feb he said "If Hamas does not return our hostages by Saturday noon - the ceasefire will be terminated, and the IDF will return to intense fighting until Hamas is finally defeated,". This could indicate that the release of the three hostages planned under the deal will suffice to keep the ceasefire in place.
- PM Benjamin Netanyahu's office has rebutted an Al-Jazeera report claiming that "people are waiting for the entry of heavy machinery and mobile houses lined up on the Egyptian side of the border. [...] People feel that once these are allowed into Gaza, Hamas will show more flexibility and that the release of Israeli captives can take place as scheduled." PMO says "The report on Al-Jazeera is fake news, and there is no basis for the allegations".
UKRAINE: Foreign Min Cautious On Talks; Kremlin 'Impressed' By Trump Position
Speaking to France's Le Monde, Ukrainian Foreign Minister Andrii Sybiha says, in reaction to US President Donald Trump's announcement of talks with Russia on ending the war in Ukraine, that 'Nothing can be discussed on Ukraine without Ukraine or on Europe without Europe.' Sybiha: 'With Trump's leadership [and] strong European commitment we have a chance to give fresh impetus to this process'.
- Says that 'As far as Ukraine is aware, the Americans have not yet finalised their plan'. Following US Secretary of Defense Pete Hegseth's comments on 12 Feb, Sybiha says 'NATO membership remains a strategic objective of Ukraine, all allies said its path was irreversible'.
- Claims that "There should be no compromises that harm the territorial integrity of sovereignty of Ukraine'.
Sybiha's comments come in the wake of a flurry of headlines hitting wires from Kremlin spox Dmitry Peskov.
- Peskov says that following the Trump-Putin call the Kremlin is focused on preparing for a meeting between the two leaders. Offered no indication on place or time for meeting (Saudi Arabia seen as most likely). On a Ukraine peace deal 'There is a political will on both sides to engage in dialogue and search for a settlement'. Peskov: 'The Biden administration tried to keep the war going but the Trump administration is trying to ensure peace.' Says that 'We are impressed by the Trump position'.
- Says that the issue of recognition of Crimea and other occupied territories 'was not raised' on the Trump-Putin call.
The topic of occupied territories will be a central one for Kyiv. Hegseth said on 12 Feb that a return to the pre-2014 borders is "an unrealistic objective."
FOREX: CHF Stands Out as Core CPI Works Against SNB Base Case
- CHF stands out among G10 FX early Thursday, rallying against all others on the back of the January inflation release. While headline CPI was inline with market expectations, the core figure outstripped forecast to hit 0.9% vs. Exp. 0.6%, dragging USD/CHF with it and narrowing the gap with tried-and-tested support at the 50-dma of 0.9039.
- We note trendline support also comes in just above 0.9040, but it is the 50-day exponential moving average that remains key on the downside, having underpinned the significant rally in the aftermath of the US election. Despite multiple attempts in recent weeks, USDCHF has continually failed to close below this average, which currently intersects at 0.9024. Below here, the January low is at 0.8965.
- AUD sits at the bottom-end of the G10 table, led lower by deteriorating risk sentiment into the Asia-Pac close. Hong Kong's Hang Seng Index started the session well, but a turn lower for equities has worked against AUD/USD and pressed the rate back to the 50-dma of 0.6260.
- The USD Index is softer, edging lower as markets extend the reaction to Trump's opening of Ukraine negotiations with Russia's Putin late yesterday. The USD Index is toward the February lows, but a further 0.5% decline would be needed before any test of 107.296 and 106.969 support.
- The US PPI print and weekly claims data are the datapoints of focus ahead, while the central bank speaker slate is much quieter - just ECB's Nagel is on the docket, appearing in Glasgow at 1700GMT/1200ET.
OPTIONS: Expiries for Feb13 NY cut 1000ET (Source DTCC)
EUR/USD: $1.0300-15(E896mln), $1.0375(E1.2bln), $1.0400(E1.3bln), $1.0500(E1.9bln)
Larger FX Option Pipeline
- EUR/USD: Feb14 $1.0200(E1.6bln), $1.0220-25(E1.5bln), $1.0275-80(E1.9bln), $1.0300-20(E4.5bln), $1.0325(E1.6bln), $1.0400(E3.8bln), $1.0435(E1.0bln), $1.0475(E1.5bln), $1.0500(E1.4bln); Feb17 $1.0500(E2.3bln); Feb18 $1.0300(E1.7bln)
- USD/JPY: Feb14 Y150.00($1.9bln), Y150.90-00($1.6bln), Y152.00($2.3bln), Y154.00($1.2bln), Y156.00($1.7bln)
- EUR/JPY: Feb14 Y157.65(E1.7bln)
- GBP/USD: Feb14 $1.2080-00(Gbp1.2bln)
- AUD/USD: Feb14 $0.6200(A$1.2bln), $0.6275-00(A$1.3bln)
- USD/CAD: Feb14 C$1.4450($1.1bln), C$1.4600($1.1bln), C$1.4800($2.1bln)
- USD/CNY: Feb14 Cny7.1500($3.3bln), Cny7.2000($2.6bln), Cny7.3000($2.2bln), Cny7.3400($2.4bln)
EQUITIES: Eurostoxx 50 Futures Rally to Fresh Cycle Highs
The Eurostoxx 50 futures contract continues to appreciate. 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. Sights are on a major resistance at 5525.00, the March 2000 all-time high. Clearance of this level would highlight a key bullish break. Initial firm support to watch lies at 5243.32, the 20-day EMA. 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.
- Japan's NIKKEI closed higher by 497.77 pts or +1.28% at 39461.47 and the TOPIX ended 32.26 pts higher or +1.18% at 2765.59.
- Elsewhere, in China the SHANGHAI closed lower by 13.902 pts or -0.42% at 3332.483 and the HANG SENG ended 43.55 pts lower or -0.2% at 21814.37.
- Across Europe, Germany's DAX trades higher by 225.23 pts or +1.02% at 22376.04, FTSE 100 lower by 72.75 pts or -0.83% at 8733.9, CAC 40 up 71.44 pts or +0.89% at 8113.18 and Euro Stoxx 50 up 47.49 pts or +0.88% at 5453.04.
- Dow Jones mini down 32 pts or -0.07% at 44430, S&P 500 mini down 3.25 pts or -0.05% at 6069.25, NASDAQ mini up 25.5 pts or +0.12% at 21829.75.
COMMODITIES: WTI Futures Erase This Week's Earlier Gains, Back Below 50-Day EMA
WTI futures have pulled back from Tuesday high and price is again trading below the 50-day EMA - at $72.17. Attention is on $70.43, the Feb 6 low. A clear break of this support would undermine a bullish theme and confirm a clear breach of the 50-day EMA. This would strengthen a bearish threat and open $68.05, the Dec 20 ‘24 low. Key short-term resistance has been defined at $75.18. A move above this level is required to reinstate a bull theme. A bull cycle in Gold remains in play and the yellow metal is trading closer to its recent highs. Recent gains once again confirm a resumption of the uptrend and maintain 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 $2809.2, the 20-day EMA.
- WTI Crude down $0.71 or -0.99% at $70.65
- Natural Gas up $0.09 or +2.61% at $3.66
- Gold spot up $11.26 or +0.39% at $2916.01
- Copper down $0 or 0% at $470.4
- Silver up $0.04 or +0.13% at $32.29
- Platinum up $7.02 or +0.7% at $1003.17
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 14/02/2025 | 0800/0900 | *** |  ES | HICP (f) |
| 14/02/2025 | 1000/1100 | *** |  EU | GDP (p) |
| 14/02/2025 | - | *** |  CN | Money Supply |
| 14/02/2025 | - | *** | CN | New Loans |
| 14/02/2025 | - | *** | CN | Social Financing |
| 14/02/2025 | 1330/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 14/02/2025 | 1330/0830 | ** | CA | Wholesale Trade |
| 14/02/2025 | 1330/0830 | *** | US | Retail Sales |
| 14/02/2025 | 1330/0830 | ** | US | Import/Export Price Index |
| 14/02/2025 | 1415/0915 | *** | US | Industrial Production |
| 14/02/2025 | 1500/1000 | * | US | Business Inventories |
| 14/02/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 14/02/2025 | 2000/1500 | US | Dallas Fed's Lorie Logan |