Highlights:
- ECB decision likely to be uneventful as Bank take further sequential step toward neutral
- Fed communications tweak leaves little market ripple, with Treasuries slightly bull flatter
- Weekly US jobless claims, advance US GDP up next
- Treasuries have bull flattened overnight, extending the post-Powell rally (MNI Fed Review here). Recent impetus comes from softer-than-expected European GDP data, with Treasuries underperforming sizeable rallies across EGBs.
- Fresh from the Fed yesterday, focus turns to US data with the national accounts Q4 advance release plus weekly jobless claims, the latter with continuing claims for a payrolls reference period.
- The ECB decision at 0815ET and presser 0845ET could offer some spillover risk but the decision itself is seen as a locked in 25bp cut.
- Cash yields are 1-3.5bp lower, with declines led by the long end.
- 2s10s sits at 29.7bp (-2.2bp), approaching month-to-date lows.
- TYH5 has recently set a session high of 109-10 (+ 11+) as it nears resistance. Cumulative volumes are limited at 265k.
- The corrective bull cycle is in play with a break of resistance at 109-11+/109-12 (50-day EMA/Jan 27 high) required to strengthen this condition. Clearance could open 109-31 (Dec 18 high).
- Data: GDP/PCE Q4 advance (0830ET), Jobless claims (0830ET), Pending home sales Dec (1000ET)
- Fedspeak: The final day of the FOMC blackout
- Bill issuance: US Tsy $95B 4W & $90B 8W bill auctions (1130ET)
STIR: Fed Rates Extend Reversal Of Hawkish Tilt On FOMC
- Fed Funds implied rates have continued to reverse the hawkish tilt higher seen with the initial FOMC decision, extending what at the time was only a modest paring with Powell’s press conference.
- Only March holds a notable increase compared to pre-FOMC levels (+2.5bps to leave only 5bp of cuts priced) whilst implied rates from September onwards are a little lower.
- The 48bp of cuts for 2025 is off Monday’s recent dovish extremes of 53bp but is still elevated compared to most of January.
- Cumulative cuts from 4.33% effective: 5bp Mar, 14bp May, 25bp Jun, 31bp Jul and 48bp Dec.
- SOFR futures show larger post-FOMC declines, currently sitting ~5bps lower for 2027 contracts.
ECB: MNI ECB Preview, Jan'25: An 'Easy' Step Nearer Neutral
- We have published and e-mailed to subscribers the MNI ECB Preview, including MNI analysis plus analyst views on what to expect at this month's meeting.
- Please find the full report here: https://media.marketnews.com/ECB_Preview_Jan2025_fa0c9e0123.pdf
FED: MNI Fed Review-Jan 2025: Slightly Hawkish Hold
We've just published our review of the January FOMC meeting, including a comparison of the January vs December policy statements and a link to a transcript of Chair Powell's press conference. PDF here:
- The FOMC's January meeting delivered a slightly hawkish hold, tipping the balance away from a March rate cut but not really suggesting that the Committee's assessment of the monetary policy path had changed since the December meeting.
CANADA: MNI BoC Review, Jan'25: Firmly On Tariff Watch
- We have published and e-mailed to subscribers the MNI BoC Review.
- Please find the full report here: https://media.marketnews.com/BOC_Review_Jan2025_b4ade17abf.pdf
- (Please ignore Dec 2024 at the top of the pdf)
GLOBAL MACRO: Could The Tech Sell-off Have More Legs?
DeepSeek’s impact on financial markets was very obvious at the start of the week, particularly in terms of tech share indices (and most obviously through Nvidia’s share price). This steep drop has highlighted concentration risks in the sector and we outline below potential watch points for further signs of stress in this space, which could impact financial markets more broadly.
- Prior to the fall, Nvidia’s stock success brought with it unintended consequences for the S&P 500, leading to it becoming the most concentrated it has been since the dot-com crash of 2000.
- This concentration has also hidden the underlying issues with the members of the S&P where only just over 20% of the stocks were able to outperform the index in recent years.
- Not only via their S&P allocations, but through direct allocations, investors globally are potentially lacking investment diversity, with a dramatic over exposure to a select few tech stocks.
- Importantly, there are signs exist that this new found ‘tech sell-off’ may have more to run.
- Gold usually enjoys ‘safe-haven’ status, meaning that in times of stress in markets, it usually advances. Yet gold, which is coming off one of its best years ever in 2024, fell just over 1% on Monday during the tech sell off.
- Traders indicate that gold contract positions were being liquidated by investors exposed to the tech sector, freeing up capital in markets that were remaining liquid, causing gold to move in a direction opposite to what it normally would have.
- Similarly in Japan, Japanese Government Bond investors began buying JGB’s, another ‘safe-haven’ asset despite the Central Bank raising rates in its most recent meeting.
- Local Japan investors have been buying offshore stocks for the past 7 weeks (per weekly flow data) Since early Dec over Yen2 trillion of flows have left domestic markets into offshore equities making Japanese investors potentially over exposed to US tech (although this only partially reverses prior outflows seen since Oct last year).
- Interconnectivity cannot be ignored in financial markets and whilst moves in recent days may not yet spell the beginning of a sustained move lower, the impact on ‘safe-haven’ assets as a bell weather for broader market implications, cannot be ignored.
- Deepseek’s entrance without question has brought about uncertainty to the entire AI ecosystem at a time where most likely, investors have been ‘jumping on the Nvidia’ bandwagon, to chase even more success.
- To understand what happens next, don’t just watch Nvidia’s share price, rather look for erratic behaviour of other asset classes as a potential indicator that Deepseek’s impact could be more than just the AI ecosystem; and in fact challenge investor appetite and asset allocation globally.
- The geopolitical shifts in this space will also be in focus. Just days before Deepseek’s impact on markets, U.S. President Donald signed an executive order related to AI to "make America the world capital in artificial intelligence."
FOREX: USD/JPY Slippage Exposes January Low
- JPY is favoured across G10 for a second session, helping press USD/JPY seemingly sustainably back below the 50-dma. The moves follow a speech from the BoJ's deputy governor Himino, who stressed that real rates in Japan remain in negative territory despite a recent rate hike - meaning the BoJ has scope to continue to tighten policy should its economic outlook unfold inline with expectations.
- JPY price action raises the focus on key support below - crossing at 153.72 to coincide with the DeepSeek-inspired sell-off in US equities this week. This level also marks the 50% retracement for the upleg in the pair posted off December low - meaning a break below will open the next leg toward 152.55.
- The EUR trades poorly on the back of a soft string of economic data. Both French and German GDP updates were soft relative to expectations, helping EUR/GBP slip to a new multi-week low at 0.8360, opening 0.8348 in the process.
- NZD/USD trade this week has kept the pair inside it's primary downtrend, with the near-term outlook worsening on the failed break of the 0.5707 50-dma on January 24th. Renewed weakness here isolates downside targets at 0.5633 and - ultimately - the bear trigger and pullback low of 0.5542.
- Focus for the session ahead turns to the ECB rate decision, at which markets expect another sequential 25bps cut. The tone of Lagarde's press conference will be carefully watched, particularly to gauge any contrast with Powell's policy comments yesterday - at which the Fed adopted an effective wait-and-see approach on rates for this year.
AUSTRALIA: AUD Consolidating Renewed Weakness, NAB Adjust RBA Forecast
- AUDUSD sits marginally weaker on Thursday, broadly consolidating a powerful move lower this week, with losses of 1.39% since last Friday’s close following a notable hold of 50-day EMA resistance. Spot was assisted south by a lower-than-expected set of Q4 Australia inflation data on Wednesday, which alongside a more stable greenback have provided key headwinds for the pair.
- Bolstering the bearish trend, NAB brought forward its RBA rate cut forecast to February overnight, bringing all four Australian major banks now in line, while the OIS market is pricing in a 92% chance of a 25bps cut.
- A continuation lower for AUDUSD, would bring the focus back on 0.6131, the Jan 13 low and the bear trigger. Below here, attention would be on 0.6045, the 1.5 projection of the Sep 30 - Nov 6 - 7 price swing.
- In the crosses, AUDNZD is trading back towards the lower bound of the past 4 months, printing a 1.1006 low overnight. Standard Chartered have recommended going short, and they target 1.0788 with a stop at 1.1103, citing diverging central bank policies and highlighting the RBNZ has likely peaked in dovishness. Additionally, AUDJPY broke the prior January low overnight and the next area of interest will be at 95.52.
OPTIONS: Expiries for Jan30 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0350-55(E2.7bln), $1.0365-75(E1.6bln), $1.0400-05(E1.1bln), $1.0425-40(E1.3bln), $1.0450-70(E2.0bln)
- USD/CAD: C$1.4490-00($1.7bln)
EQUITIES: E-Mini S&P Trading Back at Last Week's Highs
- A bull cycle in the Eurostoxx 50 futures contract remains intact and the move down from the Jan 24 high, appears to have been a correction. A deeper retracement would allow an overbought trend condition to unwind. Moving average studies are in a bull-mode set-up highlighting a dominant uptrend. The first important support to watch is 5121.39, the 20-day EMA. A resumption of the uptrend would open 5298.50, a Fibonacci projection.
- The S&P E-Minis contract is trading above Monday’s low. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the recent sharp pullback appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, a Fibonacci retracement. Key resistance is 6178.75, the Dec 6 high.
COMMODITIES: Gold Close to Recent Highs, Bull Cycle in Play
- This week’s move down in WTI futures marks an extension of the current corrective cycle. The 20-day EMA has been breached and attention turns to support around the 50-day EMA, at $72.23. A clear break of the 50-day average would suggest scope for a deeper retracement. On the upside, a reversal higher would focus attention on $79.48, the Apr 12 ‘24 high and a key resistance.
- Gold continues to trade closer to its recent highs. A bull cycle is in play and the recent breach of resistance at $2726.2, the Dec 12 high, reinforces current conditions. Sights are on $2790.1, the Oct 31 all-time high. A break of this hurdle would confirm a resumption of the primary uptrend. On the downside, the first key support to watch is $2678.5, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
| Date | GMT/Local | Impact | Country | Event |
| 30/01/2025 | 1315/1415 | *** |  EU | ECB Deposit Rate |
| 30/01/2025 | 1315/1415 | *** | EU | ECB Main Refi Rate |
| 30/01/2025 | 1315/1415 | *** | EU | ECB Marginal Lending Rate |
| 30/01/2025 | 1330/0830 | * |  CA | Payroll employment |
| 30/01/2025 | 1330/0830 | *** |  US | Jobless Claims |
| 30/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 30/01/2025 | 1330/0830 | *** | US | GDP |
| 30/01/2025 | 1345/1445 | EU | ECB Governing Council Meeting press conference | |
| 30/01/2025 | 1500/1000 | ** | US | NAR Pending Home Sales |
| 30/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 30/01/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 30/01/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 31/01/2025 | 2330/0830 | * |  JP | Labor Force Survey |
| 31/01/2025 | 2330/0830 | ** | JP | Tokyo CPI |
| 31/01/2025 | 2350/0850 | ** | JP | Industrial Production |
| 31/01/2025 | 2350/0850 | * | JP | Retail Sales (p) |
| 31/01/2025 | 0030/1130 | * |  AU | Producer price index q/q |
| 31/01/2025 | 0700/0800 | ** |  DE | Retail Sales |
| 31/01/2025 | 0730/0830 | ** |  CH | Retail Sales |
| 31/01/2025 | 0745/0845 | *** |  FR | HICP (p) |
| 31/01/2025 | 0745/0845 | ** | FR | PPI |
| 31/01/2025 | 0855/0955 | ** | DE | Unemployment |
| 31/01/2025 | 0900/1000 | *** | DE | North Rhine Westphalia CPI |
| 31/01/2025 | 0900/1000 | *** | DE | Bavaria CPI |
| 31/01/2025 | 0900/1000 | ** | EU | ECB Consumer Expectations Survey |
| 31/01/2025 | 1000/1100 | ** |  IT | PPI |
| 31/01/2025 | 1300/1400 | *** | DE | HICP (p) |
| 31/01/2025 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/01/2025 | 1330/0830 | *** | US | Personal Income and Consumption |
| 31/01/2025 | 1330/0830 | *** | US | Employment Cost Index |
| 31/01/2025 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/01/2025 | 1330/0830 | US | Fed Governor Michelle Bowman | |
| 31/01/2025 | 1445/0945 | *** | US | MNI Chicago PMI |
| 31/01/2025 | 1600/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 31/01/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
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