EXECUTIVE SUMMARY
- MNI FED PREVIEW - KEEPING RATE CUT HOPE ALIVE
- DISTRICT JUDGE BLOCKS TRUMP'S FEDERAL SPENDING FREEZE
- RIKSBANK CUTS 25BPS; NO DISSENTS RECORDED
- AUSTRALIA Q4 TRIMMED CPI LOWER-THAN-EXPECTED AT 0.5% Q/Q
Figure 1: Asia Dollar Index seasonality typically a headwind in Feb (last 10yrs average monthly performance)
Source: MNI/Bloomberg
NEWS
MNI FED PREVIEW - JANUARY 2025: Keeping Rate Cut Hope Alive
The FOMC will keep the benchmark Fed funds rate on hold on January 29 for the first time in four meetings, as it shifts to a more patient phase of its easing cycle after delivering 100bp of cuts. The forward guidance adopted in December points to a data-dependent approach to assessing the “extent and timing” of additional rate adjustments. To this end, there has been only limited inflation and labor market data since then, while the Trump administration’s policies and their potential impact on the economic outlook are still in a formative stage.
US (MNI): District Judge Blocks Trump's Federal Spending Freeze
A US District Judge blocked a Trump administration freeze on federal spending, ordered by the White House Office of Management and Budget, minutes before it was set to go into effect yesterday. The block will expire Feb 3 at 17:00 ET 22:00 GMT. The order, which covers all government spending except direct payments to individuals, such as Social Security, and Medicare, is widely seen as the most far-reaching of Trump’s executive actions and part of a broader attempt to recalibrate potentially trillions of dollars of federal government spending. The coming week will test to what extent Trump can realise the bulk of his agenda via executive action.
US (WSJ): White House to Push Out Federal Workers Through Buyout Offer
The White House gave federal workers a choice: return to the office full time or resign and get paid for the next eight months. In a Tuesday night email, the Office of Personnel Management told federal workers that they have until Feb. 6 to decide how to proceed. If they step down, they will continue to receive all pay and benefits and will be exempt from in-person work requirements until Sept. 30.
US/CHINA (FT): OpenAI Says It Has Evidence China’s Deepseek Used Its Model to Train Competitor
OpenAI says it has found evidence that Chinese artificial intelligence start-up DeepSeek used the US company’s proprietary models to train its own open-source competitor, as concerns grow over a potential breach of intellectual property. The San-Francisco-based ChatGPT maker told the Financial Times it had seen some evidence of “distillation”, which it suspects to be from DeepSeek.
US/JAPAN (BBG): Japan’s Kato: Held Online Meeting With Bessent, Discussed FX
Japanese Finance Minister Katsunobu Kato tells reporters he discussed currency and other financial and geopolitical issues with new US Treasury Secretary Scott Bessent. Kato held first video conference with Bessent on Wednesday; call lasted about 20-25 minutes. Confirmed with Bessent they will continue to discuss FX closely going forward
RIKSBANK (MNI): Riksbank Cuts 25bps; No Dissents Recorded
The RIksbank cut its key interest rate by 25 basis points at its January meeting, taking it down to 2.25% and it gave no clear indication that it was anticipating any further cuts. In December the Executive Board signalled a rate cut during the first half of this year and in its January statement it said that as the risk of inflation becoming too high was limited and economic activity was weak the first meeting of 2025 was the time to cut.
EUROPE (MNI): EC Singles Out Energy, Digital as Draghi Priorities
The European Commission singles out energy grids, digital infrastructures, AI industrial applications and critical medicines as priority areas for boosting competitiveness in line with key recommendations of the Draghi report, according to a leaked copy of its Competitiveness Compass to be released on Wednesday. Funding will rely on a continued repurposing of EU Cohesion Funds and financial incentives from the EIB and national development banks, supported by enhanced guarantees to leverage private funding, the report will say.
FRANCE (MNI): Greens & PS Criticise PM's Immigration Comments as Budget Talks Halted
Marine Tondelier, leader of the environmentalist Ecologists, has added her voice to the wave of criticism from the left towards PM Francois Bayrou regarding his comments on immigration from 27 Jan. In an interview with LCI on Monday, Bayrou said "Contributions from foreigners are a positive for a people, so long as they remain proportionate. But as soon as you get the feeling of flooding, of no longer recognizing your own country, its lifestyle and its culture, the feeling of rejection appears."
UK (MNI): 'Productive Capacity of UK Has Become Far Too Weak' - Chancellor
Delivering a speech on growth, Chancellor of the Exchequer Rachel Reeves says "Productive capacity of the UK has become far too weak." Reeves: "The solution is government systematically removing barriers...The strategy that I have consistently set out is to drive the supply side of the economy." Reeves says her growth strategy has three prongs: Stability, Reform and investment. Reeves acknowledges her increase in National Insurance on business has consequences on business and beyond- 'I accept there are costs to responsibly. But the costs of irresponsibility are far higher. Those who opposed my Budget know that too'
UK/EU (FT): UK Hopes of Security Deal With EU Hit by Fishing Dispute
Sir Keir Starmer’s plan to agree a security pact with the EU is being blocked by French and other member states’ demands over fishing rights and a youth mobility scheme, complicating his hopes of an early win in “reset” talks with Brussels. In recent weeks the UK’s efforts to sign a bilateral security and defence partnership with the European Commission have met growing opposition from EU capitals that want to link it to a broader package of agreements, officials from both sides said.
UK (FT): UK Ministers Plan to Subsidise EV Loans to Drive Sales
UK ministers are drawing up plans to subsidise electric car purchases by guaranteeing consumer loans, as they look at ways to drive up sales that remain stubbornly below official targets. The government has opened private discussions with the auto finance sector to try to increase the availability of low-interest or interest-free loans to help boost the take-up of EVs, according to government and industry figures.
BOJ (MNI): More Data Needed Before Hike - BOJ Minutes
Most Bank of Japan board members emphasised the need for further wage overseas economic data before raising the policy interest rate at the December 18-19 meeting, the minutes showed on Wednesday. Many members pointed out that economic activity and prices had been developing in line with the Bank's outlook at the meeting. “Some members expressed the view that, at this stage, risks such as the upside risks to prices were not a reason to rush to raise the policy interest rate, as these risks had been contained to a certain degree,” the minutes showed.
NEW ZEALAND (MNI): RBNZ's Conway Sees Neutral at 2.5-3.5%
The Reserve Bank of New Zealand estimates the neutral interest rate between 2.5-3.5%, below the Official Cash Rate’s 4.25% level, Chief Economist Paul Conway noted in a presentation on Wednesday. Several factors, both international and domestic, had pressured the RBNZ’s estimate over recent years, Conway added, noting lower productivity growth had weighed on the neutral rate.
CZECHIA (FT): Czech Central Bank Head Wants It to Buy Billions of Euros in Bitcoin
The head of the Czech National Bank wants to plough billions of euros’ worth of the country’s reserves into bitcoin, a groundbreaking move that could make it the first western central bank known to hold crypto assets. Governor Aleš Michl told the Financial Times that he would present a plan to the board to invest in bitcoin as a way of diversifying the CNB’s reserves at a meeting on Thursday. Should the board approve this, then the CNB could eventually hold as much as 5 per cent of its €140bn of reserves in bitcoin, he said.
DATA
EUROZONE DATA (MNI): Lending to NFCs and Households Accelerates in December
Eurozone lending to households and firms accelerated in December, in a sign that ECB policy rate cuts are slowly being fed through to the real economy. More data will be required for the ECB to judge its policy settings as neutral (rather than restrictive) though, particularly after the Q4 Bank Lending Survey signalled a tightening in firm lending standards and soft firm loan demand expectations for the next 3 months.
GERMAN DATA (MNI): GfK Sees No Sustainable Recovery for Consumer Climate in Sight
- GERMAN GFK FEB CONSUMER CLIMATE -22.4
The GfK Consumer Climate for Germany declined in its February advance print, to -22.4 points, compared to January's revised -21.4. While the series remains above December's -23.1, weakness was apparent in all subindicators of the release: economic & income expectations as well as willingness to buy all declined. "A sustainable recovery in the Consumer Climate is currently not in sight", GfK concludes.
SPAIN DATA (MNI): Q4 Flash GDP Firmer Than Consensus
- SPAIN Q4 FLASH GDP +0.8% Q/Q, +3.5% Y/Y
Spain Q4 flash GDP was stronger than consensus at 0.8% Q/Q (vs 0.6% consensus, 0.8% prior) and 3.5% Y/Y (vs 3.2% consensus, 3.5% revised prior from 3.3%). Spanish outperformance versus other key Eurozone countries has been highlighted in survey evidence, with the December composite PMI the highest since March 2023. Growth continued to be driven by domestic demand, which contributed 1.2pp to the Q/Q print (vs 1.0pp in Q3). External demand contributed negatively 0.4pp.
SWEDEN DATA (MNI): Q4 Flash GDP Misses Riksbank Projection
- SWEDEN FLASH Q4 GDP +1.1% Y/Y
This morning's growth and lending data won't affect the outcome of today's Riksbank decision, where a 25bp cut is widely expected. The Q4 flash GDP indicator was 0.2% Q/Q (vs 0.3% cons and prior) and 1.1% Y/Y (vs 1.1% cons, 0.7% prior). This was below the Riksbank's 0.4% Q/Q and 1.2% Y/Y forecast from the December MPR. As always, the flash GDP reading should be taken with a generous pinch of salt - it has been prone to large revisions in recent quarters.
JAPAN DATA (MNI): Japan Consumer Confidence Drops, Govt Cuts View
Japan's consumer confidence index posted its second straight drop in January, down 1.0 points to 35.2 from 36.2 in December, while the government lowered its assessment for the first downward revision since May, data released by the Cabinet Office on Wednesday showed. All four components, overall economic well-being, the willingness to buy durable goods, income conditions and the labour market, worsened from December, increasing concern over the outlook for private consumption on the back of continued high prices.
AUSTRALIA DATA (MNI): Aussie Q4 Trimmed CPI at 0.5% Q/Q
- AUSTRALIA Q4 TRIMMED CPI +0.5% Q/Q
- AUSTRALIA MONTHLY DEC CPI 0.2% MM, 2.5% YY
Australian trimmed mean inflation printed at 0.5% q/q over Q4, 10 basis points lower than expected, and down from Q3’s 0.8%, data from the Australian Bureau of Statistics showed. The measure was 3.2% on a year-ended basis, down 30bp over Q3. Headline inflation was 2.4% y/y. The Reserve Bank of Australia prefers trimmed mean inflation and had expected it to print at 3.4% y/y over Q4.
FOREX: AUD Pierces Support as Inflation Softens
- JPY is trading somewhat firmer early Wednesday, with markets eyeing reports overnight that the Japanese finance minister had held talks with his newly-minted US counterpart Bessent, at which the two discussed FX policy on top of financial and geopolitical issues. Given the Trump administration's sensitivity to weaker currencies for trading partners, markets have bid the JPY slightly higher to keep USD/JPY pinned to the Y155.00 pivot level for now.
- Australian inflation data overnight came in modestly softer than expected, leading to AUD weakness headed into the Wednesday open. AUD/USD plumbed a pullback low at 0.6227 - piercing the 50% retracement for the upleg posted off the cycle low in mid-January in the process. As a result, AUD and NZD are the poorest performers in G10 FX so far.
- The Fed decision ahead is the market focus, with markets likely to look through an unchanged decision on rates policy to narrow in on any fresh market pricing for the Fed's terminal rate. Markets are priced for ~50bps of further easing into year-end, and the USD will be sensitive to any direct messaging from Powell on pricing, particularly any suggestion that the Fed could go further with easing in the face of growth and tariff risks this year.
- Equity sensitivity will come into further focus later today, with a raft of earnings set for after-market. AI-adjacent stocks including Tesla, Microsoft, IBM and Meta Platforms are due - within which any reference to the rapid rise of China's DeepSeek will be carefully watched.
EGBS: Bund Futures Off Session Highs as Euro Equities Find a Base
Bund futures are +29 ticks at 131.70, off earlier session highs as European equities find a short-term base. The downtick in crude oil futures is somewhat offset by a ~3% rally in natural gas, limiting the feedthrough into core EGBs.
- The 10-year OAT/Bund spread has widened back to ~74bps after reaching a low of 72bps earlier. Markets are digesting a rift between the Socialists and the government, following PM Bayrou’s comments around immigration yesterday.
- German cash yields are 2-3bps lower across the curve. E4.5bln of the 10-year 2.50% Feb-35 Bund was sold this morning.
- Eurozone lending to households and firms accelerated in December, in a signal that ECB policy rate cuts are continuing to be fed through the real economy.
- 10-year peripheral spreads to Bunds have tightened alongside the equity rally. The 10-year BTP/Bund spread has fully retraced the widening seen into yesterday’s close, now ~2.5bps tighter at ~107bps. Yesterday’s widening came on news that PM Meloni has been placed under investigation in a case relating to the repatriation of a Libyan police officer.
- Broader global focus turns to the BoC and Fed decisions later today, before the ECB decision tomorrow (a 25bp cut remains essentially fully priced in ECB-dated OIS).
GILTS: Underpinned Despite Soft Green Auction
Gilts hold the bulk of the opening rally.
- Futures last +42 at 92.51, just off session highs (92.54).
- Short-term bullish correction within the longer run bearish technical theme remains intact.
- Initial support and resistance 91.10/92. 68.
- Yields 3.5-4.5bp lower, 10s lead the rally.
- Spread to Bunds continues to hover around 204bp, which represents the early November closing low. A break (on a closing basis) would expose the psychological 200bp marker.
- GBP STIRs hold the early dovish repricing.
- BoE-dated OIS showing ~72.5bp of cuts through ’25 vs. 69bp late yesterday.
- SONIA futures flat to +4.5.
- 8-Year green gilt supply saw a softish demand/pricing mix.
- No meaningful market input from Chancellor Reeves pro-growth speech.
- Macro and cross-market cues will be eyed for the remainder of today, with the UK data calendar subdued through the remainder of the week.
EQUITIES: Eurostoxx 50 Futures Extend Recovery from Monday's Low
A bull cycle in the Eurostoxx 50 futures contract remains intact and the move lower from last Friday’s 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 5108.69, the 20-day EMA. A resumption of the uptrend would open 5298.50, a Fibonacci projection. The S&P E-Minis contract remains 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.
- Japan's NIKKEI closed higher by 397.91 pts or +1.02% at 39414.78 and the TOPIX ended 18.69 pts higher or +0.68% at 2775.59.
- Across Europe, Germany's DAX trades higher by 93.71 pts or +0.44% at 21525.84, FTSE 100 higher by 4.98 pts or +0.06% at 8538.74, CAC 40 down 33.4 pts or -0.42% at 7865.03 and Euro Stoxx 50 up 31.83 pts or +0.61% at 5227.87.
- Dow Jones mini down 55 pts or -0.12% at 44976, S&P 500 mini up 3 pts or +0.05% at 6100.25, NASDAQ mini up 73.5 pts or +0.34% at 21655.
Time: 09:55 GMT
COMMODITIES: Gold Continues to Trade Close to Recent Highs
Monday’s move lower 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 $72.22. 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 is trading 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 $2675.2, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
- WTI Crude down $0.71 or -0.96% at $73.11
- Natural Gas down $0.13 or -3.8% at $3.339
- Gold spot down $0.53 or -0.02% at $2764
- Copper down $2 or -0.47% at $422.85
- Silver up $0.02 or +0.07% at $30.4769
- Platinum down $0.29 or -0.03% at $945.77
Time: 09:55 GMT
| Date | GMT/Local | Impact | Country | Event |
| 29/01/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 29/01/2025 | 1330/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 29/01/2025 | 1415/1415 |  GB | BOE's Bailey at Treasury Select Committee | |
| 29/01/2025 | 1445/0945 | *** |  CA | Bank of Canada Policy Decision |
| 29/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 29/01/2025 | 1900/1400 | *** | US | FOMC Statement |
| 30/01/2025 | - |  EU | European Central Bank Meeting | |
| 30/01/2025 | 0030/1130 | ** |  AU | Trade price indexes |
| 30/01/2025 | 0630/0730 | ** |  FR | Consumer Spending |
| 30/01/2025 | 0630/0730 | *** | FR | GDP (p) |
| 30/01/2025 | 0700/0800 | ** |  SE | Retail Sales |
| 30/01/2025 | 0700/0800 | ** |  DE | Import/Export Prices |
| 30/01/2025 | 0800/0900 | ** | SE | Economic Tendency Indicator |
| 30/01/2025 | 0800/0900 | *** |  ES | HICP (p) |
| 30/01/2025 | 0800/0900 | ** |  CH | KOF Economic Barometer |
| 30/01/2025 | 0900/1000 | *** |  IT | GDP (p) |
| 30/01/2025 | 0900/1000 | *** | DE | GDP (p) |
| 30/01/2025 | 0930/0930 | ** | GB | BOE M4 |
| 30/01/2025 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 30/01/2025 | 1000/1100 | ** | EU | Unemployment |
| 30/01/2025 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 30/01/2025 | 1000/1100 | *** | EU | EMU Preliminary Flash GDP Q/Q |
| 30/01/2025 | 1000/1100 | *** | EU | EMU Preliminary Flash GDP Y/Y |
| 30/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 30/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 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) |