MNI US OPEN - Dollar Returns to Post-Powell Lows

NEWS

UK (MNI): UK to Avoid 2023 Recession, Rate Peak Near - NIESR

The Bank of England's assumption that the UK will undergo a shallow, five quarter recession through 2023 is too pessimistic and it will instead show minimal growth, of 0.2% this calendar year, new National Institute of Economic and Social Research forecasts show.

UK/UKRAINE (MNI): Zelensky Arrives in London for UK Visit

Ukraine's President Volodymyr Zelensky has arrived in London in his first trip to the UK since the beginning of Russia's full-scale invasion, news wires report. Zelensky is expected to address parliament, meet UK Prime Minister Rishi Sunak and visit Ukrainian troops training in the country. Zelensky made his first and only foreign trip since outbreak of the war in late December, when travelled to the U.S.

UK/ITALY (MNI): Bilateral Partnership To Boost Trade & Investment Signed

The UK Department for International Trade has confirmed that Secretary of State for Business and Trade Kemi Badenoch and Italian Foreign Minister Antonio Tajani have signed a partnership intended to boost exports and investment between the two nations. Comes as part of the two-day bilateral Pontignano Forum between the countries taking place in Rome.

ECB (MNI): Citi See ECB Remuneration Step as Negative Excess Liquidity Shock

Following the ECB step yesterday to lower the remuneration ceiling on government deposits, Citi write that they see the sharp cheapening response in the Schatz spread as a negative excess liquidity shock. The market reaction was sharp, suggesting that markets were possibly pricing a return to 0% remuneration and a plunge in ECB government deposits.

CHINA (BBG): Xi Woos Taiwan Opposition Ahead of Pivotal Presidential Vote

Chinese leader Xi Jinping appears to be recalibrating his hardline approach to Taiwan in the year before the island holds a presidential election that his government’s preferred negotiating partner has a shot at winning. Kuomintang Vice Chairman Andrew Hsia is expected to visit China on Wednesday, the latest in a series of friendly gestures between the one-time foes in the Chinese Civil War.

CHINA (MNI): New Loans Expected to Rise in January - Caixin Survey

New yuan loans issued in January are forecast to have increased by CNY1 billion year-on-year, according to a survey of 13 financial institutions by Caixin. Due to continued credit support for infrastructure projects, improved financing conditions for real estate developers, and the recovery of corporate credit demand, new yuan loans in January will be slightly higher than last year's level, according to analysts cited by the news outlet.

MNI RBA Review: February 2023 - 25bp, More Hikes on the Way

The RBA hiked rates 25bp to 3.35%, as was widely expected. This brought the cash rate to above the mid-point of the central bank’s estimated range for neutral. The statement was more hawkish and made it clear that rates need to rise further and by more than 25bp, as inflation worries came to the fore.

DATA

FRANCE DATA (MNI): Private Sector Payrolls Stall in Q4

• FRANCE Q4 FLASH PRIVATE SECTOR PAYROLLS 0.0% Q/Q (FCST +0.3%); Q3 +0.6% Q/Q

French private sector employment stalled in Q4 in the prelim data, against expectations of a +0.3% q/q expansion and a +0.6% q/q uptick in Q3. Net job creations was a modest +3.0k in the fourth quarter, after +119.1k in Q3 and seven consecutive quarters of increases. France unemployment data is due next week, likely to edge up from the near-record low of 7.3% recorded in Q3. The labour market will continue to remain buoyant compared its pre-pandemic levels.

SWEDEN DATA (MNI): Industrial Orders Jump Fails to Boost Production Levels

• SWEDEN DEC INDUSTRIAL ORDERS +25.1% M/M; NOV -0.6% M/M
• SWEDEN DEC INDUSTRIAL ORDERS +24.9% Y/Y; NOV -7.0%r Y/Y

Swedish industrial orders jumped by +25.1% m/m and +24.9% y/y in December, after having contracted in November. Transport equipment was the key upwards driver, surging +122.9% m/m alone. Orders were volatile albeit to a lesser degree across other industries. The jump in orders failed to feed through into higher production levels. Swedish industrial production fell by -0.4% m/m, after -1.3% m/m in November.

JAPAN (MNI): Japan Jan Sentiment Dips but Outlook Index Rises

Japan's economic sentiment index posted a third straight drop in January but the outlook index posted a second straight rise, prompting the government to largely maintain its assessment from the previous month, the Economy Watchers released by the Cabinet Office Wednesday showed.

FOREX: Dollar Returns to Post-Powell Lows

• The greenback is flagging ahead of the NY crossover Wednesday, slipping against most others in G10 as markets extend the reaction the appearance from Fed's Powell on Tuesday. Powell's comments continued to underline the Fed's apparent belief that inflation has peaked, and disinflationary trends will extend through the rest of 2023, however more tightening steps may be required to reinforce this backdrop.
• NOK sits at the other end of the G10 table, stabilising after slipping sharply alongside the SEK over the past week or so. EUR/NOK remains within range of the 11.1535 cycle high, but the two-day pullback in the cross has allowed technically overbought conditions to unwind. Focus turns to this Friday's Norwegian CPI release, which should feed directly into the next round of Norges Bank projections in March.
• GBP/USD also sits somewhat higher, stressing the importance of the 200-dma as support, which successfully contained last week's slip lower in the pair. The level crosses at 1.1948, with 1.2194 marking the next upside level.
• Wednesday's not a busy session for data releases, which should keep focus on the busier speaker slate. 2023 FOMC voters Williams, Cook, Barr, Kashkari and Waller are all slated to make appearances, which should keep markets busy for the duration.
• ECB's Knot appears at a webinar with MNI, while the Bank of Canada's first minutes release is also on the docket.

BONDS: Speakers Take the Stage Ahead of Tomorrow's German HICP

• Core fixed income has traded sideways in the European morning session and stayed to fairly tight ranges relative to recent sessions. Treasuries are off their overnight highs with the market reversing some expectation of future cuts (but the terminal rate remaining fairly steady). Gilts and Bunds are both a bit lower on the day.
• Looking to today's events we have appearances from Fed's Williams, Cook, Barr, Bostic, Kashkari and Bostic as well as the ECB's Knot giving an MNI webcast at 15:00GMT / 10:00ET (registration for the latter is available here).
• Markets will also start looking forward to tomorrow's delayed German HICP data release.
• TY1 futures are up 0-7+ today at 113-15 with 10y UST yields down -2.6bp at 3.650% and 2y yields down -2.6bp at 4.440%.
• Bund futures are down -0.71 today at 135.99 with 10y Bund yields up 2.0bp at 2.364% and Schatz yields unch at 2.693%.
• Gilt futures are down -0.18 today at 104.82 with 10y yields down -1.0bp at 3.305% and 2y yields down -2.2bp at 3.460%.

EQUITIES: Equity Futures Moderate Following Post-Powell Spike

The EUROSTOXX 50 futures trend needle continues to point north. Resistance at 4206.00, the Jan 18 high, has been breached. The clear break confirms a resumption of the current uptrend and paves the way for gains towards 4269.50, a Fibonacci projection. Note that the trend remains overbought. A pullback, if seen, would represent a healthy correction. A break of 4097.00, the Jan 19 low, would signal the start of a short-term bear cycle. The S&P E-Minis trend condition remains bullish. The contract traded higher last week and confirmed a resumption of the bull cycle that started Dec 22. A key resistance and a bull trigger at 4180.00, the Dec 13 high, has been pierced. A clear break of this level would confirm a resumption of a broader uptrend and open 4250.00, the Aug 26 2022 high. Initial firm support to watch lies at 4007.50, Jan 31 low. The latest pullback is considered corrective.

• Japan's NIKKEI closed lower by 79.01 pts or -0.29% at 27606.46 and the TOPIX ended 0.57 pts higher or +0.03% at 1983.97.
• Elsewhere, in China the SHANGHAI closed lower by 15.988 pts or -0.49% at 3232.106 and the HANG SENG ended 15.18 pts lower or -0.07% at 21283.52.
• Across Europe, Germany's DAX trades higher by 126.11 pts or +0.82% at 15450.22, FTSE 100 higher by 56.38 pts or +0.72% at 7923.17, CAC 40 up 37.53 pts or +0.53% at 7173.03 and Euro Stoxx 50 up 22.83 pts or +0.54% at 4233.55.
• Dow Jones mini down 61 pts or -0.18% at 34148, S&P 500 mini down 9.5 pts or -0.23% at 4166.75, NASDAQ mini down 20 pts or -0.16% at 12760.

COMMODITIES: WTI Futures Target 78.34 50-Day EMA to Ease Bearish Pressure

A sharp sell-off last Friday in WTI futures reinforced bearish conditions. The move lower Monday resulted in a print below $72.74, the Jan 5 low and a key support. A clear break of it would strengthen the bearish theme and expose $70.56, Dec 9 low and a bear trigger. Prices have recovered this week but gains are considered corrective. Initial firm resistance to watch is at $78.34, the 50-day EMA. A break would ease bearish pressure. Trend conditions in Gold are bearish for now, and the yellow metal remains in a corrective cycle. This follows the strong sell-off on Thursday and Friday last week and sights are on the 50-day EMA, at $1854.4. This average represents a key support and if breached, would strengthen a bearish case and suggest scope for a deeper pullback. On the upside, key resistance and the bull trigger, has been defined at $1959.7, the Feb 2 high.

• WTI Crude up $1.15 or +1.49% at $78.29
• Natural Gas up $0.04 or +1.39% at $2.621
• Gold spot up $11.05 or +0.59% at $1884.73
• Copper up $2.55 or +0.62% at $410.6
• Silver up $0.32 or +1.46% at $22.502
• Platinum up $11.58 or +1.18% at $990.46