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Figure 1: German 2022 Industrial Production 5% Below Pre-Covid Levels


ECB (BBG): Consumer Inflation Expectations for Next 12 Months Unchanged

Consumers’ expectations for inflation over the next 12 months remained unchanged at 5% in December, European Central Bank says in statement summarizing its monthly survey. Expectations for inflation three years ahead edged up to 3% from 2.9%, reversing a previous decline.

US (BBG): Fed’s Bostic Says Higher Peak Rate on Table After Jobs Blowout

Federal Reserve Bank of Atlanta President Raphael Bostic said January’s strong jobs report raises the possibility that the central bank will need to increase interest rates to a higher peak than policymakers had previously expected. If a stronger-than-expected economy persists, “It’ll probably mean we have to do a little more work,” Bostic told Bloomberg News in a phone interview on Monday.

UK (MNI): PM Set to Engage in Ministerial Reshuffle & Gov't Department Shakeup

Prime Minister Rishi Sunak is expected to engage in a ministerial reshuffle and a reformation of various gov't departments today in his first significant alteration to Cabinet since taking office in October 2022. A number of UK outlets are reporting that the Department for International Trade and the Department for Business, Energy and Industrial Strategy are both set to experience some sort of shake-up in their responsibilities and areas of focus.

RBA (MNI): RBA Hikes 25bp to 3.35%, Further Increases "Needed"

The Reserve Bank of Australia warned it expects more rate hikes will be "needed" after lifting rates by 25bp to 3.35% as it forecast a decline in inflation to "around" 3% by mid-2025. The ninth consecutive hike - and fourth consecutive 25bp tightening - pushed rates to their highest level since 2012 and delivered cumulative tightening of 325bp since the first hike in May. The hike was in line with market expectations.

JAPAN (MNI): Japan's Govt to Present BOJ Nominees Next Week - Press

The government will likely present nominees for Bank of Japan governor and deputy governors next week, Kyodo reported on Tuesday. The government was widely expected to nominate the candidates on Friday. Japan's government has approached BOJ Deputy Governor Masayoshi Amamiya as a possible successor to central bank chief Haruhiko Kuroda, whose term ends on April 8, people familiar with the matter said, the Nikkei reported on Monday.

JAPAN (MNI): Japan Bought Record High JPY5.6 Trln Yen on Oct 21

The Japanese government bought JPY5.62 trillion of yen on October 21, 2022, marking a record high intervention since data was first collected in April 1991, data released by the Ministry of Finance on Tuesday showed. The data also showed the scale of yen buying intervention on October 24 was JPY729.6 billion.


GERMAN DATA (MNI): 2022 Industrial Production 5% Below Pre-Covid Levels

  • GERMANY DEC INDUSTRIAL PROD. -3.1% M/M (FCST -0.8%); NOV +0.4%r M/M
  • GERMANY DEC INDUSTRIAL PROD. -3.9% Y/Y (FCST -1.6%); NOV -0.5%r Y/Y

Germany industrial production fell by -3.1% m/m and -3.9% y/y in December, below forecasts of a softer contraction. Real industrial production for the total of 2022 was -0.6% below that of 2021 and a marked 5.0% below pre-covid 2019. Energy production slumped -2.3% m/m, intermediate goods production -5.8% m/m and construction plunged -8.0% m/m. Consumer goods rose +0.3% m/m and capital goods production was flat.


UK (MNI): UK House Price Growth Slows as BOE Hikes Bite

The string of consecutive interest rate hikes from the Bank of England is continuing to bite on the housing market, with average annual UK house price gains dipping to the slowest pace in three years, the Halifax said Tuesday. House prices rose 1.9% year-on-year, slowing from 2.1% in December, the UK's leading provider of mortgages said, with the average cost of a house now 4.2% below the peak seen in August 2022.

UK DATA (MNI): Jan BRC Uptick Masks Continued Fall in Real Retail Sales


UK BRC retail sales increased +3.9% (like-for-like) and +4.2% (total) in January, slowing from December and remaining weaker than the 3-month average growth rates. This data is not adjusted for inflation. As such, the increase in sales in January implied a much larger decline in real sales. Heavy discounts in January were implemented to try to boost January sales, yet at the cost of company profit margins.

JAPAN DATA (MNI): Japan Dec Wages Rise; Real Pay Turns Positive

Real wages turned positive for the first time in nine months in December but they are still below the rise in the consumer price index, sustaining concerns over slower consumer spending in the coming months, according to data released Tuesday by the Ministry of Health, Labour and Welfare. Average wages rose 1.8% y/y in December after rising 1.5% in November, with total monthly average cash earnings per regular employee increasing 4.8% y/y in December compared to 1.9% y/y growth in November.

JAPAN DATA (MNI): Japan Dec Household Spending -1.3% y/y


Average spending by Japanese households with two or more people decreased by 1.3% y/y in December, following last 1.2% y/y decrease. Spending on food dip further by 3.6% y/y in December, compared with last 2.9% y/y fall in November. Spending on fuel, lighting and water rose 0.6% y/y, compared with last 1.6% y/y fall. The average real income of households with salaried workers fell 0.4% y/y, expanding from the previous 0.3% y/y decrease.

AUSTRALIA DATA (MNI): Trade Position Robust


Australian trade data for December came in very close to expectations. The trade surplus narrowed to $12.24bn from an upwardly-revised $13.47bn but remains elevated. Exports of goods and services fell 1.4% m/m, the third consecutive monthly fall, due to other mineral fuels. Imports rose 1% m/m after declining the previous three months, driven by travel services. There isn't anything in the trade data to concern the RBA.

FOREX: AUD Higher For First Session in 4 as RBA Flag Need For Further Tightening

  • AUD/USD sits higher for the first session in four following the RBA rate decision, at which the bank raised rates by 25bps to 3.35%, and hinted that another 50bps of rate rises could be still to come in an effort to rein in inflation. This puts AUD/USD close to a point off yesterday's lows at $0.6856 (showcasing a solid bounce off the 50-dma), with $0.6963 the next near-term upside level ahead of $0.7007, the 50% retracement of the early February downleg.
  • GBP/USD traded a new weekly low of $1.1987 in Asia-Pac trade, putting the pair well within range of the 200-dma support of $1.1951. Any break through here opens the lowest level since early January, with focus turning to a potential party-wide reshuffle of the UK government. UK GDP, industrial production and trade balance data cross on Friday.
  • Lastly, NOK is underperforming despite a more constructive crude oil price backdrop. EUR/NOK holds close to the cycle highs printed yesterday at 11.1086 - a break above here would mark the highest rate since November 2020.
  • US and Canadian trade balance data are the calendar highlights Tuesday, ahead of an appearance from Fed's Powell, who speaks at the Economic Club. His comments will be carefully watched in the wake of the bumper jobs report as well as an observation from Bostic, who raised the prospect of a higher peak rate after the NFP data.

BONDS: Focus on Powell Later

  • Relative to the past couple of session, bond moves have been a little less volatile in the European morning session today. However, it has still been an eventful session with supply in focus: France and the Netherlands are holding syndications while the UK, Austria and Germany (linkers) have all held auctions this morning.
  • Looking ahead the main focus is on Fed Chair Powell's appearance at the Economic Club of Washington where he will be interviewed by David Rubenstein, due at midday ET / 17:00GMT.
  • TY1 futures are up 0-3 today at 113-19 with 10y UST yields down -1.6bp at 3.627% and 2y yields down -4.7bp at 4.429%.
  • Bund futures are down -0.23 today at 136.68 with 10y Bund yields up 1.3bp at 2.305% and Schatz yields down -0.4bp at 2.606%.
  • Gilt futures are down -0.18 today at 105.28 with 10y yields up 1.6bp at 3.257% and 2y yields up 1.5bp at 3.432%.

EQUITIES: Eurostoxx 50 Uptrend Remains Technically Overbought

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. S&P E-Minis traded higher last week and in the process cleared recent highs to confirm a resumption of the current 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 lies at 4007.50, the Jan 31 low. The latest pullback is considered corrective.

  • Japan's NIKKEI closed lower by 8.18 pts or -0.03% at 27685.47 and the TOPIX ended 4.18 pts higher or +0.21% at 1983.4.
  • Elsewhere, in China the SHANGHAI closed higher by 9.396 pts or +0.29% at 3248.094 and the HANG SENG ended 76.54 pts higher or +0.36% at 21298.7.
  • Across Europe, Germany's DAX trades lower by 5.1 pts or -0.03% at 15340.56, FTSE 100 higher by 31.9 pts or +0.41% at 7868.73, CAC 40 up 2.21 pts or +0.03% at 7139.31 and Euro Stoxx 50 up 6.94 pts or +0.17% at 4212.39.
  • Dow Jones mini up 14 pts or +0.04% at 33948, S&P 500 mini up 7.5 pts or +0.18% at 4131, NASDAQ mini up 45.25 pts or +0.36% at 12560.5.

COMMODITIES: Bearish Gold Remains in Corrective Cycle

A sharp sell-off on Friday in WTI futures reinforced bearish conditions. The move lower Monday resulted in a print below $72.74, 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. Moving average studies are in a bear-mode position highlighting current market sentiment. Gains are considered corrective. Initial firm resistance is at $78.56, the 50-day EMA. Trend conditions in Gold are bearish for now, as the yellow metal enters a corrective cycle. This follows the strong sell-off on Thursday and Friday last week and sights are on the 50-day EMA, at $1853.7. 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 $1.48 or +2% at $75.67
  • Natural Gas up $0.01 or +0.24% at $2.461
  • Gold spot up $9.34 or +0.5% at $1877.56
  • Copper up $1.85 or +0.46% at $405.2
  • Silver up $0.12 or +0.52% at $22.4038
  • Platinum up $1.42 or +0.15% at $977.24

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