EXECUTIVE SUMMARY
- MNI FOMC MINUTES PREVIEW - EYEING INFLATION LANGUAGE CHANGE AND TARIFF TALK
- RBNZ CUTS OCR 50BP TO 3.75% AS EXPECTED
- BOJ’S TAKATA BACKS GRADUAL, VIGILANT HIKES
- UK ANNUAL INFLATION ABOVE MARKET AND BOE EXPECTATION
Figure 1: MNI FOMC Hawk-Dove Spectrum
NEWS
MNI FOMC MINUTES PREVIEW - JANUARY 2025: Eyeing Inflation Language Change and Tariff Talk
Secretary of State Marco Rubio told European allies that the US will keep sanctions on Russia in place at least until a deal to end the Ukraine conflict is reached, even as his boss, President Donald Trump, said he’ll probably meet Vladimir Putin to discuss a settlement before the end of February. Rubio gave the assurance that sanctions won’t be lifted sooner to a group of European counterparts on a call Tuesday, according to people familiar with the situation who asked not to be identified discussing private deliberations.
US/RUSSIA (MNI): Trump-Putin Meeting Needs Prep But Could Happen by Month End - Kremlin
Russian state media reporting comments from Kremlin spox Dmitry Peskov. Says the prospective meeting between Presidents Vladimir Putin and Donald Trump "will take time to prepare", but that they could meet before the end of the month. Says "We will first need the reanimation of Russia-US relations, then the restoration."
RBNZ (MNI): RBNZ Cuts OCR 50bp to 3.75% as Expected
The Reserve Bank of New Zealand monetary policy committee cut the Official Cash Rate a further 50 basis points to 3.75% on Wednesday, noting scope existed for further easing throughout 2025. “With headline CPI inflation close to the midpoint, measures of core inflation converging on the midpoint, stable business inflation expectations, and significant spare capacity in the economy, the Committee agreed that a further reduction in the OCR was appropriate,” the MPC said in a statement following the decision.
RBNZ (MNI): Orr Signals More Gradual Cuts Ahead
The Reserve Bank of New Zealand is likely to decelerate Official Cash Rate cuts, with 25-basis-point adjustments signaled for both the April and May meetings, Governor Adrian Orr told reporters following Wednesday's 50bp reduction to 3.75%. “We are looking at lowering the OCR a little bit quicker than what we projected back in November, but that's around 50bp by mid-year,” Orr said, pointing to the updated forecasts within the Monetary Policy Statement published alongside Wednesday’s decision.
EU/RUSSIA (MNI): 16th Sanctions Package Agreed as Divergence w/US Looms
EU ambassadors have reached a preliminary accord on the 16th package of sanctions on Russia. The sanctions are reported to include a Russian primary aluminium import ban, 'phased-in' restrictions on certain flat-rolled products of alloy steel, certain machine tools, and certain automotive parts and accessories, and the listing of another 73 new shadow fleet vessels. The package is set to be formally adopted by EU foreign ministers at the Foreign Affairs Council on Monday 24 Feb (marking the third anniversary of Russia's full-scale invasion of Ukraine).
ECB (BBG): ECB’s Panetta Says Economic Weakness Is Worse Than Expected
The euro zone’s bout of economic sluggishness is lasting longer than anticipated, European Central Bank Governing Council member Fabio Panetta said, warning that the so far resilient jobs market may be cracking. The weakness is “more persistent than we expected,” with a long-awaited consumption-led recovery failing to materialize, the Italian central-bank chief said.
UK (FT): Keir Starmer Prepares to Seek Approval From Donald Trump for Chagos Islands Deal
Sir Keir Starmer will next week try to sell his contentious Chagos islands deal to US President Donald Trump, amid a growing dispute over the rationale for an agreement affecting the US-UK military base at Diego Garcia. British officials claim that criticism of the deal is based on “wild speculation” and insist there are multiple national security grounds for striking an accord under which the UK will cede sovereignty of the Chagos Islands to Mauritius.
BOJ (MNI): BOJ Takata Backs Gradual, Vigilant Hikes
Bank of Japan board member Hajime Takata said on Thursday the BOJ needed to consider raising the policy interest rate to avoid creating excessively high expectations of continued monetary easing. “Inflation is approaching the 2% price stability target, with positive corporate behaviour already being observed, I believe it will be important for the Bank to consider continuing to implement gear shifts gradually, even after the additional rate hike decided in January 2025, in order to avoid creating excessively high expectations of continued monetary easing, which would lead to a materialisation of the upside risks to prices and the risk of overheating of financial activity,” Takata told business leaders in Sendai City.
CHINA (BBG): Chinese Investment Into North America Crashed Before US Election
China’s investment into North America dropped at the end of last year below levels seen during the worst of the pandemic, a slump caused by hurdles in the US and likely exacerbated by a wait-and-see attitude of firms ahead of the election won by Donald Trump. Companies only announced $191 million of new investments into Canada, Mexico and the US last quarter, according to new research from US-based consultancy Rhodium Group, a decline of more than 90% from the same period a year earlier.
CHINA (MNI): China Unveils Plan to Attract Foreign Investors
MNI (Beijing) China will facilitate mergers and acquisitions involving foreign investors and strengthen efforts to attract investment in key areas, according to a plan approved by the State Council on Wednesday. Chinese authorities will optimise rules and procedures, and lower barriers for cross-border share swaps, while foreign-invested companies will be allowed to use Chinese domestic loans for equity investments, the document said, noting the country encourages foreign investment in service sectors such as elderly care services, culture and tourism, sports, healthcare, vocational education and finance.
CHINA (MNI): China to Ensure Credit Supply for Private Companies
MNI (Beijing) China’s top financial watchdog said Wednesday it will work to maintain a stable and effective credit supply to private enterprises, including private real estate developers, according to a statement on the National Financial Regulatory Administration website. The regulator said it will increase support for small and medium-sized enterprises’ first-time borrowing and loan renewals, as well as bridging banks and enterprises for key private investment projects.
BRAZIL (WSJ): Brazil Charges Former President Bolsonaro in Alleged Coup Plot
Brazil’s Attorney General’s Office charged former President Jair Bolsonaro on Tuesday with plotting to overturn his 2022 election loss as the country’s authorities zero in on one of President Trump’s closest allies in Latin America. Attorney General Paulo Gonet charged Bolsonaro and 33 of his right-wing allies over what police said was a plot to stop President Luiz Inácio Lula da Silva from taking office in 2023, including plans to assassinate the leftist leader.
INDONESIA (MNI): BI-Rate Stays on Hold
Bank Indonesia leaves its policy rate unchanged at 5.75%, pausing its easing cycle in line with the consensus call. A minority of 14 out of 35 economists polled by Bloomberg expected a 25bp rate cut, while the other 21 correctly predicted the on-hold decision. Governor Warjiyo pointed to uncertainties in global financial markets amid US trade policies and reduced room for Fed easing, while also pointing to the continued need to support growth.
PHILIPPINES (BBG): Philippines VP Duterte Asks Court to Void Impeachment Case
Philippine Vice President Sara Duterte has asked the Supreme Court to nullify the impeachment complaint against her, as the embattled politician challenges efforts to oust her. Duterte filed the petition on Tuesday, when her supporters also made a separate submission asking the court to void the impeachment case, a spokesperson for the court said on Wednesday. The moves come after the House of Representatives impeached the vice president earlier this month on charges she plotted to assassinate President Ferdinand Marcos Jr. and misused public funds.
DATA
UK DATA (MNI): UK Inflation Hits Highest Annual Rate Since March
- UK JAN CPI -0.1% M/M, +3% Y/Y
- UK JAN CORE CPI -0.4% M/M, +3.7% Y/Y
- UK JAN SERVICES CPI -0.2% M/M, +5% Y/Y
- UK JAN RPI -0.1% M/M, +3.6% Y/Y
UK inflation rose at the fastest pace in almost a year in January, outpacing even the Bank of England's expectation for a move higher, data released Wednesday by the Office for National Statistics showed. CPI rose by 3.0%, year-on-year, up from 2.5% in the 12 months to December, hitting the highest level since the 3.2% seen in March 2024. “The rise was driven by air fares not falling as much as we usually see at this time of year, partly impacted by the timing of flights over Christmas and New Year," ONS Chief Economist Grant Fitzner said.
Overall for the MPC this is a rather mixed release. The small downside surprise in services inflation (0.15ppt vs their Feb MPR forecast) will be a welcome surprise. The MPC has shown through its wider communications that it's not too concerned about energy CPI increasing later this year, but if food prices also increase and core goods prices settle at higher levels, that's going to
make it harder to get headline CPI back to target without services coming in lower than pre-pandemic levels on a sustainable basis. For March this probably changes no one's view. And it's not a big enough surprise to get a bigger reading for the future yet. But it is more of the same with upside surprises to food and core goods.
UK DATA (MNI): Brightmine Median Pay Awards at Lowest Level Since 2021
- UK NOV-JAN MEDIAN PAY AWARDS +3% :Brightmine
Brightmine median basic pay awards in the 3 months to January came in at 3.0%, the second consecutive reading where pay awards have remained at the lowest level since December 2021 (after the 3 months to December figure was revised to 3.0% from 3.3%). The press release notes this is "signaling a shift toward more restrained pay increases after a period of elevated awards." The dispersion in pay awards narrowed in January with the interquartile range having narrowed to between 2.5% and 4.0% in January, driven by the upper quartile falling.
EUROZONE DATA (MNI): Dec Current Account Surplus at 2.8% From 1.7% a Year Ago
The Eurozone seasonally adjusted current account surplus was E38.4bln in December, up from a downwardly revised E25.1bln in November (vs E27.0bln initial). As a 12m rolling percentage of GDP, the surplus was steady at 2.8%. That's still up from 1.7% in 2023. The increase in the surplus from a year ago was largely goods driven (2.6% of GDP in Dec 2024 vs 1.7% the year prior), with the services surplus seeing a more modest increase to 1.1% (vs 0.8% a year prior). Primary (0.2% of GDP) and secondary (-1.1% of GDP) income balances were unchanged on the year.
CHINA DATA (MNI): China Jan Utilised FDI Lower Than Last Year
MNI (Beijing) China utilised CNY97.6 billion of foreign investment during January, a 13.4% year-on-year decline but a 27.5% month-on-month increase, data from the Ministry of Commerce showed on Wednesday. The manufacturing sector utilised CNY28.78 billion, while the service sector used CNY66.8 billion, the Ministry said, adding that China saw the establishment of 4,229 new foreign-invested enterprises during the first month, a 7.8% decrease y/y.
CHINA DATA (MNI): China House Price Declines Narrow in January
MNI (Beijing) New commercial residential sales prices in first-tier cities fell by 3.4% year-on-year in January, narrowing from December’s 3.8% y/y decline, data from the National Bureau of Statistics showed on Wednesday. Second-tier cities’ new commercial residential sales prices fell 5.0% year-on-year, 0.4 percentage points narrower fall than the previous month. Secondary market sales prices in first-tier and second-tier cities fell by 5.6% and 7.6% year-on-year, 1.1 pp and 0.3 pp narrower than December.
JAPAN DATA (MNI): Autos, Ships Push Japan Jan Exports Higher
- JAPAN POSTS JPY2.76 TRLN TRADE DEFICIT IN JAN
- JAPAN JAN EXPORTS +7.2% Y/Y; DEC +2.8%
Japan’s exports posted their fourth straight rise in January, up 7.2% vs. +2.8% in December, thanks to an increase in automobile and vessel shipments, data released by the Ministry of Finance showed on Wednesday. Exports of automobiles rose 10.5% in January following a 5.9% decline in December, while exports of ships rose 106.9%.Imports increased 16.7% in January for the second straight rise following +1.7% in December. Japan posted a trade deficit of JPY2.76 trillion, the first deficit in two months following December's JPY132.5 billion surplus.
JAPAN DATA (MNI): Japan Govt Keeps Econ Assessment; Upgrades Exports
Japan’s government left its overall economic assessment in February for the seventh straight month but upgraded its view on exports for the first time since August 2023, the Cabinet Office said on Wednesday. The assessment on imports was lowered for the first time since March 2024. The assessments on other major components, such as private consumption, capital investment and production, were left from the previous month.
JAPAN DEC CORE MACHINE ORDERS -1.2% M/M; NOV +3.4% (MNI)
AUSTRALIA DATA (MNI): Aussie Q4 Wages Grow 0.7% Q/Q
The Australian Wage Price Index rose 0.7% q/q in Q4, 10 basis points lower than expected and 20bp down on Q3’s result, data from the Australian Bureau of Statistics showed Wednesday. The measure rose 3.2% y/y, in line with the Reserve Bank of Australia’s most recent forecasts. The private sector rose 0.7%, while the public sector saw a 0.6% increase over the quarter. The result was the lowest quarterly wage growth since March 2022.
FOREX: USD Bounce Drags EUR/USD Further Off Recovery High
- The RBNZ rate decision spurred initial heavy selling in NZD, as markets responded to the 50bps rate cut to prompt a 0.5678 low in NZD/USD. The move proved short-lived, with the rally off lows coinciding with the RBNZ's signals that the OCR may only have limited room to fall further. As such, a short-covering bounce to 0.5732 has stuck, keeping the NZD the strongest performer in G10 headed into the NY crossover.
- The single currency is the poorest performer so far, pressing EUR/USD back below 1.0450 and through yesterday's lows in the process. The move comes as part of the a broader bounce off lows for the USD Index in a move that looks idiosyncratic relative to broader market risk appetite: the EuroStoxx50 continues to plumb alltime highs.
- UK inflation data came in ahead of expectations, however the details show little evidence that should push any MPC votes in either direction - with the upside surprises stemming from core goods and food prices - leaving UK rates markets primed for the next BoE cut at the June meeting.
- Datapoints are few and far between Wednesday, with US housing starts and building permits the primary releases. This should leave markets with plenty of capacity to digest the FOMC minutes later today - at which traders will be on watch for the rationale behind the Fed's recent shift in statement language concerning inflation.
EGBS: Bund Futures Pressured by Supply, Oil Uptick; Spreads Widen
Bund futures are -35 ticks at 131.75, pressured by this morning 10-year German supply and an uptick in crude oil futures.
- EGBs have been happy to look through US President Trump’s overnight tariff threats on Auto, Drug, Chip Imports, while the mixed UK CPI report this morning also saw little reaction.
- The German curve has bear steepened, with 2-year yields up 1.5bps and 30-year yields over 3bps higher.
- The 10-year Bund auction was digested smoothly, with the lowest accepted price of 99.77 in excess of the 99.745 pre-auction mid.
- 10-year peripheral spreads to Bunds have extended earlier widening, with European equity futures pulling at typing. The BTP/Bund spread is 1.5bps wider at 107bps, after marking a fresh year-to-date low of 104bps yesterday.
- ECB dove Panetta provided characteristically dovish commentary around weak growth prospects this morning.
- Regional focus remains on Friday’s flash PMIs, while the FOMC minutes headlines today’s global macro calendar.
GILTS: Holding Lower After CPI, Next Support in Futures Nears
Gilt futures just above session lows, with a downtick in wider core global FI and this morning’s mixed domestic CPI data providing much of the weight.
- Futures have breached initial support, with bears now looking to test the 29 Jan low (91.96), which protects more meaningful support at the 24 Jan low (91.52). The short-term bull cycle remains intact above the latter.
- Yields 3-5bp higher across the curve, 10s lead the move.
- Demand at the 4.375% Mar-28 gilt auction was a little soft, with the lowest accepted price below pre-auction mids and the cover ratio edging lower vs. the previous auction. There was no tangible market reaction
- Elsewhere, the DMO announced the launch of a new index-linked gilt maturing on 22 September 2049. The transaction is set to take place in the week commencing 10 March 2025, subject to demand and market conditions.
- BoE-dated OIS shows 50.5bp of cuts through December vs. 53.5bp at yesterday’s close.
- Further forwards, the strip shows 0.5bp of cuts for next month, 20bp of easing through May and 26bp of cuts through June.
- A reminder that we have suggested that today’s inflation data is unlikely to move the needle when it comes to specific MPC member votes in March and continue to look for the next rate cut to come in May.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.450 | -0.4 |
May-25 | 4.252 | -20.3 |
Jun-25 | 4.193 | -26.1 |
Aug-25 | 4.055 | -39.9 |
Sep-25 | 4.027 | -42.7 |
Nov-25 | 3.963 | -49.1 |
Dec-25 | 3.950 | -50.4 |
EQUITIES: Eurostoxx 50 Futures MA Studies Remain in Bull Mode Setup
The trend condition in Eurostoxx 50 futures remains bullish, with prices edging to a new alltime high on the continuation contract. The move higher last week confirmed 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. Support to watch is 5325.83, the 20-day EMA. S&P E-Minis continue to climb and the contract maintains a firmer tone. Attention is on resistance at 6162.25, the Jan 24 high. Clearance of this level would expose the key resistance at 6178.75, the Dec 6 ‘24 high. A move above this hurdle would resume the primary uptrend. On the downside, initial key support has been defined at 6014.00, the Feb 10 low. A break would highlight a bearish development.
- Japan's NIKKEI closed lower by 105.79 pts or -0.27% at 39164.61 and the TOPIX ended 8.26 pts lower or -0.3% at 2767.25.
- Elsewhere, in China the SHANGHAI closed higher by 27.049 pts or +0.81% at 3351.539 and the HANG SENG ended 32.57 pts lower or -0.14% at 22944.24.
- Across Europe, Germany's DAX trades higher by 51.82 pts or +0.23% at 22895.36, FTSE 100 lower by 9.44 pts or -0.11% at 8757, CAC 40 down 15.83 pts or -0.19% at 8191 and Euro Stoxx 50 up 1.47 pts or +0.03% at 5534.71.
- Dow Jones mini up 40 pts or +0.09% at 44682, S&P 500 mini up 5 pts or +0.08% at 6151.25, NASDAQ mini up 25 pts or +0.11% at 22255.5.
Time: 09:55 GMT
COMMODITIES: Bear Threat for WTI Futures Present Despite Moderate Recovery
WTI futures are firmer early Wednesday, however a bear threat remains present given the proximity to recent lows. Earlier this week, price pulled back from the recent high and has again traded below the 50-day EMA - at $71.62. Attention is on $70.20 (pierced), the Feb 6 low. A clear break of it would undermine a bullish theme and confirm a breach of the 50-day EMA. This would strengthen a bearish threat and open $67.75, the Dec 20 ‘24 low. Key S/T resistance has been defined at $74.06, the Feb 3 high. A move above this level would reinstate a bull theme. A bull cycle in Gold remains in play and the yellow metal continues to hold on to the bulk of its recent gains. Fresh highs 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 $2833.2, the 20-day EMA.
- WTI Crude up $0.52 or +0.72% at $72.37
- Natural Gas down $0.02 or -0.4% at $3.991
- Gold spot up $8.93 or +0.3% at $2945.17
- Copper up $1.5 or +0.32% at $465.65
- Silver up $0.11 or +0.32% at $32.9936
- Platinum up $1.12 or +0.11% at $987.22
Time: 09:55 GMT
| Date | GMT/Local | Impact | Country | Event |
| 19/02/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 19/02/2025 | 1330/0830 | *** | US | Housing Starts |
| 19/02/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 19/02/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 19/02/2025 | 1900/1400 | US | FOMC Minutes | |
| 19/02/2025 | 1900/1400 | *** | US | FOMC Minutes |
| 19/02/2025 | 2200/1700 | US | Fed Vice Chair Philip Jefferson | |
| 20/02/2025 | 0030/1130 | *** |  AU | Labor Force Survey |
| 20/02/2025 | 0700/0800 | ** |  DE | PPI |
| 20/02/2025 | 1000/1100 | ** |  EU | Construction Production |
| 20/02/2025 | 1100/1100 | ** |  GB | CBI Industrial Trends |
| 20/02/2025 | 1330/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 20/02/2025 | 1330/0830 | *** | US | Jobless Claims |
| 20/02/2025 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 20/02/2025 | 1435/0935 | US | Chicago Fed's Austan Goolsbee | |
| 20/02/2025 | 1500/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 20/02/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 20/02/2025 | 1600/1100 | ** | US | DOE Weekly Crude Oil Stocks |
| 20/02/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 20/02/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 20/02/2025 | 1705/1205 | US | St. Louis Fed's Alberto Musalem | |
| 20/02/2025 | 1800/1300 | ** | US | US Treasury Auction Result for TIPS 30 Year Bond |
| 20/02/2025 | 1930/1430 | US | Fed Governor Michael Barr | |
| 21/02/2025 | 2200/0900 | *** | AU | Judo Bank Flash Australia PMI |
| 20/02/2025 | 2200/1700 | US | Fed Governor Adriana Kugler | |
| 21/02/2025 | 2330/0830 | *** |  JP | CPI |