EXECUTIVE SUMMARY
- TRUMP SAYS HE WANTS UNIVERSAL TARIFFS ‘MUCH BIGGER’ THAN 2.5%
- NETANYAHU EYES US TRIP TO DISCUSS GAZA CEASEFIRE WITH TRUMP
- PBOC INJECTS RECORD LIQUIDITY VIA NEW TOOL AS YUAN LIMITS EASING
- JAPAN GOVERNMENT NOMINATES KOEDA FOR BOJ BOARD
Figure 1: USD Index back above 50-DMA on latest tariff rhetoric
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 (BBG): Trump Says He Wants Universal Tariffs ‘Much Bigger’ Than 2.5%
US President Donald Trump wants universal tariffs at “much bigger” than 2.5%, he tells reporters aboard Air Force One.
US (FT): Scott Bessent Pushes Gradual 2.5% Universal US Tariffs Plan
Donald Trump’s Treasury secretary Scott Bessent is pushing for new universal tariffs on US imports to start at 2.5 per cent and rise gradually, said four people familiar with the proposal. The 2.5 per cent levy would move higher by the same amount each month, the people familiar with it said, giving businesses time to adjust and countries the chance to negotiate with the US president’s administration.
US (WSJ): Trump Order Freezing Foreign Aid Halts Programs Worldwide, Prompts Confusion and Rush for Waivers
A Trump administration order pausing almost all foreign aid has left counterterrorism training in Somalia, HIV treatment in Uganda, narcotics interdiction in Colombia, prosthetics for refugees from Myanmar, and many more U.S.-funded overseas assistance programs in sudden limbo. The Jan. 24 directive stated that the State Department and the U.S. Agency for International Development “shall not provide foreign assistance” until a high-level review of the programs is completed, except to Israel and Egypt and in severe cases where emergency food assistance is needed.
US/ISRAEL (BBG): Netanyahu Eyes US Trip to Discuss Gaza Ceasefire With Trump
Israeli Prime Minister Benjamin Netanyahu is planning to visit Washington next week to meet US President Donald Trump, according to people familiar with the matter, as the leaders look to maintain the ceasefire in Gaza. The meeting is not yet finalized and may not come together in that time frame, the people said on condition of anonymity. The trip may partly depend on Netanyahu’s health. In late December, the 75-year-old had prostate-removal surgery after what doctors described as a non-cancerous enlargement. While he’s been working recently, medical staff are still monitoring his recovery.
EU (FT): EU and Nato Take Vow of Silence on Greenland
The EU and Nato have taken a vow of silence over Greenland after Denmark requested its key allies refrain from reacting to Donald Trump’s threats to seize the Arctic island. Copenhagen’s strategy of avoiding public confrontation with Trump, which four officials said was closely co-ordinated with Nato and the EU, underscores the scramble among US allies to work out how to handle the US president’s pugnacious diplomacy.
DENMARK (MNI): PM Urges European Unity Amid Trump Push for Greenland
Speaking alongside German Chancellor Olaf Scholz in Berlin, PM Mette Frederiksen calls for "an even more united Europe and for more cooperation" in the face of US President Donald Trump's call for Denmark to sell Greenland to the United States. Frederiksen did not mention Greenland by name, instead raising the threat to European security posed by Russia's hybrid attacks. Frederiksen: "We need a stronger and a more resolute Europe standing increasingly in its own right, [...[ I think we have to take more responsibility for our own security…Europe, our continent, is based on the idea of that cooperation rather than confrontation will lead to peace, to progress, to prosperity, "
GERMANY (FT): German Demand Soars for Russian LNG via European Ports
Germany is still buying significant amounts of Russian liquefied natural gas via other EU countries despite Berlin turning away direct shipments of Russian fuel, a report has found. German national energy company Sefe bought 58 cargoes of Russian LNG, through the French port of Dunkirk last year — more than six times the figure in 2023, according to a report by Belgian, German and Ukrainian NGOs.
UK (BBG): Keir Starmer Says UK Economy Is Starting to Turn Around
Prime Minister Keir Starmer said the UK economy is starting to turn around as he sought to reset his government’s relationship with business after a torrid first six months in power for Labour. “We have to get our economy working. I think we’re beginning to see how that’s turning around,” Starmer said in an interview with Bloomberg TV on Tuesday. “The number one priority of this Labour government is growth: growth, growth, growth.”
UK (FT): Rental Prices Outside London Fall for First Time Since Pandemic, Data Shows
Rental prices outside London fell quarter-on-quarter in late 2024 for the first time since before the pandemic, signalling a “key milestone” in Great Britain’s housing market after years of soaring rents. The average advertised rent of properties beyond the capital fell 0.2 per cent to £1,341 between the third and the fourth quarter of 2024, marking the first drop since the end of 2019, according to data from the property portal Rightmove on Tuesday.
CHINA (BBG): PBOC Injects Record Liquidity Via New Tool as Yuan Limits Easing
China’s central bank injected a record amount of cash into the financial system via a new tool in January, delaying more high-profile policy easing as it prioritizes stabilizing the yuan. The People’s Bank of China conducted 1.7 trillion yuan ($234 billion) of so-called outright reverse repurchase agreements using three- and six-month contracts to keep liquidity ample, it said in a statement Monday. That’s the biggest operation since officials started the program in October as part of an overhaul of their policy toolbox.
JAPAN (MNI): Japan Govt Nominates Koeda for BOJ Board
Japan's government on Tuesday nominated Junko Koeda, a professor at Waseda University, as the replacement for Bank of Japan Board Member Seiji Adachi, whose term ends on March 25, Nikkei reported. Koeda appointment will represent the first time two women have sat simultaniously among the BOJ's nine members.
She needs to get the approval at both Upper and Lower houses. Toyoaki Nakamura, the sole dissenter during last week's vote to hike the policy rate 25 basis points to 0.5%, will end his term on June 30.
JAPAN (BBG): Japan’s Pension Fund GPIF to be Allowed Bid in Bond Auctions
Moves are underway that would allow Japan’s Government Pension Investment Fund to participate directly in government bond auctions, according to people familiar with the matter. GPIF, as the fund is commonly known, at present purchases Japanese government bonds from auctions via securities companies. The Ministry of Finance will soon invite public comments and amend a government ordinance that defines participants in JGB auctions, according to the people familiar with the matter, who asked not to be identified as the information isn’t yet public.
JAPAN (BBG): Japan Opposition Party to Block Budget Without Bigger Tax Deal
Japanese Prime Minister Shigeru Ishiba’s government risks rejection of its annual budget if it doesn’t concede more ground to a small opposition party seeking a larger tax-free allowance, according to the party’s policy chief. The Democratic Party for the People will continue to push for a ceiling on tax-free income to be lifted to ¥1.78 million ($11,500) and will not accept the ruling coalition’s current proposal, DPP policy chief Makoto Hamaguchi said. He also largely ruled out a possible ramped-up government offer cited in a local media report.
DATA
EUOR AREA DATA (MNI): Eurozone Lending Conditions Tighten - ECB Survey
Euro area banks saw a renewed tightening of credit standards for loans or credit lines to enterprises and a continued tightening for consumer and household lending in Q4 2024, with a further net contraction expected in Q1 according to the latest ECB Bank Lending Survey, published Tuesday. Standards for mortgage loans to households were broadly unchanged, even as demand picked up strongly as the ECB cut interest rates by a further 50 basis points in the three months to December.
UK DATA (MNI): BRC-NielsenIQ Shop Prices: Deflationary Levels Similar to November
- UK JAN BRC SHOP PRICES -0.4% M/M, -0.7% Y/Y
BRC-NielsenIQ Shop Prices became less deflationary in January at -0.7% Y/Y (vs -1.0% in December). However, recall that the December data was impacted by including Cyber Monday and the late Black Friday sales (which weren't included in the prior year). So it is more beneficial to compare the January Y/Y prints with November's fall of -0.6%Y/Y for a more representative comparison that is less impacted by calendar effects.
SPAIN DATA (MNI): Lowest Unemployment Rate Since 2008
The Spanish Q4 unemployment rate was lower than expected at 10.6% (vs 11.1% cons, 11.2% prior). This was the lowest quarterly unemployment rate since Q2 2008. Spain's economic outperformance post-covid has been driven by increased immigration and strong services industry performance. This has been reflected in solid labour market outcomes, with improvements seen in both hours worked and real productivity per hour worked relative to Italy, Germany and France.
FRANCE JAN CONSUMER SENTIMENT 92 (MNI)
JAPAN DATA (MNI): Japan's Dec Trimmed Mean Rises 1.9% vs. 1.7%
Japan’s trimmed mean measure of underlying inflation rose 1.9% in December for the second straight rise following November’s 1.7%, indicating the pace of pass-through of cost increases caused by the weak yen and high labour costs continues, data released by the Bank of Japan showed on Tuesday. The trimmed mean followed data released on Friday that showed Japan's annual core consumer inflation rate rose 3.0% y/y in December, up from November’s 2.7% for the second straight rise and above the BOJ's 2% target for the 33rd straight month.
JAPAN DEC SERVICES PPI +2.9% Y/Y; NOV UNREV +3.0% (MNI)
JAPAN DEC SERVICES PPI 0.0% M/M: NOV REV +0.3% (MNI)
AUSTRALIA DATA (MNI): NAB Business Surveys, Business Conditions Improve
Australian business conditions improved in December, rising 3pt to +6, driven by a recovery in retail as consumer spending strengthened and price pressures eased. Retail conditions turned positive for the first time since November 2023, while business confidence edged up 1pt to -2. Services sectors remained the strongest performers, and capacity utilization rose to 82.8%, above its long-term average, indicating robust demand.
FOREX: Universal Tariff Talk Puts USD Index Back Above 50-dma
- The greenback is clawing back a small part of the recent lost ground, aiding the USD Index back above the 50-dma (107.648). As a result, markets are back above the 23.6% retracement for the year-to-date range in the currency, which helps add to the argument for a near-term bounce off lows for the dollar. It's the Fed decision ahead, and in particular any observations on the neutral rate, that should trigger short-term conviction here.
- Having been the best performer across G10 on Monday, the JPY is weaker against most others into Tuesday's NY crossover. Equity sentiment remains a key driver here, and the bounce off lows for the e-mini S&P has been instructive in the pullback for the JPY today.
- Trump tariff threats have further worked in favour of the greenback, as they re-demonstrate the concerns around a further inflationary impulse. Both the President and his Treasury Secretary talked up the benefits of universal import tariffs overnight, with Bessent eyeing 2.5% tariffs as a starting point, but Trump claiming he wants "much bigger" levies.
- Preliminary durable goods orders and the Conference Board's consumer confidence stats for January are next to cross, but are unlikely to shake up markets given the proximity to the Fed on Wednesday. The central bank speaker schedule remains very contained, with both the FOMC and ECB's Governing Council inside their pre-meeting media blackout periods.
EGBS: BTPs and OATs Outperform Bunds on Improved Risk Backdrop
Bund futures are -10 ticks at 131.53, softening a touch as global equity futures continue to recover from yesterday’s lows. The improved risk backdrop sees BTP and OAT futures outperform Bunds.
- A corrective bull cycle remains in play in Bunds, with initial resistance still the 20-day EMA at 132.10.
- The German cash curve has lightly bear flattened. The new 2.20% Mar-27 Schatz was launched this morning, and digested smoothly.
- The ECB’s Q4 Bank Lending Survey signalled a tightening of credit standards and a lower demand balance amongst firms than seen in Q3.
- Austria is launching a new 10-year RAGB and tapping a 2049 Green RAGB via syndication today.
- Alongside Germany, the Netherlands and Italy also held conventional auctions this morning.
- The OAT/Bund spread is back below 73bps, with fiscal/political headline flow set to become more prominent again in the coming days/weeks.
- The remainder of today’s regional data calendar is light, leaving focus on any US tariff-related headline flow and the upcoming run of DM central banks later this week.
GILTS: Off Lows, No Lasting Reaction to Cross-Market Cues
Little lasting reaction to cross-asset moves in gilts, with the recovery from yesterday’s lows in oil and equity markets having more impact elsewhere.
- Futures back towards session highs in recent trade, last -9 at 92.33 (92.13-36 range).
- The medium-term trend condition in the contract remains bearish. However, recent gains continue to highlight a corrective phase and signal scope for a continuation higher near-term.
- Initial support and resistance located at 91.10/92.68.
- Yields little changed across the curve.
- 2s10s 0.5bp off ’25 highs, 5s30s on track for a fresh ’25 closing high.
- Recent tightening to Bunds extends. 10-Year ~1.5bp tighter at 204bp, spread on track for lowest close since early November.
- 1.125% Sep-35 I/L supply was digested smoothly.
- BoE-dated OIS still little changed on the day, showing ~71.5bp of easing for ’25.
- We continue to look for cuts in February and May, with ~22.5bp and ~42.5bp of cuts currently priced through those meetings.
- SONIA futures flat to +1.0.
- Little of note on the UK data calendar this week, which will leave focus on the long end & broader macro cues, as well as issuance.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Feb-25 | 4.474 | -22.7 |
Mar-25 | 4.427 | -27.3 |
May-25 | 4.277 | -42.3 |
Jun-25 | 4.210 | -49.0 |
Aug-25 | 4.096 | -60.4 |
Sep-25 | 4.067 | -63.3 |
Nov-25 | 4.003 | -69.7 |
Dec-25 | 3.981 | -71.9 |
EQUITIES: E-Mini S&P Back Above Key Short-Term Support
A bull cycle in the Eurostoxx 50 futures contract remains intact and the move lower from last Friday’s high, is considered corrective. A deeper retracement would allow an overbought trend condition to unwind. Moving average studies remain in a bull-mode set-up highlighting a dominant uptrend. The first important support to watch is 5097.39, the 20-day EMA. A resumption of the uptrend would open 5298.50, a Fibonacci projection. The S&P E-Minis contract initially traded lower Monday extending the pullback from last Friday’s high. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the move down 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 lower by 548.93 pts or -1.39% at 39016.87 and the TOPIX ended 1.17 pts lower or -0.04% at 2756.9.
- Across Europe, Germany's DAX trades higher by 85.17 pts or +0.4% at 21367.16, FTSE 100 higher by 46.86 pts or +0.55% at 8549.93, CAC 40 up 19.85 pts or +0.25% at 7926.43 and Euro Stoxx 50 up 14.69 pts or +0.28% at 5203.14.
- Dow Jones mini up 14 pts or +0.03% at 44916, S&P 500 mini up 16.5 pts or +0.27% at 6062.25, NASDAQ mini up 107 pts or +0.5% at 21361.5.
Time: 09:50 GMT
COMMODITIES: WTI Futures Through Initial Support at 20-Day EMA
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 $72.16. 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. Despite yesterday’s pullback, Gold is trading closer to its recent highs. A bull cycle is in play and the 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 $2671.6, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
- WTI Crude up $0.34 or +0.46% at $73.5
- Natural Gas down $0.04 or -1.08% at $3.65
- Gold spot up $3 or +0.11% at $2743.4
- Copper up $2.1 or +0.5% at $425.1
- Silver down $0.12 or -0.4% at $30.09
- Platinum down $2.13 or -0.22% at $947.69
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 28/01/2025 | 1330/0830 | ** |  US | Durable Goods New Orders |
| 28/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 28/01/2025 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 28/01/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 28/01/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 28/01/2025 | 1430/1530 |  EU | ECB's Cipollone in panel on future of markets | |
| 28/01/2025 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 28/01/2025 | 1500/1000 | ** | US | Richmond Fed Survey |
| 28/01/2025 | 1530/1030 | ** | US | Dallas Fed Services Survey |
| 28/01/2025 | 1630/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 28/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 28/01/2025 | 1700/1800 | EU | ECB's Lagarde to mee t with Ursula von der Leyen | |
| 28/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
| 29/01/2025 | 0030/1130 | *** |  AU | CPI Inflation Monthly |
| 29/01/2025 | 0030/1130 | *** | AU | CPI inflation |
| 29/01/2025 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 29/01/2025 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 29/01/2025 | 0700/0800 | SE | Flash Quarterly GDP Indicator | |
| 29/01/2025 | 0800/0900 | *** |  ES | GDP (p) |
| 29/01/2025 | 0830/0930 | *** | SE | Riksbank Interest Rate Decison |
| 29/01/2025 | 0900/1000 | ** | EU | M3 |
| 29/01/2025 | 0900/1000 | ** |  IT | ISTAT Consumer Confidence |
| 29/01/2025 | 0900/1000 | ** | IT | ISTAT Business Confidence |
| 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 |