Articles

UK Energy Secretary Ed Miliband to visit China March 17 to ap

• to reboot UK-China talks on energy cooperation (UK-China Energy Dialogue)
• will meet with Chinese investors

info via Reuters.

This article was written by Eamonn Sheridan at www.forexlive.com.

IC Markets Asia Fundamental Forecast | 28 February 2025

What happened in the U.S. session?

After expanding at an annualized rate of 3.0% and 3.1% in the second and third quarters of 2024 respectively, the second estimate by the Bureau of Economic Analysis (BEA) pointed to a slowdown in economic activity in the final quarter. GDP increased at an annual rate of just 2.3% as fixed investment contracted for the first time since the first quarter of 2023 while both exports and imports contracted. Meanwhile, unemployment claims unexpectedly surged from 220k in the previous week to 242K in the latest reading, well above market expectations of 222k. marginally higher than the previous week’s figure of 219k. Despite a softer set of macroeconomic data, demand for the dollar intensified as the culmination of trade tariffs placed or to be placed on the trading partners of the U.S. functioned as a strong catalyst. The dollar index (DXY) jumped above 107 to hit an overnight high of 107.35.

What does it mean for the Asia Session?

The Tokyo core CPI had surged from an annual rate of 1.8% last October to 2.5% in January this year, highlighting the rising price pressures in Japan. However, February’s reading moderated lower to 2.2%, slowing from January’s 11-month high as it printed under market estimates of 2.3%. Despite showing some signs of easing, the latest result remains above the Bank of Japan’s 2% target for the fourth consecutive month, reinforcing a hawkish outlook on domestic monetary policy. Demand for the yen remained strong as USD/JPY fell sharply towards 149 as Asian markets came online.

The Dollar Index (DXY)

Key news events today

PCE Price Index (1:30 pm GMT)

Chicago PMI (2:45 pm GMT)

What can we expect from DXY today?

The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – has shown the headline figure accelerating from September through December while the core remained unchanged at an annual rate of 2.8%. Both metrics continue to remain well above the Fed’s target of 2% and should January’s results come in hot once more, the dollar could see strong bids. Meanwhile, business activity in the Chicago area has been dire since the second half of 2022 with nearly every month indicating a contraction based on the Chicago PMI report. February’s PMI is expected to highlight the ongoing deterioration in this area, a result that could weigh on the greenback.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 29 January.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
• December’s Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025 totalling 50 bps, compared to the full percentage point of reductions projected in the previous quarter.
• GDP growth forecasts were revised upward for 2024 (2.5% vs. 2% in the September projection) and 2025 (2.1% vs. 2%), while remaining steady at 2% for 2026. Similarly, PCE inflation projections have been adjusted higher for 2024 (2.4% vs. 2.3%), 2025 (2.5% vs. 2.1%), and 2026 (2.1% vs. 2%).
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• The Committee will roll over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing in each calendar month that exceeds a cap of $25 billion per month and redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
• In addition, the Committee will reinvest the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding.
• The next meeting runs from 18 to 19 March 2025.

Next 24 Hours Bias

Medium Bullish

Gold (XAU)

Key news events today

PCE Price Index (1:30 pm GMT)

Chicago PMI (2:45 pm GMT)

What can we expect from Gold today?

The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – has shown the headline figure accelerating from September through December while the core remained unchanged at an annual rate of 2.8%. Both metrics continue to remain well above the Fed’s target of 2% and should January’s results come in hot once more, the dollar could see strong bids. Meanwhile, business activity in the Chicago area has been dire since the second half of 2022 with nearly every month indicating a contraction based on the Chicago PMI report. February’s PMI is expected to highlight the ongoing deterioration in this area, a result that could weigh on the greenback. Whatever the outcome, gold is likely to face higher volatility during the U.S. trading hours.

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

After hitting a high of 0.6400 last Friday, the Aussie ran out of steam and reversed sharply to dive over 2% this week. This currency pair slid lower towards 0.6220 as demand for the greenback intensified.

Central Bank Notes:

• The RBA reduced the cash rate by 25 basis points to bring it down to 4.10% on 18 January, marking the first rate cut since November 2020.
• Financial conditions are restrictive, which is weighing on demand and is helping to bring down underlying inflation; growth in private demand has been subdued.
• Underlying inflation has moderated over the past three quarters with trimmed mean inflation easing to 3.2% over 2024 and it is expected to reach the 2–3% target range in early 2025, which is sooner than expected at the time of the November Statement.
• The unemployment rate declined a little in late 2024 to 4% with much of the strength in the labour market underpinned by strong employment growth, which has also bolstered household incomes.
• The announcement of tariffs between the United States and other major economies poses challenges to the global outlook but the scale and incidence of the tariffs and their effects remain highly uncertain – which may itself delay some investment until the outlook becomes clearer.
• Economic activity strengthened in China but growth there is still facing structural headwinds while domestic economic growth is forecast to pick up and the labour market is forecast to remain tight.
• If the cash rate follows the market path, underlying inflation is projected to be a little above 2.5% over most of the forecast period. The anticipated recovery of GDP growth and lingering tightness in labour market conditions are expected to sustain some upward pressure on inflation.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 1 April 2025.

Next 24 Hours Bias

Medium Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

In a similar fashion to its Pacific neighbour, the Kiwi tumbled nearly 2.2% this week as it dropped to an overnight low of 0.5629. Extreme overhead pressures remain intact and this currency pair drifted towards 0.5600 at the beginning of the Asia session.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 3.75% on 19 February, marking the fourth consecutive rate cut.
• The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band; inflation expectations are at target and core inflation continues to fall towards the target mid-point.
• Economic activity in New Zealand remains subdued and with spare productive capacity, domestic inflation pressures continue to ease. Price and wage-setting behaviours are adapting to a low-inflation environment while the price of imports has fallen, also contributing to lower headline inflation.
• Economic growth is expected to recover during 2025 as lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions. Higher prices for some key commodities and a lower exchange rate will increase export revenues and employment growth is expected to pick up in the second half of the year as the domestic economy recovers.
• Global economic growth is expected to remain subdued in the near term as geopolitics, including uncertainty about trade barriers, is likely to weaken global growth. Global economic activity is also likely to remain fragile over the medium term given increasing geoeconomic fragmentation.
• Consumer price inflation is expected to be volatile in the near term, due to a lower exchange rate and higher petrol prices. Nevertheless, the Committee is well placed to maintain price stability over the medium term.
• The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the Committee confidence to continue lowering the OCR. If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.
• The next meeting is on 9 April 2025.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

Tokyo Core CPI (11:30 pm GMT 27th February)

What can we expect from JPY today?

The Tokyo core CPI had surged from an annual rate of 1.8% last October to 2.5% in January this year, highlighting the rising price pressures in Japan. However, February’s reading moderated lower to 2.2%, slowing from January’s 11-month high as it printed under market estimates of 2.3%. Despite showing some signs of easing, the latest result remains above the Bank of Japan’s 2% target for the fourth consecutive month, reinforcing a hawkish outlook on domestic monetary policy. Demand for the yen remained strong as USD/JPY fell sharply towards 149 as Asian markets came online on Friday.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 24 January, by an 8-1 majority vote, to set the following guidelines for money market operations for the inter-meeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• Japan’s economy has recovered moderately, although some weakness has been seen in part. Exports and industrial production have been more or less flat while corporate profits have been on an improving trend and business sentiment has stayed at a favourable level.
• The employment and income situation has improved moderately while private consumption has been on a moderately increasing trend despite the impact of price rises and other factors.
• On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been at around 3% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned.
• Inflation expectations have risen moderately while underlying CPI inflation has been increasing gradually toward the price stability target of 2%. With wages continuing to rise, there has been an increase in moves to reflect higher costs, such as increased personnel expenses and distribution costs, in selling prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 March 2025.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

Germany CPI (Tentative)

What can we expect from EUR today?

Consumer inflation, both headline and core, had accelerated from September through December in Germany. Headline CPI surged from an annual rate of 1.6% to 2.6% while the core jumped from 2.7% to 3.3%. However, inflationary pressures eased in January as both these metrics rose at a noticeably slower rate based on the preliminary estimates. Should the final result indicate price pressures moderating even lower, the Euro could face near-term headwinds.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 30 January to mark the fourth successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.90%, 3.15% and 2.75% respectively.
• The disinflation process is well on track and inflation is set to return to the Governing Council’s 2% medium-term target in the course of this year. Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027.
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 6 March 2025.

Next 24 Hours Bias

Medium Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

As widely anticipated, Switzerland’s economy expanded by 0.2% in the final quarter of 2024 to register a second successive period of slower growth. It also marked the softest expansion since the second quarter of 2023 with sectors such as construction; trade and motor vehicle repair; and human health and social work displaying weak performances. Meanwhile, the mining and quarrying; and arts, entertainment, and recreation sectors contracted. Coupled with strong bids for the greenback, USD/CHF rallied 0.8% as it broke above the key threshold of 0.9000 overnight. This currency pair was floating around 0.8990 at the beginning of the Asia session and it should remain supported as the day progresses.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Medium Bullish

The Pound (GBP)

Key news events today

BoE Deputy Governor Ramsden’s Speech (7:00 am GMT)

What can we expect from GBP today?

Bank of England (BoE) Deputy Governor David Ramsden will deliver his speech on monetary policy in a world of geopolitical fragmentation at Stellenbosch University in South Africa where he could drop subtle clues regarding the outlook on future monetary policy. With demand for the greenback picking up strongly, Cable reversed off Thursday’s high at 1.2688 before diving under 1.2600. This currency pair was floating around 1.2600 as Asian markets came online on Friday.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7 to 2 to reduce the Bank Rate by 25 basis points (bps) to bring it down to 4.50% on 6 February 2025, while two members preferred to reduce it by 50 bps.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• CPI inflation was 2.5% in 2024 Q4 as domestic inflationary pressures moderated but remained somewhat elevated while some indicators eased more slowly than expected. Higher global energy costs and regulated price changes are expected to push up headline CPI inflation to 3.7% in 2025 Q3, even as underlying domestic inflationary pressures are expected to wane further.
• While CPI inflation is expected to fall back to around the 2% target thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures.
• GDP growth has been weaker than expected at the time of the November Monetary Policy Report, and indicators of business and consumer confidence have declined – GDP growth is expected to pick up from the middle of this year.
• The labour market has continued to ease and is judged to be broadly in balance. Productivity growth has been weaker than previously estimated, and the Committee judges that growth in the supply capacity of the economy has weakened.
• Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate and it will continue to monitor closely the risks of inflation persistence and what the evolving evidence may reveal about the balance between aggregate supply and demand in the economy.
• Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 8 May 2025.

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

Key news events today

GDP (1:30 pm GMT)

What can we expect from CAD today?

After declining 0.2% in November, economic activity in Canada is expected to rebound in December with a growth of 0.3% over the previous month. Based on the preliminary estimates, sectors such as retail trade; manufacturing; and construction are anticipated to lead the expansion. However, the Loonie has come under intense pressure this week due to the tariffs slapped on Canadian imports into the U.S. with USD/CAD rallying more than 2.0% over the last couple of weeks. This currency pair broke above 1.4400 overnight and it looks to eclipse the 1.4500 level today.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points bringing it down to 3% on 29 January; this marked the sixth consecutive meeting where rates were reduced.
• The bank announced its plan to complete the normalization of its balance sheet, ending quantitative tightening, and will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.
• Past cuts to interest rates have started to boost the economy and the recent strengthening in both consumption and housing activity is expected to continue. However, business investment remains weak while the outlook for exports is being supported by new export capacity for oil and gas.
• The Bank forecasts GDP growth will strengthen in 2025 and now projects GDP will grow by 1.8% in both 2025 and 2026, somewhat higher than potential growth.
• The labour market remains soft, with the unemployment rate at 6.7% in December. Job growth has strengthened in recent months, after lagging growth in the labour force for more than a year. Wage pressures, which have proven sticky, are showing some signs of easing.
• CPI inflation remains close to 2%, with some volatility due to the temporary suspension of the GST/HST on some consumer products. Shelter price inflation is still elevated but it is easing gradually, as expected.
• A broad range of indicators, including surveys of inflation expectations and the distribution of price changes among components of the CPI, suggests that underlying inflation is close to 2% with forecasts that CPI inflation will be around the 2% target over the next two years.
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate a further 25 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The cumulative reduction in the policy rate since last June is substantial as lower interest rates are boosting household spending and the economy is expected to strengthen gradually and inflation to stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 12 March 2025.

Next 24 Hours Bias

Medium Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Prices for crude oil experienced a shot in the arm as U.S. President Donald Trump revoked a licence granted to U.S. oil major Chevron Corporation to operate in Venezuela on Thursday, elevating supply concerns for this commodity. The Chevron licence revocation means the company will no longer be able to export Venezuelan crude and at the same time, if Venezuelan state oil company PDVSA exports oil previously exported by Chevron, U.S. refineries would be unable to buy it because of American sanctions. WTI oil surged more than 2.5% as it hit an overnight high of $70.54 per barrel and this bullish sentiment could remain in place on the final trading day of the week. This benchmark could very well buck a 5-week losing streak by the time U.S. markets come to a close.

Next 24 Hours Bias

Weak Bullish

The post IC Markets Asia Fundamental Forecast | 28 February 2025 first appeared on IC Markets | Official Blog.

Manufacturing and service are both expected to improve over January. manufacturing is expected to move into expansion.

Looking at recent history:

Manufacturing PMI:

• July 2024: The manufacturing PMI stood at 49.4, a slight decrease of 0.1 from June, indicating a marginal contraction in manufacturing activity.

• August 2024: The index declined further to 49.1, suggesting a continued contraction in the manufacturing sector.

• September 2024: The PMI improved to 49.8, approaching the expansion threshold but still indicating a slight contraction.

• October 2024: The index reached 50.1, crossing into expansion territory, reflecting a modest recovery in manufacturing activity.

• November 2024: The PMI increased to 50.3, marking the highest reading since April and indicating a continued expansion in the manufacturing sector.

• December 2024: The index slightly decreased to 50.1%, maintaining its position above the threshold, thus indicating ongoing, albeit modest, expansion.

• January 2025:
  China’s manufacturing PMI fell to 49.1 from 50.1 in December 2024, indicating a contraction in manufacturing activity. This decline was partly attributed to the Lunar New Year holiday, during which many workers returned to their hometowns, leading to reduced production capacity. Additionally, new orders and production sub-indices also experienced declines, reflecting weakened demand and output.

Non-Manufacturing PMI:

• July 2024: The non-manufacturing PMI was at 50.2, a decrease of 0.3 from June, indicating marginal expansion in the non-manufacturing sector.

• August 2024: The index declined to 49.6, signaling a contraction in non-manufacturing activities.

• September 2024: The PMI rebounded to 50.9, returning to expansion territory.

• October 2024: The index decreased to 50.6, indicating a slower pace of expansion.

• November 2024: The PMI further declined to 50.0, suggesting stagnation in non-manufacturing activities.

• December 2024: The index rose to 52.2, reflecting a notable recovery and expansion in the non-manufacturing sector.

• January 2025:
  The non-manufacturing PMI, which encompasses the services and construction sectors, decreased to 50.2 in January from 52.2 in the previous month, suggesting a slowdown in growth. The services sector, in particular, was affected by the holiday period, leading to reduced business activity and employment challenges. Despite the slowdown, the index remained above the 50-point threshold, indicating continued, albeit slower, expansion.

Next week we’ll get the privately-surveyed, Caixin, PMIs.

The two PMIs are quite different. If you are unfamiliar with this, the following will set you up!

The PMIs (Purchasing Managers’ Indexes) from China’s National Bureau of Statistics (NBS) and Caixin/S&P Global differ primarily in survey scope, methodology, and focus. Here’s a breakdown of the key differences:

1. Provider and Affiliation

• NBS PMI:

  • Compiled by the National Bureau of Statistics of China, a government agency.
  • Seen as the official PMI, closely aligned with government policies and priorities.

• Caixin/S&P Global PMI:

  • Compiled by Caixin Media in collaboration with S&P Global.
  • A private-sector index, often considered more market-driven.

2. Survey Scope

• NBS PMI:

  • Focuses on large and state-owned enterprises.
  • Covers a broader range of industries, including manufacturing and non-manufacturing sectors (e.g., construction and services).
  • Reflects conditions in sectors heavily influenced by government policies and infrastructure spending.

• Caixin PMI:

  • Focuses on small to medium-sized enterprises (SMEs), particularly in the private sector.
  • Captures the performance of companies that are more exposed to market-driven forces and less influenced by state interventions.

3. Sample Size and Composition

• NBS PMI:

  • Larger sample size, with about 3,000 enterprises surveyed for the manufacturing PMI.
  • Emphasizes state-owned enterprises and larger companies, which tend to dominate traditional industries.

• Caixin PMI:

  • Smaller sample size, surveying around 500 enterprises, with a stronger focus on export-oriented and technology-driven firms.
  • Provides insights into the private sector and its responsiveness to global economic conditions.

4. Release Dates

• NBS PMI:

  • Released monthly, typically on the last day of the month.
  • Provides separate PMIs for manufacturing and non-manufacturing sectors.

• Caixin PMI:

  • Released a few days later, usually on the first business day of the following month.
  • Includes only the manufacturing PMI and services PMI, with no equivalent for non-manufacturing activities like construction.

5. Interpretation and Use

• NBS PMI:

  • Reflects the overall economic landscape, especially trends in industries influenced by government policy.
  • Analysts use it to gauge the impact of fiscal and monetary policies on the broader economy.

• Caixin PMI:

  • Viewed as a better indicator of the health of the private sector and market-driven segments of the economy.
  • Considered more sensitive to external shocks (e.g., global trade conditions).

6. Key Insights and Differences in Results

• The NBS PMI often reflects policy-driven stability, showing less volatility because it covers sectors cushioned by government support.
• The Caixin PMI can be more volatile, as SMEs are more sensitive to real-time changes in market demand, supply chain disruptions, and global economic shifts.

Why Both Matter:

• NBS PMI offers a macroeconomic view of China’s state-influenced economy.
• Caixin PMI provides a microeconomic perspective of the more market-driven and globally competitive sectors.

By analyzing both, investors and policymakers can obtain a more comprehensive picture of China’s economic health and its underlying dynamics.

This article was written by Eamonn Sheridan at www.forexlive.com.

Heads up for muddled comments on on again-off again tariffs.

• Speaks with media at 9 am US Eastern time / 2 pm GMT
• Press conference at 1 pm US Eastern time with the President of Ukraine / 6 pm GMT

The off to Florida for some golf over the weekend.

This article was written by Eamonn Sheridan at www.forexlive.com.

Trump with a ‘tweet’ on his own social media oputler.

In breif:

• The Budget from last YEAR is still not done.
• We are working very hard with the House and Senate to pass a clean, temporary government funding Bill (“CR”) to the end of September.
• Let’s get it done!

Trump’s seal of approval should prompt wavering republicans to indeed ‘ get it done’, not many of them want to get on Trump’s **** list.

This article was written by Eamonn Sheridan at www.forexlive.com.

China’s
annual
parliament meeting begins next week:

• China’s annual parliament, the “Two Sessions,” starts next week.

A snippet from Goldman Sachs on some key points to watch for:

• estimates
  the special debt quota municipalities would be
  allowed to issue will be increased to 4.7 tn yuan, from 3.9 trillion yuan in
  2024
• keeping employment growing will be a key goal, Goldman Sachs are looking for a jobless rate target of around 5% (vs. around 5.5% last year)

UBS:

• estimates the special debt quota municipalities would be allowed to issue will be increased to 4.5 tln yuan

The backdrop to this meeting is a challenging one.

This article was written by Eamonn Sheridan at www.forexlive.com.

Tech Stocks Hammered on Tariff Update – Nasdaq Down 2.8%

US tech stocks took a hammering in trading yesterday as President Trump announced that tariffs will proceed in March, while Nvidia delivered a weaker-than-expected forecast in its quarterly update. The Nasdaq led the decline, closing 2.78% lower, followed by the S&P, which fell 1.59%, and the Dow, which closed 0.45% down.

The dollar surged on the tariff news, with the DXY gaining 0.67% on the day to reach 107.24. Meanwhile, treasury yields were more muted, with the 2-year yield rising just 0.3 basis points to 4.075% and the 10-year increasing by 2.8 basis points to 4.283%.

Oil prices jumped after President Trump revoked Chevron’s operating licence in Venezuela, with Brent crude rising 2.08% to $74.04 per barrel and WTI climbing 2.54% to $70.35. Gold fell in line with the stronger dollar and profit-taking flows, dropping 1.68% on the day to $2,867.63.

Dollar Leaps Back into Favour

The dollar recorded its strongest increase in two months yesterday as President Trump confirmed that tariffs would go ahead as planned in the coming days. The DXY surged 0.7%, climbing from near 106.50 to above 107.25, pushing several major currencies towards recent lows after having only recently hit annual highs.

Geopolitical developments were the key driver yesterday, but the focus will soon shift to fundamentals, with a crucial US inflation update due early in the New York session. If inflation data exceeds expectations and reinforces concerns about tariff-induced price pressures, the dollar could rise further and more aggressively.

Inflation Data in Focus Today

Traders and central banks will be closely watching inflation data updates today, with key figures set to be released across all three trading sessions.

In the Asian session, attention will be on Japanese markets as the Tokyo Core CPI data is released early in the day, with markets expecting a 2.3% year-on-year increase. The London session will see the release of German preliminary CPI data, with figures arriving throughout the morning as individual states report separately.

However, the main event will come with the opening of New York markets, when the Federal Reserve’s preferred inflation gauge, the PCE Price Index, is released. Markets anticipate a 0.3% increase, and the result is expected to dominate sentiment. Canadian GDP data will be published at the same time, but the US figure is likely to take precedence. Later in the session, the Chicago PMI numbers are also due, but again, the PCE data is expected to be the key market mover—especially if it deviates from expectations.

The post General Market Analysis – 28/02/25 first appeared on IC Markets | Official Blog.

The initial move after the Tokyo inflation data was for yen weakness:

• Tokyo February headline CPI +2.9% y/y vs. +3.2% expected

In that post I made note that the weaker CPI reading fed through to a weaker yen as it takes off some pressure for nearer-term BoJ rate hikes. I’ve just printed out that post, torn it up, and flushed it down the toilet.

Yen bouncing back:

Since the CPI data we’ve had:

• Japan January retail sales +3.9% y/y (expected +4.0%)
• Japan January preliminary industrial output-1.1% m/m (vs. expected -1.2%)
• BoJ’s Uchida says Japan’s economy on a moderate recovery path – some weak spots

There’s not a lot there that appear to be the smoking gun for the yen bounce – I guess Uchida fits the bill more closely than the data. Let me know what you think in the comments.

This article was written by Eamonn Sheridan at www.forexlive.com.

• UK firms became more optimistic in February, breaking a seven-month decline, with the Lloyds Bank Business Barometer rising to 49% from 37% in January.

• Confidence in hiring improved, with businesses’ employment outlook rising by nine points to 41%, indicating stronger labour demand.

• Firms’ confidence in the economy jumped by 18 points to 42%, the biggest monthly rise since late 2020, despite concerns over tax increases and a minimum wage hike.

• Two-thirds of businesses expect to raise prices in the next year, up from 61% in January, potentially influencing the Bank of England’s interest rate decisions.

Some encouraging news.

GBP is dribbled lower on broader news though, Trump’s comments slamming markets again on Thursday:

• Forexlive Americas FX news wrap: Fresh Trump tariff threat submarines markets

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan January industrial output -1.1% m/m

• expected -1.2%, prior -0.2%

for the y/y its +2.6%

• expected -1.2%, prior +1.6%

Manufacturers forecast for 1 month ahead, February, is +5.0%

• prior +1.0%

for 2 months ahead, March, -2.0%

• prior -1.2%

The data of focus so far from Japan has been:

• Tokyo February headline CPI +2.9% y/y vs. +3.2% expected

The yen has weakened on the CPI data, at the margin it suggests less urgency on Bank of Japan rate hikes.

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan January retail sales +3.9% y/y

• expected +4.0%
• prior +3.5%

more to come

This article was written by Eamonn Sheridan at www.forexlive.com.

Yesterday, Trump said that Mexico and Canada tariffs were delayed until April 2 but then appeared to contradict himself. Now he’s clearing it up with a post on Truth Social that says the Canada/Mexico tariffs are still on while there will be an additional 10% charged on Chinese goods.

The latest:

Drugs are still pouring into our Country from Mexico and Canada at very
high and unacceptable levels. A large percentage of these Drugs, much
of them in the form of Fentanyl, are made in, and supplied by, China.
More than 100,000 people died last year due to the distribution of these
dangerous and highly addictive POISONS. Millions of people have died
over the last two decades. The families of the victims are devastated
and, in many instances, virtually destroyed. We cannot allow this
scourge to continue to harm the USA, and therefore, until it stops, or
is seriously limited, the proposed TARIFFS scheduled to go into effect
on MARCH FOURTH will, indeed, go into effect, as scheduled. China will
likewise be charged an additional 10% Tariff on that date. The April
Second Reciprocal Tariff date will remain in full force and effect.
Thank you for your attention to this matter. GOD BLESS AMERICA!

The US dollar is stronger on this and USD/CAD rose to 1.4425 from 1.4364. S&P 500 futures halved their gains but are still +18 points. The market doesn’t really believe the threat on Canada and Mexico but the one on China is more credible and I think this is the first time he’s talked about an additional 10% tariff on China, though it’s not clear if that ‘additional’ to the ones that have been on since his first term or additional to the one he put on at the start of February.

This article was written by Adam Button at www.forexlive.com.