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Stock markets in the US, UK and Europe are all hitting record highs and the mood is buoyant. The US is cutting regulation and optimism is high. You would be mistaken if you think that rising tide lifts all boats.

The anchor of the market since the election has been housing-related, due to higher mortgage rates and the Fed pivot back towards neutral along with expectations for higher deficit spending.

The XHB home builder ETF struggled in December and has flat-lined since.

Toll Brothers reported earnings late yesterday and shares are down 6% in the pre-market.

“While demand was solid in our first quarter, we have seen mixed results
so far this spring selling season,” said CEO Douglas Yearley.
“Although demand has remained healthy in many of our markets and
particularly at the higher end, affordability constraints and growing
inventories in certain markets are pressuring sales – especially at the
lower end.”

At the bottom of the hour, we get the latest report on US housing starts and the consensus is for a sharp drop to 1.390m from 1.499m. That looks precipitous but it comes after a 15.8% increase in the prior report. It would take a fall below 1.294m to break the late-2024 lows.

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

Headlines:

• US-EU trade talks one to watch later in the day
• China says willing to work with US to resolve trade concerns through dialogue
• ECB’s Schnabel: We are getting closer to a point where we pause or halt cuts
• ECB’s Panetta: Signs of weakness in Eurozone economy are more persistent than anticipated
• BOJ’s Takata: We have no preset idea on timing, level of future rate hikes
• BOJ’s Takata: Long-term interest rates moving in line with state of Japan’s economy
• UK January CPI +3.0% vs +2.8% y/y expected
• Eurozone December current account balance €50.5 billion vs €34.6 billion prior
• US MBA mortgage applications w.e. 14 February -6.6% vs +2.3% prior

Markets:

• NZD leads, GBP lags on the day
• European equities lower; S&P 500 futures down 0.1%
• US 10-year yields up 2.2 bps to 4.565%
• Gold flat at $2,935.83
• WTI crude up 0.9% to $72.48
• Bitcoin up 1.3% to $96,300

It was a mixed session as markets are taking a bit of a breather this week from all the turbulence since Trump’s inauguration.

Tariff threats remain in the picture but we still have some time to work that out over the next few weeks. For today though, the dollar continues to find itself in a steadier spot on the week. There’s little catalyst in terms of headlines but with yields holding up, it is keeping the dollar afloat as well.

EUR/USD is down 0.2% to 1.0428 with GBP/USD down 0.2% as well to 1.2583. The latter touched a high of 1.2640 during the session after the hotter UK CPI report. However, that has some caveats with a rebound in airfare prices and the introduction of VAT on private school fees skewing the readings. The monthly figures hinted at the opposite, reflecting negative readings in January. So, there’s that.

Besides that, USD/JPY is down just 0.1% to 151.90 despite higher yields while NZD/USD is up 0.2% to 0.5710 but off earlier highs of 0.5730 from after the RBNZ rate cut.

In other markets, European stocks are pushed down as the winning streak since the start of the year looks to be challenged. ECB policymaker Schnabel’s comments about perhaps debating to pause rate cuts is something to note.

As for US futures, things are calmer as they are keeping relatively flat as we await the Wall Street open. Coming up later in the day, there will be US-EU trade talks to watch out for as well.

This article was written by Justin Low at www.forexlive.com.

• Strongly dissatisfied with US tariffs on Chinese goods
• Tariffs undermines normal economic, trade cooperation between the two countries
• Hopes to resolve concerns through equal dialogue and consultation
• Willing to work together to create fair, predictable policy environment for practical cooperation

This is the usual commentary from China, as they are attaching the above as part of a congratulatory message to Howard Lutnick’s appointment as US commerce secretary.

This article was written by Justin Low at www.forexlive.com.

• Prior +2.3%
• Market index 214.9 vs 230.0 prior
• Purchase index 144.0 vs 153.1 prior
• Refinance index 593.6 vs 640.6 prior
• 30-year mortgage rate 6.93% vs 6.95% prior

Mortgage applications slumped back in the past week following a decent start to the new year. Both purchase and refinancing activities suffered declines, leading to the drop as the average rate of the most popular US home loan keeps just under 7%.

This article was written by Justin Low at www.forexlive.com.

• We are getting closer to a point where we pause or halt cuts.
• I think R* cannot be any reliable guide for monetary policy in real time.
• Restriction has come down significantly, up to a point where we can no longer say with confidence that our policy is still restrictive.
• Savings rate has started to come down.
• Domestic inflation is still high.
• Wage growth is still elevated.
• We’ve seen new shocks to energy prices.
• I would exclude a rate increase.
• Services inflation should start to come down in February.
• Many indications are that wage growth will decelerate.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Šefčovič will be meeting up with Trump’s top economic adviser, Kevin Hassett, trade representative, Jamieson Greer, and commerce secretary, Howard Lutnick. They are expected to meet in Washington some time in the afternoon.

There’s going to be a lot to discuss, ranging from steel and aluminum tariffs to oil and gas purchases to reciprocal tariffs involving autos. On the latter, Trump claimed the EU had lowered its tariffs on autos last week but the EU has denied such doing. The current EU tariffs on US cars are 10% and Trump wants it brought down to level terms with the US’ 2.5% tariffs. So, we’ll see on that for one thing.

This article was written by Justin Low at www.forexlive.com.

• Prior €34.6 billion

Slight delay in the release by the source. The seasonally adjusted figure is €38.4 billion for the month of December, bringing the cumulative total for the year 2024 to €419 billion. That is a step up relative to the €241 billion total seen in 2023 as trade conditions in particular are normalising after the Russia-Ukraine conflict.

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx flat
• Germany DAX +0.1%
• France CAC 40 -0.1%
• UK FTSE -0.1%
• Spain IBEX -0.1%
• Italy FTSE MIB +0.4%

US futures are also little changed, keeping marginally higher by 0.1% on the day. It’s been a slower last few sessions, as traders are settling down for a bit of a respite after the more turbulent last few weeks. Trump’s tariffs are still in the picture though, with EU’s trade commissioner, Maroš Šefčovič, set to meet with Trump’s team later today. And not far along, we’re slowly moving closer to the 4 March deadline on Mexico and Canada’s tariffs pause.

This article was written by Justin Low at www.forexlive.com.

• Prior +2.5%
• Core CPI +3.7% vs +3.7% y/y expected
• Prior +3.2%

The December report was plagued by a steep drop in prices for airfares, as noted at the time here. A strong rebound there is one of the causes for the hotter report in January. Besides that, the introduction of VAT on private school fees was material, leading to a 12.7% monthly increase there. The annual inflation rate for education was marked up to 7.5% as such, up from 5.0% in December.

Adding to that, services inflation (in core terms) is also seen up to 5.0% from 4.4% previously. So, that will be a headache for the BOE when taking the numbers at face value here.

The only bright side is that the monthly changes to both headline and core inflation were negative. Headline monthly inflation was seen down 0.1% while core monthly inflation was seen down 0.4%. That owed much to a fall in both housing and household services.

This article was written by Justin Low at www.forexlive.com.

• S&P ratings revise Australian state Queensland rating outlook to negative
• Would-be Kishida assassin gets 10 years in jail
• Federal Reserve Vice Chair Philip Jefferson is speaking after market close on Wednesday
• Goldman Sachs says OPEC+ will delay its gradual production increases from April to July
• ANZ forecast 3 25bp rate cuts from the Reserve Bank of New Zealand, in April May and July
• More on Trump’s proposed 25% tariff on automobiles, pharmaceuticals & semiconductor chips
• RBNZ Governor Orr says NZD around fair value
• J.P. Morgan upgrades Singapore equities to overweight on strong outlook, target 6% gain
• More from RBNZ Governor Orr, says 3.75% is the high end of the range of neutral rates
• RBNZ Governor Orr confirms a rate cut in April and then May sounds about right
• China’s new home prices remain stagnant in January amid property market struggles
• BOJ’s Takata says must hike rate more if economy moves in line with BOJ forecasts
• Reserve Bank of New Zealand rate cut news conference begins 0200 GMT/2100 US Eastern time
• New Bank of Japan board Junko Koeda approved by Japan’s parliament
• NZD/USD lower after the as expected 50bp rate cut from the Reserve Bank of New Zealand
• PBOC sets USD/ CNY reference rate for today at 7.1705 (vs. estimate at 7.2807)
• RBNZ cuts cash rate by 50bp vs. 50bp expected
• Mitsubishi UFJ Morgan Stanley shifted its BOJ rate hike call to July, from Q4 previously
• Bank of Japan Board Member Takata Hajime is speaking soon
• Australian data – Wage Price Index (Q4 2024 ) +0.7% q/q (expected +0.8%)
• Japan data – January exports and imports improve y/y, December machine orders improve y/y
• Reserve Bank of New Zealand expected to cut official cash rate (OCR) target by 50bp today,
• Japan manufacturing sentiment improves second consecutive month, services sector stable
• Bank of America Survey: Trade war fears rise as US equities remain overvalued
• JP Morgan on Trump’s social media activity showing diminished market-moving influence
• Trump said he may not let Venezuela export oil, petroleum products, via firms like Chevron
• Bitcoin’s Path to $500K: Institutional interest grows amid (trimmed) regulatory hopes
• New Zealand Q4 PPI falls q/q
• Trump says “will be announcing” large firms that are coming back to the US re Chips, cars
• Trade ideas thread – Wednesday, 19 February, insightful charts, technical analysis, ideas
• Forexlive Americas FX news wrap: US dollar firms and US stocks close at a record

In
late afternoon news from the US, Trump signalled he could slap a 25%
tariff on imported automobiles, especially targeting those from
Europe and Asia (China, Japan and South Korea are notable large
exporters of vehicles). A similar tariff could also hit
pharmaceuticals and semiconductor chips. Trump indicated these could
apply as soon as April 2.

Nothing
is solid on this as yet, but it does raise further trade war
implication concerns.

Trump
also said he may not let Venezuela export oil and petroleum products
via firms like Chevron.

The
main focus for the session was the Reserve Bank of New Zealand. The
Bank cut its cash rate target by 50bp, the third 50bp rate cut in a
row. Guidance was dovish, the OCR path indicating a further cut by
50bps by mid-this year. This is expected to be two 25bp cuts although
ANZ in New Zealand are expecting three 25bp cuts, one each in April,
May and July (the next three meetings, the 9th,
28th
and 9th
respectively).

The
New Zealand dollar chopped up and then down after the announcement,
settling around lows circa 0.5680 for a half hour or so before
surging back to record a new high for the session above 0.5720. There
is more on the RBNZ in the points above.

AUD/USD
followed the NZD higher.

From
Japan we had comments from Bank of Japan policy board member Takata.
He
said (in brief) that Japan’s real interest rates remain deeply
negative and are still accommodative, but:

• the
  Bank must adjust degree of monetary support further if economy moves
  in line with its forecasts,
• the
  Bank must gradually shift policy to avoid upside price risks from
  materialising.

USD/JPY
is not really net changed much at all on the day, but it did pop
briefly to just over 152.30 before coming back to lows circa
151.80.

From
China we had January home price data. New home prices recorded their
20th straight m/m % drop. 2nd hand home prices hit 21 straight falls.

Silver
fell circa 1%.

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

Australia news

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

A 25 year old male who tried to assassinate then Prime Minister Kishida back in 2023 has been found guilty.

• Sentenced to ten years in prison.
• The attack occurred in Wakayama.
• The male throwing an explosive, a home made pipe bomb at Kishida on April 15, 2023. The explosion injured two people in the crowd.
• Kishida was making a campaign stop at the Saikazaki fishing port.

Kishida was Prime Minister of Japan from 2021 to 2024.

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