Articles

• Services and Core inflation are concerns.
• Rate cuts can’t replace economic strategy.
• March rate decision to depend on data.
• Harder to cut rates as we approach neutral.

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

• Prior -90.4
• Outlook 26.0 vs 20.0 expected
• Prior 10.3

That’s the best reading since October with the outlook reading also improving to its highest since July. It points to some optimism to start the year in the German economy. However, it is still premature to say that this will be where things will recover strongly from hereon.

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

Don’t hold your breath on this one. The US and Russia are meeting in Riyadh now and there will surely be positive takeaways from the meeting. As for the details, they may be lacking. I reckon a lot of this is to check on what can Russia do to appeal to the US while Ukraine are left wanting in the sidelines. Knowing how Trump likes to make a show of things, you would expect him to have the most important announcement in all of this. And that means any major breakthrough will only come from after his meeting with Putin. That is expected to take place next week. So, today’s meeting is largely just to create a segue to that.

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

As a reminder, Ukraine will not be involved with the talks today and that might be a bit of a concern. If anything, it shows that Russia has the most flexibility in trying to appeal to the US while Ukraine will have to play catch up after. Also present in the background is Saudi foreign minister, Prince Faisal bin Farhan Al Saud.

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

• Prior +1.8%
• CPI +1.7% vs +1.7% y/y prelim
• Prior +1.3%

There was a slight increase in core annual inflation, up to 1.4% in January from 1.3% in December. That owes to a slight increase in services prices, which were up to 2.5% as compared to 2.2% in the month before.

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

That’s setting up for a decently better mood ahead of the European open, though regional futures are lightly changed for now. European indices did continue with gains yesterday though, with the DAX finishing over 1% higher to fresh record highs again. The latest BofA fund manager survey shows that market players are regarding any trade war as no more than tail risk. Perhaps that speaks to the look and feel on tariffs now as compared to before Trump’s inauguration. That especially since he isn’t really hitting hard at China in particular.

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

• Prior 4.4%
• Employment change 107k vs 48k expected
• Prior 35k
• Average weekly earnings +6.0% vs +5.9% 3m/y expected
• Prior +5.6%
• Average weekly earnings ex bonus +5.9% vs +5.9% 3m/y expected
• Prior +5.6%
• January payrolls change 21k
• Prior -47k; revised to -14k

ONS continues to put a caveat in the report here as they are still improving data accuracy. At this point, it’s a feature instead of a bug given how long this has been running. In any case, the December jobless rate is seen holding steadier with payrolls also nudging up in January.

But the real standout is wages data, which continues to run hot. That is bumping up real wages (as seen above) further and won’t be too comforting for the BOE in wanting to get inflation down.

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

Russia’s sovereign wealth fund chief, Kirill Dmitriev, is out in Riyadh saying that: “We really see that President Trump and his team is a team of problem solvers, people who have already addressed a number of big challenges very swiftly, very efficiently and very successfully.”

Adding that Russia is hoping that the US will hear its position in talks on Ukraine. The meeting in Riyadh is due to take place imminently and is set to precede a meeting between Trump and Putin themselves.

Of note, Russia’s delegation will involve foreign minister, Sergei Lavrov, who is set to lead talks with US secretary of state, Marco Rubio. Europe has been sidelined in this event and warned Ukraine president Zelenskyy not to agree to any ceasefire without a negotiated peace agreement with Russia.

Zelenskyy himself will not be attending the meeting and has insisted that no decision should be made without Ukraine’s involvement. As for Russia’s take, Lavrov has said that they will not be considering any territorial concessions to Ukraine amid planned negotiations to end the conflict.

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

The RBA was the key highlight to start the day and they delivered a more hawkish rate cut, more or less what was expected. The central bank made clear that this doesn’t mean there will be another in April but they are willing to move again so long as there is evidence of further disinflation. For now though, it is a case of cutting today and then waiting to see on the future.

At the balance, AUD/USD is flat at 0.6355 but off its earlier low of 0.6335 on the day. Instead, AUD/NZD is the one seeing stronger flows with a bounce from 1.1100 to 1.1140 in the aftermath of the RBA. That erases the drop from Friday and yesterday for the pair.

Overall, the aussie is holding its own against the dollar with the latter seen a touch higher across the board. It’s a steadier mood for the dollar as it nurses the losses from last week. EUR/USD is down 0.3% to 1.0453 and GBP/USD down 0.3% to 1.2595 currently.

After a break yesterday, 10-year yields in the US are higher by nearly 4 bps to 4.515% currently. That’s helping to prop up USD/JPY as well, with the pair up 0.4% to just above 152.00 now.

All that being said, the dollar is still in a softer spot following the declines last week. It’s a case of dollar longs unwinding further as Trump policy fears are not as scary as thought previously. Outside of being long in tech stocks, the dollar trade has been the most crowded in recent times though it looks to be easing this month:

Is there more room to run now that traders are getting a hang on how to deal with Trump’s theatrics?

As much as the greenback is holding its own so far today, I want to say it might be a whole different story when we get to US trading later. It wouldn’t be the first time things reverse, not least when the near-term charts are still running against the dollar.

EUR/USD, GBP/USD, and AUD/USD are all still holding above the 100 and 200-hour moving averages while USD/JPY, USD/CAD, and USD/CHF are also keeping below their 100 and 200-hour moving averages respectively. All of that suggests the near-term bias is still siding with dollar sellers for now.

Coming up in European trading, we do have some economic data points to move things along. The UK labour market report is one to watch out for, before moving on to the final French inflation numbers for January and the German ZEW business survey findings.

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

• AUD/USD chopped higher on the as expected RBA rate cut announcement
• RBA CUTS by 25bp, as widely expected (to 4.1%, from 4.35% previously)
• 9 of the top 10 RBA cash rate forecasters are tipping a cut – decision is imminent
• Federal Reserve speakers on Tuesday include Daly and Barr
• China’s State Planner says to support private firms
• A rare (photo) decision from the RBA locks in a rate cut today
• GBP traders heads up: Bank of England Governor Bailey speaking Tuesday
• PBOC sets USD/ CNY mid-point today at 7.1697 (vs. estimate at 7.2538)
• USD trading higher in Asia morning
• Russia has freed another American prisoner – New York Times reporting
• What happens to the Australian dollar if the RBA doesn’t cut today?
• More on Xi Jinping’s Call to Boost China’s Private Sector
• Japan Finance Minister Kato says Q4 GDP data signal bright sign in domestic economy
• More from Fed’s Waller – Markets are concerned on deficits and want a term premium
• Fed’s Waller says he expects disinflation and rate cuts to resume this year
• Australian weekly consumer confidence survey fell to 85.1 (prior 86.7)
• More on Goldman Sachs ramping up its 12-month targets for Chinese equity indexes
• Forexlive Americas FX news wrap 17 Feb: US holiday keeps price action limited.
• Bank of Japan rate hikes priced in, yen to weaken
• Trade ideas thread – Tuesday, 18 February, insightful charts, technical analysis, ideas

The
Reserve Bank of Australia cut its cash rate by 25bp today, to 4.1%
from 4.35%.

• This
  is the first Reserve Bank of Australia cash rate cut since the cut in
  November 2020 to 0.1%
• The
  RBA rate hike cycle began in May 2022 with a move to 0.35%, and the
  Bank has been on hold at 4.35% since last hiking in November 2023.

The
Statement from the Bank today did not indicate a succession of cuts to
come, it’ll be slow going from here, but it’s a start. It was a
‘hawkish’ cut.

The
Australian dollar was marked higher immediately given the cut was
widely anticipated. It very soon pulled back to little changed and is
now inching higher as I update.

Reserve
Bank of Australia Governor Bullock is speaking soon, her news
conference begins at 0430 GMT / 2330 US Eastern time.

And,
a reminder, we get to do this all again tomorrow with the Reserve
Bank of New Zealand cash rate decision due, a 50bp cut is expected
but 25bp is live also.

Elsewhere
across the FX space the US dollar showed some strength. EUR, NZD,
GBP, CAD are all lower. There really was no smoking gun catalyst I can
point to.

USD/JPY
was a stand out. It had a quick dip under 151.30 on fin min Kato
acknowledging the strong GDP data yesterday but soon bounced back and
carried on to highs above 152.00 as I post.

I wanted to post an AUD shot but the USD/JPY was just too impressive – another big up day here in Asia:

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

The Reserve Bank of Australia has finally joined its global peer central banks in cutting rates. Well, once. It’s a start:

• RBA CUTS by 25bp, as widely expected (to 4.1%, from 4.35% previously)

Check out that post for the details. It’s a ‘hawkish’ cut to the extent that its not indicating a rapid cutting cycle ahead. Not at all.

AUD/USD update:

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

• China NDRC: to speed up preparations for implementation of private economy promotion lawChina NDRC: will continue to solve difficulties and high cost of financing for private enterprisesChina NDRC: current political, economic, and social environment very conducive to development of private economyChina NDRC: to support private firms in key national strategies and security capacity building, driving a new round of large-scale equipment upgrades and trade-ins for consumer goodsChina NDRC: to ease market access and expedite the revision of new negative list for market entry

China is pumping up the rhetoric on supporting private firms:

• More on Xi Jinping’s Call to Boost China’s Private Sector

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