Fear and debasement trade unwinds as Trump lines up Warsh for Fed chair pick

EU mid-market update: Fear and debasement trade unwinds as Trump lines up Warsh for Fed Chair pick; USD climbs, Gold on pace for its worst one-day drop since 2013.

Notes/observations

- Precious metals experienced a sharp correction, with gold falling below $5,000/oz and silver sliding under $100/oz as US dollar extended gains. Profit-taking after this week’s parabolic move and heightened focus on Trump’s imminent Fed-chair announcement drove a broad unwind across the metals complex.

- FX markets were dominated by US dollar’s broad rally on reports that Kevin Warsh is the likely nominee for Fed Chair. Analysts initially interpreted Warsh’s prior hawkish leanings as a sign of potential policy orthodoxy, even though his recent commentary aligned more with Trump’s push for lower rates. Sterling (GBP) gave back gains as analysts highlighted a lack of domestic catalysts, weak UK data flow, and political noise inside the Labour Party. Euro (EUR) also eased from recent highs as ECB officials voiced discomfort with excessive euro strength.

- It is not yet clear if Warsh would replace Miran on the Fed Board. whose term expires today. Any appointment of Kevin Warsh represents a profound strategic mismatch, pairing a career-long inflation hawk with a presidency that explicitly demands aggressive monetary easing. Tier1 analysts warn that Warsh will face an "uphill battle" with a resistant FOMC to implement his unconventional agenda of trading balance-sheet contraction for lower rates, particularly as he seeks to restore institutional credibility by dismantling the very data-driven transparency that currently anchors market stability.

- Kevin Warsh spent the 2008 crisis hunting for inflation ghosts, only to re-emerge in 2026 as a radical plumber intent on dismantling the Fed’s $6.6 trillion safety net. His "New Accord" (previewed in July 2025’s CNBC interview) offers a Faustian bargain: headline rate cuts to satisfy political masters in exchange for a brutal draining of the financial system’s plumbing. By aggressively shrinking the balance sheet and forcing a return to "reserve scarcity," he may aim to end the era where the Fed serves as a permanent, subsidized warehouse for Treasury risk.

- Digital assets weakened, with BTC dropping <$83K as risk sentiment deteriorated and concerns resurfaced around the return on AI-related capex after disappointing results from Microsoft and other software names. Tech stocks globally saw pressure, reflecting doubts about near-term monetization paths and rising competition effects within the AI ecosystem. Sandisk soaring in premarket after results, while Visa and Apple are muted.

- Geopolitically, uncertainty increased after Trump threatened Canada with tariffs on Gulfstream aircraft and warned the UK about deepening China ties. He also claimed Putin agreed to a temporary pause in strikes on Ukraine’s energy infrastructure due to extreme cold, though this remains unverified.

- Overall, European equities are firmer with bank stocks outperforming. Caixa Bank rallied after a strong Q4 and updated medium-term guidance, while Raiffeisen delivered better-than-expected earnings despite ongoing FX-loan litigation pressures in Poland. Adidas gained on stronger-than-forecast Q4 brand sales and a €1B buyback.

- Macro data was plentiful within EU, plethora of GDP and CPI readings but majority in line with expectations and market ignoring readings as focus is instead of other factors around Fed Chair, USD move, metals and yields.

- During its earnings call, Apple said it is currently in a "supply chase mode" fueled by a staggering 23% surge in iPhone revenue and a blockbuster 38% rebound in Greater China. To power the next generation of Siri, Cupertino has pivoted toward pragmatism, admitting that Google’s AI provides the "most benefit" for its foundation models even as it keeps the price tag of that partnership under wraps. While a bullish 16% revenue guide suggests the demand remains intact, looming margin pressure from memory inflation and a billion-dollar tariff bill will test Apple's ability to turn record-breaking volume into bottom-line perfection.

- Reportedly Russian combat fatalities surged to 35,000 in December, a spike that matches current recruitment rates and threatens the Kremlin's ability to sustain the war effort without a politically risky new mobilization. As monthly losses significantly outpace the 2025 average, Ukraine’s strategic objective said to reach 50,000 Russian KIA per month aims to force a critical manpower breaking point in Moscow’s volunteer-based system.

- Asia closed mixed with Hang Seng underperforming -2.1%. EU indices +0.1-1.1%. US futures -0.9% to -1.2%. Gold -6.2%, DXY +0.5%; Commodity: Brent -1.3%, WTI -1.3%; Crypto: BTC -6.4%, ETH -7.6%.

Asia

- Japan Jan Tokyo CPI Y/Y: 1.5% v 1.7%e ; CPI (ex-fresh food) Y/Y: 2.0% v 2.2%e.

- Japan Dec Jobless Rate: 2.6% v 2.6%e.

- Japan Dec Retail Sales M/M: -2.0% v -0.5%e; Y/Y: -0.9% v +0.7%e.

- Japan Dec Preliminary Industrial Production M/M: -0.1% v -0.4%e; Y/Y: 2.6% v 2.1%e.

- Australia Q4 PPI Q/Q: 0.8% v 1.0% prior; Y/Y: 3.5% v 3.5% prior.

- New Zealand Jan ANZ Consumer Confidence: 107.2 v 101.5 prior.

- South Korea Dec Industrial Production M/M: 1.7% v 0.5%e; Y/Y: -0.3% v -2.0%e.

Global conflict/tensions

- Russia Pres Putin said to have agreed to a one-week ceasefire on Ukraine cities, to refrain from long-range attacks that have cut power and heating to much of the country.

Europe

- UK Lloyds Business Barometer: 44 v 50e.

Americas

- Trump saying he would bring the US Fed Chair announcement forward to Friday; preparing to nominate Kevin Warsh to be the next Federal Reserve chair.

- US Treasury Semi-annual Currency Report did not name any currency manipulators; Keeps Germany, Vietnam, Singapore and Taiwan on the monitor list

- Pres Trump stated that was working hard with Congress to ensure we’re able to fully fund the govt without delay

- Deal said to been reached to hold Senate votes on 2-week stopgap funding for DHS Bill and FY package of remaining spending Bills to avert a govt shutdown

Trade

- President Trump announced to charge Canada a 50% Tariff on any and all Aircraft sold into the United States of America. Stated that Canada was effectively prohibiting the sale of Gulfstream products in Canada if not immediately corrected then to charge Canada a 50% Tariff on any and all Aircraft sold into the USA

- South Korea and US did not reach conclusion during first day of trade talks; both sides were expected to hold more talks on tariffs

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.26% at 608.72, FTSE +0.05% at 10,176.35, DAX +0.75% at 24,476.01, CAC-40 +0.31% at 8,096.78, IBEX-35 +1.02% at 17,756.16, FTSE MIB +0.49% at 45,296.50, SMI -0.10% at 13,161.80, S&P 500 Futures -0.89%]

Market focal points/key themes: European indices opened generally higher and remained upbeat through the early part of the session; European equities supported by earnings optimism; among better performing sectors are financials and technology; lagging sectors include materials and consumer discretionary; focus on upcoming Eurozone GDP figures; earnings expected in the upcoming US session include Exxon Mobil, Chevron, American Express and Verizon.

Equities

- Consumer discretionary: Electrolux [ELUXB.SE] +16.0% (earnings; guidance; no dividend), Adidas [ADS.DE] +5.0% (prelim earnings), Swatch [UHR.CH] +7.5% (earnings).

- Financials: Raiffeisen Bank [RBI.AT] +1.0% (earnings).

- Industrials: Signify [LIGHT.NL] -13.5% (earnings; pause stock buybacks).

Speakers

- Swiss National Bank (SNB) reiterated that it did not engage in any FX manipulation of Swiss Franc (CHF) (**Note: Switzerland was named again on the monitoring list under the US Treasury Semi-annual Currency Report).

- French PM Lecornu said to have used constitutional tool to adopt budget for 2026.

- Fitch affirmed South Korea sovereign rating at AA-; Outlook stable.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: Plans to buy bonds in Feb at same pace as m/m.

Currencies/ Fixed Income

- USD was firmer as speculation grew that President Trump would select Warsh as the next Fed Chair. Speculation ramped up after the two met on Thursday and Trump's advisers had been told with Trump to make an announcement on Friday morning. Greenback finding some support as Warsh's past hawkishness helped to dampen prospects of a more dovish Fed post-Powell.

- USD/JPY probing above the 154 neighborhood aided by the potential Fed nominee announcement. Dealers also eyeing an upcoming Japan MOF report to see if indeed there was BOJ intervention a week ago. The Yen recently went from 159 to test 152 on ‘rate check speculation from Japan MOF and US Treasury on behalf of the central banks.

- EUR/USD testing the 1.1900 area by mid-session as the pivotal 1.20 key resistance likely to hold for now on a weekly close basis. A plethora of EU growth and inflation data did little to move the gauge on any ECB rate action for the foreseeable future.

- The prospect of a less-dovish Fed also extending to commodity markets with precious metals falling sharply lower. Spot gold moved below the $5,000/oz while spot silver dipped below the $100/oz level

Economic data

- (FI) Finland Q4 GDP Indicator Q/Q: +0.6% v -0.1% prior.

- (FI) Finland Dec GDP Y/Y: -0.3% v +0.3% prior.

- (FI) Finland Dec Retail Sales Volume Y/Y: 0.7% v 3.4% prior.

- (ZA) South Africa Dec M3 Money Supply Y/Y: 8.2% v 8.3% prior; Private Sector Credit Y/Y:8.7 % v 7.7%e.

- (FR) France Q4 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: 1.1% v 1.2%e.

- (FR) France Dec Consumer Spending M/M: -0.6% v -0.4%e; Y/Y: -1.0% v -0.6%e.

- (DE) Germany Dec Import Price Index M/M: -0.1% v -0.4%e; Y/Y: -2.3% v -2.6%e.

- (SE) Sweden Dec Retail Sales M/M: -0.7% v +1.1% prior; Y/Y: 1.5% v 6.9% prior.

- (SE) Sweden Nov Non-Manual Workers Wages Y/Y: 3.5% v 3.5% prior.

- (NO) Norway Dec Retail Sales M/M: -0.7% v +1.2% prior.

- (NO) Norway Jan Unemployment Rate: 2.3% v 2.1% prior; Unemployment Rate (seasonally adj): 2.1% v 2.1% prior.

- (DK) Denmark Dec Unemployment Rate : 2.6% v 2.6% prior; Gross Unemployment Rate: 2.9% v 2.9% prior.

- (TR) Turkey Dec Trade Balance: -$9.3B v -$9.4Be.

- (TH) Thailand Dec Current Account Balance: $3.1B v $1.3Be; Overall Balance of Payments (BOP): $3.7B v $0.7B prior; Trade Account Balance: +$2.7B v -$0.2B prior; Exports Y/Y: 18.1% v 5.5% prior; Imports Y/Y: 18.0% v 17.3% prior.

- (HU) Hungary Q4 Preliminary GDP Q/Q: 0.2% v 0.5%e; Y/Y: 0.7% v 0.8%e.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 233.0K v 225.9K tons prior.

- (TH) Thailand May Foreign Reserves w/e Jan 23rd: $289.4B v $284.1B prior.

- (FR) France Dec PPI M/M: 0.2% v 2.8% prior; Y/Y: -2.0% v -1.5% prior.

- (FR) France Q4 Preliminary Private Sector Payrolls Q/Q: -0.1% v -0.1% prior.

- (ES) Spain Q4 Preliminary GDP Q/Q: 0.8% v 0.6%e; Y/Y: 2.6% v 2.6%e.

- (ES) Spain Jan Preliminary CPI M/M: -0.4% v -0.3%e; Y/Y: 2.4% v 2.4%e.

- (ES) Spain Jan Preliminary CPI EU Harmonized M/M: -0.7% v -0.8%e; Y/Y: 2.5% v 2.4%e; CPI Core Y/Y: 2.6% v 2.5%e.

- (CH) Swiss Jan KOF Leading Indicator: 102.5 v 103.0e.

- (AT) Austria Q4 GDP Q/Q: 0.2% v 0.4% prior; Y/Y: 0.7% v 1.0% prior.

- (AT) Austria Dec PPI M/M: -0.3% v 0.3% prior; Y/Y: -1.9% v -1.3% prior.

- (CZ) Czech Q4 Advance GDP Q/Q: 0.5% v 0.8% prior; Y/Y: 2.4% v 2.5%e.

- (RU) Russia Narrow Money Supply w/e Jan 23rd (RUB): 19.51T v 19.65T prior.

- (TW) Taiwan Q4 Advance GDP Y/Y: 8.6% v 7.6%e.

- (TR) Turkey Dec Foreign Tourist Arrivals Y/Y: 5.0% v 2.6% prior.

- (NL) Netherlands Q4 Preliminary GDP Q/Q:0.5 % v 0.3%e; Y/Y: 1.8% v 1.8% prior.

- (HK) Hong Kong Q4 Advance GDP Q/Q: 1.0% v 0.4%e; Y/Y:3.8 % v 3.0%e.

- (HK) Hong Kong Dec M3 Money Supply Y/Y: 4.2% v 4.5% prior; M2 Money Supply Y/Y: 4.2% v 4.5% prior; M1 Money Supply Y/Y: 11.7% v 14.9% prior.

- (DE) Germany Jan Unemployment Change: 0.0K v +3.0Ke; Jobless Claims Rate: 6.3% v 6.3%e.

- (DE) Germany Q4 Preliminary GDP Q/Q: 0.3% v 0.2%e; Y/Y: 0.4% v 0.3%e; GDP NSA (unadj) Y/Y: 0.6% v 0.4%e.

- (EU) Euro Zone Dec ECB 1 Year CPI Expectations: 2.8% v 2.7%e; 3 Year CPI Expectations: 2.6% v 2.4%e.

- (ES) Spain Nov Current Account Balance: €0.2B v €7.2B prior.

- (DE) Germany Jan CPI Hesse M/M: 0.0% v 0.1% prior; Y/Y: 2.1% v 2.2% prior.

- (DE) Germany Jan CPI Bavaria M/M: 0.0% v 0.0% prior; Y/Y: 2.1% v 1.7% prior.

- (DE) Germany Jan CPI Brandenburg M/M: 0.0% v 0.1% prior; Y/Y: 2.2% v 2.2% prior.

- (DE) Germany Jan CPI Saxony M/M: 0.0% v 0.2% prior; Y/Y: 2.3% v 1.9% prior.

- (DE) Germany Jan CPI Baden Wuerttemberg M/M: 0.0% v 0.2% prior; Y/Y: 2.1% v 1.9% prior.

- (DE) Germany Jan CPI North Rhine Westphalia M/M: 0.1% v 0.0% prior; Y/Y: 2.0% v 1.8% prior.

- (IT) Italy Q4 Preliminary GDP Q/Q: 0.3% v 0.1% prior; Y/Y: 0.8% v 0.6% prior.

- (CZ) Czech Dec M2 Money Supply Y/Y: 3.8% v 3.3% prior.

- (NO) Norway Central Bank (Norges) Feb Net FX Transactions (NOK): -726M v -776M prior.

- (IS) Iceland Dec Final Trade Balance (ISK): B v -40.8B prelim.

- (UK) Dec Net Consumer Credit: £1.5B v £1.7Be; Net Lending: £4.6B v £4.4Be.

- (UK) Dec Mortgage Approvals: 61.0K v 64.9Ke.

- (UK) Dec M4 Money Supply M/M: % v 0.8% prior; Y/Y: % v 4.3% prior; M4 (ex-IOFCs) 3-month annualized: % v 5.4% prior.

- (PT) Portugal Q4 Preliminary GDP Q/Q: 0.8% v 0.6%e; Y/Y: 1.9% v 2.4% prior.

- (EU) Euro Zone Q4 Advance GDP Q/Q: 0.3% v 0.2%e; Y/Y: 1.3% v 1.3%e.

- (EU) Euro Zone Dec Unemployment Rate: 6.2% v 6.3%e.

- (BE) Belgium Dec Unemployment Rate: 6.4% v 6.4% prior.

- (IT) Italy Dec Unemployment Rate: 5.6% v 5.8%e.

Fixed income issuance

- (IN) India sold INR320B vs. INR320B indicated in 6.48% Oct 2035 bonds; Avg Yield: 6.7229%.

- (DK) Denmark sold total DKK700M in 1-month and 3-month Bills.

- (ZA) South Africa sold total ZAR vs. ZAR1.0B indicated in 2031, 2050 and 2058 I/L bonds.

Looking ahead

- (MX) Mexico Dec Public Balance (MXN): No est v -991.7B prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (IN) India Dec YTD Fiscal Deficit (INR): No est v 9.767T prior.

- 06:00 (IE) Ireland Jan Preliminary CPI EU Harmonized M/M: No est v 0.6% prior; Y/Y: No est v 2.7% prior.

- 06:00 (PT) Portugal Jan Preliminary CPI M/M: No est v 0.1% prior; Y/Y: No est v 2.2% prior; CPI EU Harmonized M/M: No est v 0.0% prior; Y/Y: No est v 2.4% prior.

- 06:00 (IT) Italy Dec PPI M/M: No est v 1.3% prior; Y/Y: No est v -0.3% prior.

- 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £2.0B respectively).

- 06:20 (EU) ECB’s Vujcic (Croatia).

- 06:30 (BR) Brazil Dec Nominal (overall) Budget Balance: -97.0Be v -101.6B prior; Primary Budget Balance (BRL): +4.0Be v -14.4B prior; Net Debt to GDP: 65.4%e v 65.2% prior.

- 06:30 (IN) India Forex Reserve w/e Jan 23rd: No est v $701.4B prior.

- 07:00 (ZA) South Africa Dec Trade Balance (ZAR): 27.3Be v 37.7B prior.

- 07:00 (BR) Brazil Dec National Unemployment Rate: 5.1%e v 5.2% prior.

- 07:00 (MX) Mexico Q4 Preliminary GDP Q/Q: +0.6%e v -0.3% prior; Y/Y: +1.3%e v -0.1% prior.

- 07:00 (CL) Chile Dec Retail Sales Y/Y: 5.5%e v 5.8% prior; Commercial Activity Y/Y: No est v 6.0% prior.

- 07:00 (CL) Chile Dec Industrial Production Y/Y: +0.1%e v -0.8% prior; Manufacturing Production Y/Y: -0.5%e v -1.3% prior; Total Copper Production: No est v 451.8K prior.

- 08:00 (DE) Germany Jan Preliminary CPI M/M: 0.0%e v 0.0% prior; Y/Y: 1.9%e v 1.8% prior.

- 08:00 (DE) Germany Jan Preliminary CPI EU Harmonized M/M: -0.2%e v +0.2% prior; Y/Y: 2.0%e v 2.0% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance.

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:30 (US) Dec PPI Final Demand M/M: 0.2%e v 0.2% prior; Y/Y: 2.8%e v 3.0% prior.

- 08:30 (US) Dec PPI (ex-food/energy) M/M: 0.2%e v 0.0% prior; Y/Y: 2.9%e v 3.0% prior.

- 08:30 (US) Dec PPI (ex-food/energy/trade) M/M: 0.3%e v 0.2% prior; Y/Y: No est v 3.5% prior.

- 08:30 (CA) Canada Nov GDP M/M: +0.1%e v -0.3% prior; Y/Y: 0.7%e v 0.4% prior.

- 09:45 (US) Jan Chicago Purchase Managers Index (PMI): 43.5e v 42.7 prior (revised from 43.5).

- 10:00 (MX) Mexico Dec Net Outstanding Loans (MXN): No est v 7.253T prior.

- 10:00 (CO) Colombia Dec National Unemployment Rate: No est v 7.0% prior; Urban Unemployment Rate: 8.1%e v 7.3% prior.

- 11:00 (EU) Potential sovereign ratings after European close (S&P on Italy, Luxembourg; EFSF and ESM; Scope on Finland).

- 13:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to raise the Overnight Lending Rate by 50bps to 9.75%.

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 13:30 (US) Fed’s Musalem.

- 20:30 (CN) China Jan Manufacturing PMI (Govt Official): 50.1e v 50.1 prior; Non-manufacturing PMI: 50.3e v 50.2 prior; Composite PMI: No est v 50.7 prior.