Notes/Observations

- Continued optimism on upcoming high-level trade talks between US-China as China President Xi to meet with US trade delegation Friday including Lighthizer and Mnuchin

- Sweden Central Bank keeps policy steady and maintains its forward guidance for the next potential rate hike; did not renew its mandate on FX intervention

- UK Jan CPI slowed more than expected moved back below BOE inflation target for 1st time in 2 years (YoY: 1.8% v 2.0%e)

- Focus on US Jan CPI data to be released later today

Asia:

- New Zealand Central Bank (RBNZ) left the Official Cash Rate unchanged at 1.75% (as expected)

- RBNZ Gov Orr reiterated chances of rate cut had not increased, outlook was balanced up or down; did not rule out rate cut, best guess was that rate would be held steady for a long period

- China President Xi said to meet with US trade delegation Friday (Feb 15th) including Lighthizer and Mnuchin in Beijing

- South Korea Jan Unemployment Rate: 4.4% v 3.8%e (highest since 2010)

Europe:

-PM May said to have warned that she must pass a deal in 30 days or Parliament will delay Brexit. At least three 'remainer' UK cabinet ministers reportedly plan to support Cooper-Letwin plan on Feb 27th to end 'no-deal Brexit' threat

- PM May adviser Oliver Robbins reportedly was overheard saying that MPs will be given choice between PM May's deal or lengthy delay to Brexit

- PM May said to have the opportunity to win a late concession from EU leaders at Brussels summit March 21s

- PM May reportedly told business leaders that extending Article 50 process wouldn't serve any purpose

- Spain minority Socialist govt said to plan an early general election after its expected defeat in a budget vote on Wednesday

Americas:

- US President Trump: May consider delaying March 1st deadline if nearing a deal with China but would prefer not to. Would be seen as a sign of goodwill in trade talks. Could not say was happy about border deal; to have meeting on deal later on Tuesday, did not expect govt shutdown. Might add to current congressional border proposal; current plan was not doing the trick

- Fed's George (hawk, voter): Support for pausing interest rate hikes was to let Fed assess the impact of past hikes. inflation pressures did not appear very strong

- Fed Mester (hawk, non-voter): monetary policy does not seem far behind or ahead of the curve; inflation likely to move below 2% in first part of the year due to low energy prices. Plans would be finalized for ending balance sheet runoff and completing balance sheet normalization at coming meetings

Energy:

- Weekly API Oil Inventories: Crude: -1M v +2.5M prior

 

Macro

(SE) Sweden: The Riksbank left the repo rate unchanged at -0.25%, as expected. While growth is more subdued, economic activity is still strong and the conditions for inflation have not changed to a significant extent. Against that background, the Riksbank not only left the repo rate, but also the guidance that the next increase will be during the second half of 2019 unchanged.

(NZ) New Zealand: The RBNZ held the official cash rate at 1.75%, in line with widespread expectations. The RBNZ reiterated the pledge to keep the rate at the current level through 2019 and 2020. They repeated that the next move could be up or down. Less dovish than expected then as the RBNZ expect low rates to maintain growth along with positive fiscal policy.

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.28% at 363.78, FTSE +0.44% at 7,167.06, DAX +0.10% at 11,137.19, CAC-40 +0.23% at 5,067.98, IBEX-35 -0.06% at 8,978.00, FTSE MIB +0.62% at 19,928.50, SMI +0.15% at 9,134.50, S&P 500 Futures +0.12%]

Market Focal Points/Key Themes: Equities European Indices trade slightly higher across the board following on from a strong close on Wallstreet overnight and higher futures this morning as positive momentum continues. In the UK, inflation fell below the BoE target for the first time in two years ahead of high stake talks between UK PM may and the EU in an attempt to forge a Brexit deal. On the corporate front on another busy morning for corporate earnings shares of Dutch Beverage name Heineken trades higher after reporting a top and bottom line beat, with Ingenico another notable riser despite lower year on year earnings but rises on a more optimistic 2019 outlook. Other notable gainers include Rexel, Akza Nobel, Tele2, Tullow Oil, Dunelm and IHG among others. ABN Amro on the other hand declines over 7% as the earnings which fell far short of consensus; Bic, Akastor and Clariant are among other notable decliners after earnings. Elsewhere Kloeckner rises on steeping down of its CFO, while Clinigen rises over 10% after reaching an agreement with Novartis to acquires US rights to Proleukin. Looking ahead notable earners include Dish Network, Teva, Hilton Worldwide, Diabold Nixdorf and Lithia Motors among others.

- Consumer discretionary: Heineken Holding [HEIA.NL] +5.5% (earnings), Ingenico [ING.FR] +8% (earnings), Takeaway.com [T5W.DE] +0.5% (earnings), Dunelm Group [DNLM.UK] +2.5% (earnings), InterContinental Hotels Group [IHG.UK] +1% (acquisition)

- Materials: Akzo Nobel [AKZA.NL] +3.5% (earnings; dividend cut)

- Energy: Tullow Oil [TLW.UK] +3% (earnings)

- Financials: ABN AMRO Holding [ABN.NL] -7% (earnings), Amundi [AMUN.FR] +5% (earnings)

- Healthcare: Clinigen Group [CLIN.UK] +13% (to acquire drug rights from Novartis)

- Industrials: Leonardo [LDO.IT] +1% (contract), Rolls Royce Holdings [RR.UK] +2.5% (analyst action)

- Technology: Wirecard [WDI.DE] -2% (momentum; several lawfirms to investigate on behalf of investors), Rexel [RXL.FR] +3.5% (earnings)

- Telecom: Tele2 [TEL2A.SE] +2% (earnings; dividend raise)

 

Speakers

- Sweden Central Bank (Riksbank) Policy Statement reiterated that its next potential hike to take place in H2 2019 and then saw two hikes annual afterwards. Reiterated that monetary policy needs to proceed cautiously and proceed at a slow pace afterward. The Board did not extend the mandate for FX intervention

- Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference noted that not much had happened since December; domestic market remained strong. Reiterated view that SEK currency (Krona) to gradually strengthen over time

- ECB's Lane (Ireland): Have been focused on Brexit risks for a long time. No deal Brexit would deal a severe blow to the Irish economy

- UK Brexit Sec Barclay: Brexit deal would help to give business confidence. EU leaders did not want an extension of Brexit uncertainty

- Italy League party official Borghi (budget committee): Ruling coalition has no intention to sell any of the Bank of Italy's gold reserves

- South Africa State-owned utility Eskom said to be technically insolvent and would run out of money by April in the absence of govt help

- BOJ Gov Kuroda: Inflation is slowly moving towards 2%; to continue to watch for risks while conducting policy. Stated that was his responsibility to achieve 2% inflation target by 'persistently' continuing stimulus policy.

- IEA Monthly Oil Report maintained 2019 global oil demand growth forecast at 1.4M bpd while raising 2019 Non-Opec supply from 1.6M bpd to 1.8M. Oil market were still working off the surpluses built up in H2 2018. US sanctions on Venezuela might create problems for crude quality but not quantity

 

Currencies/Fixed Income

- USD was slightly softer and taking a reprieve from its recent bull run.

- EUR/USD was little changed but holding above the 1.13 level. Focus turning to the Germany GDP data due out on Thursday (tomorrow).

- GBP/USD was slightly lower after UK Jan CPI slowed more than expected moved back below BOE inflation target for 1st time in 2 years (YoY: 1.8% v 2.0%e). Analysts see the next potential BOE rate hike in 2021. Pair trading below the 1.29 level ahead of the NY morning.

- EUR/SEK cross moved lower after the Sweden Central Bank kept its policy steady and maintained its forward guidance for the next potential rate hike in the H2 part of 2019. The SEK strength was attributed to the Riksbank Board not renewing its mandate on FX intervention

- The NZD currency was firmer by 1.7% (along with higher NZ bond yields as the central bank pushed out its forecast for an interest-rate increase to early 2021, thereby paring investors' dovish positions, who were looking for signs of a policy easing later this year. RBNZ Gov Orr reiterated chances of rate cut had not increased

- Spanish bond yields are trading at their lowest in a year at around 1.24%, despite the elevated uncertainty around the upcoming budget vote and the possibility of snap election. Spain's Socialist Party-controlled governing coalition needs votes from smaller parties to get majority to pass its spending plans, but some smaller, Catalan parties are likely to vote against the measure

 

Economic Data

- (RO) Romania Jan CPI M/M: 0.8% v 0.9%e; Y/Y: 3.3% v 3.3%e

- (NO) Norway Q4 Average Monthly Earnings Y/Y: 2.8% v 2.7% prior

- (CZ) Czech Jan CPI M/M: 1.0% v 0.7%e; Y/Y: 2.5% v 2.1%e

- (TW) Taiwan Q4 Final GDP Y/Y: 1.8% v 1.8%e

- (SE) Sweden Central Bank (Riksbank) left the Repo Rate unchanged at -0.25% (as expected) and did not renew its mandate on FX intervention

- (CZ) Czech Dec Current Account Balance (CZK): +0.5B v -4.1Be

- (IS) Iceland Jan International Reserves (ISK): 757B v 736B prior

- (UK) Jan CPI M/M: -0.8% v -0.7%e; Y/Y: 1.8% v 1.9%e (back below BOE target for 1st time since Jan 2017); CPI Core Y/Y: 1.9% v 1.9%e; CPIH Y/Y: 1.8% v 1.9%e

- (UK) Jan RPI M/M: -0.9% v -0.8%e; Y/Y: 2.5% v 2.6%e; RPI Ex-mortgage interest payments (RPI-X) Y/Y: 2.5% v 2.6%e; Retail Price Index: 283.0 v 283.2e

- (UK) Jan PPI Input M/M: -0.1% v +0.2%e; Y/Y: 2.9% v 3.8%e

- (UK) Jan PPI Output M/M: 0.0% v 0.0%e; Y/Y: 2.1% v 2.2%e

- (UK) Jan PPI Output Core M/M: 0.4% v 0.2%e; Y/Y: 2.4% v 2.3%e

- (UK) Jan ONS House Price Index Y/Y: 2.5% v 2.5%e

- (EU) Euro Zone Dec Industrial Production M/M: -0.9% v -0.4%e; Y/Y: -4.2% v -3.3%e

**Fixed Income Issuance**

- (IN) India sold total INR100B vs. INR100B indicated in 3-month, 6-month and 12-month bills

- (DK) Denmark sold DKK1.5B in 3-month bills; Avg Yield: -0.650% v -0.675% prior; bid-to-cover: 2.67x v 2.58x prior

- (SE) Sweden sold SEK1.5B in 0.75% 2028 bond; Avg Yield: 0.3489% v 0.6430% prior; Bid-to-cover: x v 3.02x prior

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 2021 bonds; Avg Yield: 1.12% v 1.06% prior;Bid-to-cover: 4.75x v 3.88x prior

- (IT) Italy Debt Agency (Tesoro) sold total €4.5B vs. €3.5-4.5B indicated range in 2021 and 2025 BTP bonds

- Sold €2.25B vs. €1.75-2.25 indicated range in 2.30% Oct 2021 BTP; Avg Yield: 0.99% v 1.07% prior; Bid-to-cover: 1.77x v 1.49x prior (Jan 11th 2019)

- Sold €2.25B vs.€1.75-2.25B indicated range in 2.50% Nov 2025 BTP; Avg Yield: 2.26% v 2.35% prior; Bid-to-cover: 1.38x v 1.64x prior

- (CH) Switzerland sold total CHF215.1M in 2032 and 2055 bonds

 

Looking Ahead

- 05:30 (DE) Germany to sell €1.5B in 2.50% Aug 2046 Bunds

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €0.75-1.0B in 2029 and 2034 OT bonds

- 06:00 (IL) Israel Jan Trade Balance: No est v -$2.2B prior

- 06:00 (PT) Portugal Q4 Labour Costs Y/Y: No est v 1.5% prior

- 06:00 (ZA) South Africa Dec Retail Sales M/M: -2.7%e v +3.3% prior; Y/Y: 2.5%e v 3.1% prior

- 06:00 (BR) Brazil Dec Retail Sales M/M: -0.1%e v +2.9% prior; Y/Y: 3.8%e v 4.4% prior

- 06:00 (BR) Brazil Dec Broad Retail Sales M/M: -1.0%e v 1.5% prior; Y/Y: 3.6%e v 5.8% prior

- 06:00 (RU) Russia OFZ Bond auction results; (no limited provided) in issuance under 2 tranches

- 06:45 (US) Daily Libor Fixing

- 07:00 (US) MBA Mortgage Applications w/e Feb 8th: No est v -2.5% prior

- 07:00 (IS) Iceland Jan Unemployment Rate: No est v 2.7% prior

- 07:00 (UK) Weekly PM May question time in House of Commons

- 07:00 (CZ) Czech Central Bank to comment on CPI data

- 08:00 (PL) Poland Dec Current Account Balance: -€1.0Be v -€0.2B prior; Trade Balance: -€1.2Be v -€0.2B prior; Exports: €16.6Be v €20.0B prior; Imports: €17.9Be v €20.3B prior - 08:00 (HU) Hungary Central Bank Jan Minutes

- 08:00 (UK) Baltic Dry Bulk Index

- 08:30 (US) Jan CPI M/M: +0.1%e v -0.1% prior; Y/Y: 1.5%e v 1.9% prior

- 08:30 (US) Jan CPI (Ex-food/energy) M/M: 0.2%e v 0.2% prior; Y/Y: 2.1%e v 2.2% prior

- 08:30 (US) Jan CPI Index NSA: 251.617e v 251.233; CPI Core Index: 260.574e v 260.027 prior

- 08:30 (US) Jan Real Avg Weekly Earnings Y/Y: No est v 1.4% prior (revised from 1.2%); Real Avg Hourly Earning Y/Y: No est v 1.3% prior (revised from 1.1%)

- 08:30 (CA) Canada Jan Teranet House Price Index M/M: No est v -0.3% prior; Y/Y: No est v 2.5% prior; House Price Index (HP): No est v 224.07 prior

- 08:50 (US) Fed's Mester (hawk, non-voter) on Economic Outlook and Monetary Policy

- 08:50 (US) Fed's Bostic (dove, non-voter) to Speak to European Financial Forum in Dublin

- 09:00 (IT) ECB's Visco (Italy)

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 12:00 (US) Fed's Harker (dove, non-voter)

- 12:00 (CA) Canada to sell 5-year notes

- 14:00 (US) Dec Monthly Budget Statement: -$11.0Be v -$204.9B prior

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