ING Comments on Euro, Sterling, Poland's Zloty, Czech Republic's Koruna

The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

0901 GMT - Sterling remains vulnerable even after efforts from U.K. Treasury chief Rachel Reeves and the Bank of England to restore confidence in U.K. government bonds, ING's Chris Turner says in a note. Reeves announced measures for boosting growth Wednesday. The BOE unveiled Tuesday a new contingent facility to lend cash to non-bank financial institutions in the event of a gilt market dislocation. ING still expects fiscal consolidation in March and lower services inflation will cause the BOE to cut interest rates by 100 basis points this year. The bank expects sterling to fall to to $1.19 and the euro to rise to 0.85 pounds by year-end. GBP/USD and EUR/GBP trade flat at 1.2451 and 0.8371 respectively. (renae.dyer@wsj.com)

0846 GMT - The Federal Reserve's removal of the statement that "inflation is making progress" toward the 2% target suggests long-dated bond yields will be higher, says Franklin Templeton Institute's Chris Galipeau in a note. "This comment will be a point of focus and should place the expectation of multiple rate cuts in 2025 at risk," the senior market strategist says. "Long bond yields should back up on this," he says. On Wednesday, the Fed left the target range for the fed funds rate unchanged at 4.25%-4.50%, as expected. The 10-year Treasury yield falls 4 basis points to 4.516%, according to Tradeweb. (emese.bartha@wsj.com)

0828 GMT - Yields on U.K. government bonds, or gilts, decline as investors await the European Central Bank interest rate decision at 1315 GMT when a 25 basis-point rate cut is widely expected. "The ECB is poised to implement a 25 basis points cut, indicating a potential continuation of easing measures," Tickmill Group's Patrick Munnelly says in a note. The 10-year gilt yield and the 30-year gilt yield each decline 1 basis point to last trade at 4.585% and 5.137%, respectively, Tradeweb data show. (miriam.mukuru@wsj.com)

0815 GMT - The Federal Reserve is keeping flexibility on future policy moves, stating that policy is now well positioned, says Janus Henderson Investors's Daniel Siluk in a note. This possibly signals a more data-dependent, cautious approach rather than committing to a series of cuts, the head of global short duration and liquidity says. Within this context, the Fed may be in a 'pause' rather than 'skip' mode with respect to rates, he says. Fiscal issues are going to play a much bigger role for rates, Siluk says. "The FOMC may have learned some lessons on how it must be responsive to fiscal impulses like what we saw during the pandemic." The 10-year U.S. Treasury yield falls 4 basis points to 4.516%, Tradeweb data show. (emese.bartha@wsj.com)

0805 GMT - The European Central Bank is likely to cut interest rates by 25 basis points and signal further reductions, but the euro has limited room to fall as this is priced in, XTB's Kathleen Brooks says in a note. The market is pricing in 90 basis points of rate cuts this year, according to LSEG. This means the potential to surprise markets with indications of more rate cuts is limited, Brooks says. The euro also looks driven more by fears about U.S. President Trump's tariff threats rather than the ECB, she says. However, the euro remains "susceptible to volatility" after the ECB's meeting. The decision is at 1315 GMT. (renae.dyer@wsj.com)

0802 GMT - The dollar falls on caution ahead of key U.S. economic growth data for the fourth quarter of 2024, as it risks falling in the event of a weak reading. "I have always argued that the U.S. growth advantage over the other major developed economies is an important reason why the dollar is so expensively valued," Commerzbank analyst Ulrich Leuchtmann says in a note. A great deal of the U.S. growth advantage is already reflected in the dollar's price. Weaker-than-expected data could cause a significant correction lower for the dollar, although the currency could strengthen if the data exceed expectations. "Dollar strength is fragile," Leuchtmann says. The DXY dollar index falls 0.1% to 107.912. The data are due at 1330 GMT. (renae.dyer@wsj.com)

0726 GMT - The FTSE 100 is expected to open five points lower, or 0.1%, according to IG. The index closed 23 points higher, or 0.3%, at 8557 points Wednesday. The Federal Reserve left interest rates on hold on Wednesday, as highly anticipated. "Fed Chair Jerome Powell indicated that the Fed was in no hurry to cut rates further, but kept the door open for further cuts depending on the data," Jefferies economist Mohit Kumar says. Jefferies continues to expect two rate cuts this year with a potential third cut depending on the data. Thursday's focus turns to the European Central Bank's meeting at 1315 GMT. The market is pricing in a 93% chance of a 25 basis points rate cut, according to LSEG. (renae.dyer@wsj.com)

0722 GMT - The Philippines is likely to experience solid growth this year, says Capital Economics' Gareth Leather, citing recent data showing a slight pickup in the country's 4Q 2024 GDP growth. Rate cuts should help offset the impact of weaker exports and tighter fiscal policy, the senior Asia economist says. The Philippine economy is expected to grow 6.0% this year, Leather adds. Strong and steady growth supports Capital Economics' view that the Philippine central bank's easing cycle will likely be gradual in the coming months. The firm expects an additional 100 bps of rate cuts in 2025, following 75 bps of cuts in 2024. (ronnie.harui@wsj.com)

0720 GMT - Eurozone government bond yields are little changed in early trade as investors digest the Federal Reserve's policy meeting Wednesday and await the European Central Bank's decision on Thursday. The Fed left the target range for the fed funds rate on hold at 4.25%-4.50%, as expected, and signalled that it is in no hurry to change its policy stance. The ECB, meanwhile, is expected to deliver yet another 25-basis-point interest-rate cut amid concerns about the growth outlook. The 10-year German Bund yield rises about 1 basis point to 2.575%, according to Tradeweb. (emese.bartha@wsj.com)

0717 GMT - Japanese shares reversed early losses to close higher, supported by conglomerates and technology stocks. The Nikkei Stock Average ended 0.25% higher at 39513.97. Gainers included Mitsui & Co., which added 1.5%, and Marubeni Corp., up 1.3%. Technology-related stocks also rose, with SoftBank Corp. increasing 0.4% and Panasonic Holdings climbing 3.1%. USD/JPY was at 154.42, compared with 155.25 as of Wednesday 5 p.m. ET. (venkat.pr@wsj.com)

0701 GMT - Investors will need to be vigilant to the potential economic impact of higher-for-longer policy rates, Jupiter Asset Management's Matthew Morgan says in a note. The Federal Reserve is increasingly worried about data pointing to persistent inflation and resilient U.S. growth, the head of fixed income says. "The overwhelming strength of the U.S. relative to the rest of the world, a stronger dollar, and diverging global policy have the potential to create instability at a time when consumption, jobs, and housing in the U.S. may be starting to cool," Morgan says. Jupiter Asset Management expects volatility to continue, but government bonds look attractive at these levels as a hedge against an economic surprise. (emese.bartha@wsj.com)

0656 GMT - Morgan Stanley Research retains its call for an interest-rate cut by the Federal Reserve in March, its analysts say in a note. That prediction is based on their favorable inflation forecast, even though they view the bar for a cut as now higher than before. Morgan Stanley expects two rate cuts this year, with the other one coming in June. On Wednesday, the Fed left the fed funds target range unchanged at 4.25%-4.50%, as expected, and signaled no urgency to change its policy stance. U.S. Treasury yields decline in early European hours, reversing overnight rises. The 10-year Treasury yield falls about 3 basis points to 4.522%, while the 2-year Treasury yield falls 1 basis point to 4.216%, according to Tradeweb data. (emese.bartha@wsj.com)

Sterling remains vulnerable even after efforts from U.K. Treasury chief Rachel Reeves and the Bank of England to restore confidence in U.K. government bonds, ING's Chris Turner says in a note. Reeves announced measures for boosting growth Wednesday. The BOE unveiled Tuesday a new contingent facility to lend cash to non-bank financial institutions in the event of a gilt market dislocation. ING still expects fiscal consolidation in March and lower services inflation will cause the BOE to cut interest rates by 100 basis points this year. The bank expects sterling to fall to to $1.19 and the euro to rise to 0.85 pounds by year-end. GBP/USD and EUR/GBP trade flat at 1.2451 and 0.8371 respectively. (renae.dyer@wsj.com)

Sterling is little moved after U.K. Treasury chief Rachel Reeves set out plans to boost economic growth. In a speech Wednesday, Reeves announced several infrastructure projects including a third runway at Heathrow Airport. The government plans to reduce barriers to getting these projects off the ground. She said the U.K. would reset its relationship with the EU, build on its "special relationship" with the U.S. and make stronger ties with fast-growing economies around the world. She also defended her October budget, including an increase in employers' national insurance contributions to help repair public finances. GBP/USD and EUR/GBP are both little changed compared to levels before the speech at 1.2419 and 0.8381, respectively. (renae.dyer@wsj.com)

Investor perception of a speech from U.K. Treasury chief Rachel Reeves on Wednesday will be key for sterling and U.K. government bonds, Convera forex strategist George Vessey says. "If her proposals are perceived as pro-growth yet fiscally responsible, gilt yields are likely to rise in an orderly fashion, reflecting optimism about long-term economic prospects," he says. This could lead to a positive recoupling of sterling and gilt yields. In that case sterling could rise to 1.26 against the dollar and 1.20 versus the euro, compared with current levels of 1.2453 and 1.1926, respectively. If Reeves fails to provide clarity or markets lose confidence in the execution of her plans, sterling could weaken. (renae.dyer@wsj.com)

The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

0752 GMT - The euro falls against the dollar as the European Central Bank is expected to cut interest rates Thursday while the Federal Reserve pauses rate cuts Wednesday, Swissquote Bank analyst Ipek Ozkardeskaya says in a note. Data on Thursday could show much weaker eurozone economic growth compared to the U.S. in the fourth quarter, she says. This would give the ECB reason to cut rates further as inflationary pressures remain under control, she says. Investors "continue to bet that the growth gap between the U.S. and the eurozone and the diverging Fed and ECB outlooks hint at a sustained euro weakness, rather than a sustainable recovery of the single currency." The euro falls 0.1% to $1.0471. (renae.dyer@wsj.com)

0724 GMT - The government bond supply frenzy in the eurozone will probably calm down soon, but that reprieve could prove to be relatively short-lived as further syndications are likely in February, rates strategists at Societe Generale Research say. A risk-on mood, combined with attractive outright yield levels, has boosted demand for eurozone government bonds, leading to yield spread tightening, they say in a note. "If there is no repricing of the European Central Bank rate cuts and the general appetite for eurozone government bonds continues, there is no reason to expect a sharp widening in spreads," they say. That said, the strategists add that the situation in France is set to remain fragile, while Germany holds elections in February. (emese.bartha@wsj.com)

0723 GMT - With the European Central Bank in easing mode, a spike in long rates close to the levels of the beginning of rate cuts makes duration increasingly appealing, rates strategists at Societe Generale Research say in a note. "We recommend cautiously buying duration, not necessarily in Bunds ahead of German elections," they say. The rates strategists prefer 30-year Spanish or Italian government bonds for eurozone duration. Germany will hold elections on Feb. 23. German 10-year Bund yields might rise to around 2.80%, although an increase to 3% is unlikely, they say. The 10-year Bund yield falls 5 basis points to 2.52% in early trade, according to Tradeweb. (emese.bartha@wsj.com)

0719 GMT - The broad-based deterioration in China's PMIs point to a weak start to 2025, Barclays economists say. The beyond-seasonal drop in the manufacturing PMI in January and big miss in non-manufacturing PMI suggest that growth momentum slowed visibly, Yingke Zhou and others say. The alarming, five-year low in the construction PMI points to a deeper contraction in housing building and a slow start for new infrastructure, they write. Reflecting this, they see China's seasonally adjusted annual growth rate slowing from 7.9% on quarter in 4Q to 2.2% in 1Q. From 2Q onward, there could be a mild recovery as new policy support kicks in, followed by moderation in the next quarters as a potential trade war bites. Barclays keeps its full-year growth forecast at 4.3%. (fabiana.negrinochoa@wsj.com)

0650 GMT - China's surprisingly weak January PMIs cast doubt if the economy can gain a firmer footing after better-than-expected 4Q GDP growth, says Commerzbank Research senior economist Tommy Wu in a note. Although the latest PMI readings need to be taken with "a pinch of salt," due to the moving holiday effects of the Lunar New Year, Wu says the magnitude of decline was unexpectedly strong. The PMIs reinforce Commerzbank Research's view that the Chinese economy still needs further stimulus to help it to stay on a stable growth path. "This is especially true if China can no longer rely on exports as it did last year," Wu says. China's trade outlook faces challenges such as potential U.S. tariffs, he adds.(amanda.lee@wsj.com)

0649 GMT - The Nikkei Stock Average ended 0.9% lower at 39565.80 as weakness in tech and electronics stocks offset gains in bank shares. SoftBank Group dropped 8.3% and Advantest lost 8.6% after they rose sharply last week on renewed enthusiasm over artificial intelligence-related demand. Meanwhile, Mitsubishi UFJ Financial Group gained 0.7% and Sumitomo Mitsui Financial Group climbed 1.5% after their main banking units said they would raise short-term prime lending rates. Broader market index Topix rose 0.3% to 2758.07. Earnings are in focus. The 10-year Japanese government bond yield dropped 1.5 bps to 1.215%. USD/JPY is at 156.10, compared with 156.01 late Friday in New York. (kosaku.narioka@wsj.com; @kosakunarioka)

0619 GMT - More two-way swings for USD and other FX pairing are likely in store as Trump continues to use tariffs as a means to achieve his policies, Maybank analysts say. The dollar edged higher against most currencies after Trump ordered 25% emergency tariffs on Colombia over its refusal to allow planes with migrants to land in the country. Trump walked back on the threat as the White House said Colombia met its demands to repatriate migrants. That comes right after Trump threatened 25% tariffs on Mexico and Canada, the analysts note. With the U.S. 10-year Treasury yield and oil prices both edging lower, that tilts risks for the greenback to the downside on the whole in the near term, they say. (fabiana.negrinochoa@wsj.com)

0616 GMT - China's weaker-than-expected January PMI readings underscore the need for additional policy measures to stabilize economic growth, Citi analysts write in a note. While the Lunar New Year holiday effect contributed to the decline, manufacturing activity weakened more than typically seen in a seasonal slowdown, they say. External demand faced challenges, with tariff risks looming under Trump 2.0, the analysts add. Although the current trade-in policy will likely provide some support for holiday consumption, a key policy event to watch is the National People's Congress in March, they note. (amanda.lee@wsj.com)

0557 GMT - The Bank of Japan seems likely to keep normalizing policy at a gradual pace, economists at PGIM Fixed Income say in a note. The policy rate is now at the psychologically important level of 0.5%. The BOJ has been unable to keep rates above that threshold since the mid-1990s and is likely hoping that this time will be different, they note. More policy normalization is backed by macro data, the currency impact from a strong USD, and the BOJ's thinking on Japan's experience with low inflation and prior policy action. "Our view is that rates will rise by a further 25 bps this year, but potentially not until the Autumn." But if underlying inflation accelerates beyond 2%, BOJ could speed up the pace of rate hikes, they add. (monica.gupta@wsj.com)

0533 GMT - The Australian central bank still seems likely to make its first rate cut of the cycle next month, Nomura analysts say, expecting the upcoming 4Q CPI release to show that inflation pressures have continued to recede. They reckon this week's report will show evidence of moderation in trouble spots such as rent and insurance. More benign inflation should roughly offset a stronger-than-expected labor market over recent months. They see the rate cut argument shifting a little from a weak economy requiring monetary support to lower inflation allowing policy to become less restrictive. Given these labor market and inflation developments, Nomura continues to favour policy moves in February, May and August, following quarterly CPI reports. (fabiana.negrinochoa@wsj.com)

0525 GMT - South Korea's weaker-than-expected 4Q GDP print prompts DBS's economics team to cut its growth forecast for this year. The print caps off another year of below-potential GDP growth in 2024, with domestic demand again featuring as a key drag, economist Ma Tieying says. DBS now sees 2025 growth at 1.7% versus 2.0% previously, and 2.0% in 2024. It expects demand to stay weak in 1Q. A potential recovery could start in 2Q as the effect of the political crisis and recent airplane crash subside, restoring consumer confidence. This assumes that the constitutional court upholds President Yoon's impeachment, leading to a new election, Ma adds. Export growth is likely to slow through the year, with the focus on the risks posed by U.S. tariffs. (fabiana.negrinochoa@wsj.com)

0517 GMT - Australia's 4Q CPI data due Wednesday is in focus as market observers try to interpret what the print will mean for the Reserve Bank of Australia ahead of its February meeting. Eyes will be on the trimmed mean measure, which market consensus has at 3.3% on year and 0.6% on quarter, HSBC Global Research says in a note. There is a risk the trimmed mean could print even lower as some of the effects of government subsidies on rent and electricity may seep in. However, recent strong jobs figures may make it harder to believe that underlying inflation will keep falling. The RBA has a complicated decision to make next month, as cutting too early in a fully employed economy could mean not achieving sustained 2.5% inflation, it says. (monica.gupta@wsj.com)

The euro falls against the dollar as the European Central Bank is expected to cut interest rates Thursday while the Federal Reserve pauses rate cuts Wednesday, Swissquote Bank analyst Ipek Ozkardeskaya says in a note. Data on Thursday could show much weaker eurozone economic growth compared to the U.S. in the fourth quarter, she says. This would give the ECB reason to cut rates further as inflationary pressures remain under control, she says. Investors "continue to bet that the growth gap between the U.S. and the eurozone and the diverging Fed and ECB outlooks hint at a sustained euro weakness, rather than a sustainable recovery of the single currency." The euro falls 0.1% to $1.0471. (renae.dyer@wsj.com)