Market Focus Shifting From Risk Of Tariffs To Positives From End To War In Ukraine

Economic

Russia-Ukraine Conflict

Summary:

‘Great progress’, ‘We’re close but not there on inflation’, ‘We don’t get excited about one or two good readings, and we don’t get excited about one or two bad readings.’ These are some semi-live comments from Fed Chair Powell at its second day hearing before Congress in the wake of blow-out US January inflation figures, published less than two hours earlier.

Markets

Anyway, in those figures, the progress on inflation was well masked. US January headline inflation jumped 0.5% M/M (from 0.4% and 0.3% expected) rising the Y/Y measure to 3.0% (from 2.9%). Similar story for core CPI inflation at 0.4% M/M (from 0.2%) with the Y/Y measure reaccelerating to 3.3% from 3.2%. Food (0.4% M/M) and energy prices (1.1%) both also services inflation (0.5% M/M and 4.3% Y/Y) don’t suggested a that a swift return toward 2.0% was gaining momentum. Idem for shelter prices (0.4% M/M, 4.4%).

The market reaction was straight forward. US yields closed between 7.2 (2-y) and 9.8 bps (5-y) higher. US markets now only see a next 25 bps Fed rate cut fully discounted in the final quarter of the year. The fact that the biggest yield rise occurred at the belly of the curve suggests that markets feel that even in a scenario of persistent inflation, the (political) bar remains high of the Fed to resume raising rates.

Markets for now only consider a higher-for-(much)-longer scenario. Still, US yields closed off the intraday peak levels. A decline in the oil price (Trump suggesting upcoming Ukraine peace talks) capped a rise in inflation expectations. Even so, the US 10-y $42 bln Note sale, despite the higher yield, only attracted mediocre investors interest. German yields in sympathy gained between 5.3 bps (2-y) and 3.3 bps (30-y).

US equities opened about 1.0% lower on tighter interest rate conditions post the CPI release, but easily reversed most of the initial loss. Dollar gains were limited and short-lived except for USD/JPY (close 154.4 from 152.5). Especially the euro showed remarkable resilience. Interest-driven USD strength, if any, was counterbalanced by the prospect that an end to the war in Ukraine might be on the horizon after Trump’s phone call with Putin kickstarted the process.

Asian equity markets this morning mostly show solid gains. The market focus is shifting from the risk of US tariffs to the potential positives from an end to the war in Ukraine. This evidently applies to European markets. EUR/USD this morning jumps to currently trade near 1.043. This theme probably also will set the tone on European markets later today. Aside from the Ukraine risk-on , the eco calendar contains the US PPI and jobless claims data. They probably won’t amend the higher-for-longer message from yesterday’s US CPI.

The US 2-y yield is close to the key 4.40% resistance area. However, for a break the market probably has to reconsider Fed rate hikes. We’re not that far yet. In FX, the euro is gaining traction. A break beyond 1.0442 would open the way to the 1.0533/1.0630 previous correction highs. UK Q4 GDP at 0.1% Q/Q reported this morning was less worse than expected, but the details (poor private consumption and investments) confirms an ongoing uphill battle for the UK economy. Sterling gains modestly (EUR/GBP 0.834).

News & Views

The European Commission yesterday confirmed that it will cut the settlement cycle for stock, bond and fund trades from two days to one. Single-day securities settlement will begin on October 11 2027, aligning the switch with those in the UK and Switzerland. The move will bring a significant reduction in margin requirements for market participants and would also unlock important benefits, notably by achieving risk reduction, margin savings and the reduction of costs linked to misalignment with other major jurisdictions. The US shortened its settlement time in May of last year with countries like Canada, Mexico, India and China also already on the T+1 scheme.

News agency Bloomberg runs an article citing at least six EU member states who would be pushing the EC to allow more flexibility on refilling requirements for gas storage ahead of next winter. The Gas Coordination Group meets today. Targets are currently designed to ensure that inventories are 90% full by November 1st, but current levels (48% full on average) are relatively low because of cold weather, low wind generation and loss of Russian supplies. There is concern that overly strict targets are at least partly responsible for the surge in gas prices to the highest level in two years’ time.

Source: ACTIONFOREX

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Warren Takunda

Economic

Asian shares mostly rose Thursday after U.S. President Donald Trump agreed with Russian leader Vladimir Putin to start talks about ending the war in Ukraine.

The possibility that Trump may pause some of the tariffs he has announced was also a cause for optimism in Asian markets.

The upswing came despite a decline on Wall Street on Wednesday after a report showed inflation is worsening for Americans.

Japan’s benchmark Nikkei 225 jumped 1.3% to finish at 39,461.47. Australia’s S&P/ASX200 added nearly 0.1% to 8,540.00. South Korea’s Kospi gained 1.4% to 2,583.17. The Hang Seng surged 1.2% to 22,128.08, while the Shanghai Composite edged down 0.4% to 3,332.48.

On Wall Street, the S&P 500 dropped 0.3%, though it had been on track for a much worse loss of 1.1% at the start of trading. The Dow Jones Industrial Average sank 225 points, or 0.5%, while the Nasdaq composite edged higher by less than 0.1%.

The losses were pared as the price of oil eased. A barrel of benchmark U.S. crude fell 2.7% to below $72 after Trump said he had agreed with Russia’s president to begin “negotiations” on ending the war in Ukraine. Such a move could free up the global movement of crude.

In Thursday’s energy trading, benchmark U.S. crude fell 70 cents to $70.67 a barrel. Brent crude declined 72 cents to $74.46.

On Wall Street, Exxon Mobil sank 3% as oil-and-gas companies fell broadly following the 2.4% drop for the price of a barrel of Brent on Wednesday.

Wall Street’s overall momentum remained downward, and the majority of stocks fell. Treasury yields also remained notably higher in the bond market, cranking up the pressure on financial markets after the morning’s report said U.S. consumers had to pay higher prices for eggs, gasoline and other costs of living than economists expected.

Overall inflation was 3% for U.S. consumers in January. That was worse than the 2.9% inflation rate in December, which is what economists expected to see again.

The inflation report suggested not only that pressure on U.S. households’ budgets is amplifying but also that traders on Wall Street were correct to forecast the Federal Reserve will deliver less relief for Americans through lower interest rates this year.

The Fed had cut its main interest rate sharply from September through the end of last year, intending to make borrowing cheaper, help the economy and boost prices for stocks, bonds and other investments. But the Fed warned at the end of 2024 it may not cut rates by as much in 2025 because of worries about inflation staying stubbornly high. Its goal is to keep inflation at 2%.

Some investors were betting on the Fed not cutting rates at all in 2025, even before Wednesday’s report on the consumer price index.

“The hotter than expected CPI confirms investors’ anxiety regarding too-hot inflation that will keep the Fed on the sidelines,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute.

January’s reading doesn’t account for any of the tariffs that Trump has recently announced, with possibly more on the way, which economists expect will raise prices for imports further.

Following January’s discouraging inflation data, traders are betting on a 29% chance the Fed will not cut rates at all this year, according to data from CME Group. That’s up from a less than 20% chance seen the day before.

Such expectations sent the yield on the 10-year Treasury up to 4.62% from 4.54% late Tuesday.

When a 10-year Treasury, which is seen as one of the safest investments possible, is paying that much in interest, investors are less likely to pay high prices for stocks, which carry a higher risk of seeing their prices go to zero. That puts downward pressure on U.S. stock prices, which critics say already look too expensive after running to repeated records last year, with the latest for the S&P 500 coming last month.

Among earnings reports, CVS Health jumped 14.9% after easily topping Wall Street’s revenue and profit expectations for the latest quarter. But ride-hailing app Lyft fell 7.9% despite reporting stronger earnings than expected.

All told, the S&P 500 fell 16.53 points to 6,051.97. The Dow Jones Industrial Average dropped 225.09 to 44,368.56, and the Nasdaq composite added 6.09 to 19,649.95.

In currency trading, the U.S. dollar fell to 154.06 Japanese yen from 154.31 yen. The euro cost $1.0436, up from $1.0386.

Source: AP

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Warren Takunda

Stocks

London stocks were set for a steady open on Thursday as investors mulled the latest UK GDP data.

The FTSE 100 was called to open flat at 8,807.

Figures released earlier by the Office for National Statistics showed that the economy unexpectedly grew in the fourth quarter.

Gross domestic product rose 0.1% in the three months to December, beating expectations for a 0.1% contraction.

ONS director of economic statistics Liz McKeown said: "The economy picked up in December after several weak months, meaning, overall, the economy grew a little in the fourth quarter of last year.

"Across the quarter, growth in services and construction were partially offset by a fall in production. GDP per head, in contrast, fell back slightly in the quarter."

Paul Dales, chief UK economist at Capital Economics, said the 0.1% quarter-on-quarter rise in GDP in Q4 "leaves the economy all-but stagnating" as businesses adjust to higher taxes and more uncertainty from overseas.

"We aren’t expecting the economy grow much at all in the coming quarters," he said.

"After stagnating in Q3, the economy was saved from the same fate in Q4 (or worse) by a 0.4% m/m rise in GDP in December (consensus +0.1%, CE -0.1%).

"That’s pretty much the only growth there’s been for a while as it explains all of the 0.4% rise in GDP since Labour came to power in July and the 0.3% gain since last April."

In corporate news, Barclays saw profit before tax jump over the last three months of 2024 to reach £1.7bn, versus £0.1bn one year before.

Net interest income for the quarter printed at £3.5bn (consensus: £3.29bn), while the profitability of its investment bank hit £2.61bn (consensus: £2.47bn).

That came on the back of a 24% year-on-year surge in group income to £7.0bn. Total operating expenses meanwhile fell by 7% to £4.6bn.

For 2025, the lender said that it was targeting a return on tangible equity of approximately 11%, group net interest income of around £12.2bn and a cost-to-income ratio of roughly 61%. Its target for 2026 RoTE was pegged at over 12%. An additional share buyback programme of £1bn was announced.

Multinational consumer goods company Unilever said it expected a slow start to the current financial year with "subdued" market growth in the near term and announced a €1.5bn share buyback after a 12.6% rise in annual profit to €11.2bn.

"We expect the market and our growth to improve during the year as price increases, reflecting higher commodity costs in 2025. We expect a more balanced split between volume and price," the company said.

It added that the ice-cream business would be separated via a demerger and listed in Amsterdam, London and New York following a full review of options.

Relx reported solid financial growth for 2024, with revenue rising 7% on an underlying basis to £9.43bn and adjusted operating profit increasing 10% to £3.2bn.

The FTSE 100 information and events firm said adjusted earnings per share grew 9% at constant currency to 120.1p, while it completed £1bn in share buybacks, five acquisitions totalling £195m, and seven disposals for £95m.

Looking ahead, Relx said it expected continued strong underlying growth in revenue, adjusted operating profit, and adjusted earnings per share in 2025.

Source: Sharecast

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Glendon

Commodity

West Texas Intermediate (WTI) Oil price continues its downward trend for the second straight day, trading around $70.60 per barrel during early European hours on Thursday. The decline comes as market risk sentiment softens following discussions between US President Donald Trump and Russian President Vladimir Putin. The two leaders agreed to initiate negotiations aimed at ending the ongoing war in Ukraine, fueling speculation that a resolution could ease supply concerns from one of the world's largest Oil exporters.

The dollar-denominated crude market also faces pressure from rising US inflation, reinforcing expectations that the Federal Reserve (Fed) will maintain its hawkish policy stance. Higher interest rates for an extended period slow economic activity in the United States, the world's largest Oil consumer, weighing on overall demand.

Additionally, the White House suggested late Wednesday that President Trump might announce his reciprocal tariff plan before meeting Indian Prime Minister Narendra Modi on Thursday, according to CNBC. Trump has recently indicated his intention to impose tariffs on countries that levy import duties on the US, heightening fears of a global trade war and adding to inflationary concerns.

A larger-than-expected buildup in US crude inventories further put downward pressure on Oil prices. Data from the Energy Information Administration (EIA) on Wednesday showed US crude stockpiles increased by 4.07 million barrels for the week ending February 7, surpassing the anticipated 2.8 million-barrel rise.

Meanwhile, OPEC maintained its outlook for strong global oil demand growth in 2025, citing robust air and road travel. The organization, in its latest monthly report, projected world oil demand to increase by 1.45 million barrels per day (bpd) in 2025 and by 1.43 million bpd in 2026, per Business Standard. OPEC does not anticipate that potential trade tariffs will significantly impact economic growth.

Source: FXSTREET

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Justin

Economic

Forex

EUR/GBP softens to around 0.8340 in Thursday’s early European session.

UK GDP rose 0.1% QoQ in Q4 vs. -0.1% expected.

The German HICP climbed 2.8% YoY in January, as expected.

The EUR/GBP cross loses momentum to near 0.8340 during the early European session on Thursday. The Pound Sterling (GBP) edges higher after the release of UK growth numbers. The attention will shift to the preliminary reading of the Eurozone Gross Domestic Product (GDP) for the fourth quarter (Q4), which will be published on Friday.

Data released by the Office for National Statistics (ONS) showed on Thursday that the UK economy expanded 0.1% QoQ in Q4. The reading came in better than the market consensus of a 0.1% decline in the reported period. Meanwhile, the UK GDP grew 1.4% YoY in Q4 versus the 1.1% expected and 0.9% seen in Q3. The GBP trades firm in an immediate reaction to the upbeat UK GDP data.

Bank of England (BoE) Chief Economist Huw Pill said on Thursday that he “urges caution on interest rate cuts” because the long process of wrestling down inflation is not yet complete. Earlier this week, BoE policymaker Catherine Mann said that demand conditions are significantly weaker than before. She had also advocated for a larger interest rate cut in last week’s policy meeting, where the BoE unanimously agreed to lower rates by 25 basis points (bps).

On the Euro front, Destatis on Friday showed that the German Harmonized Index of Consumer Prices (HICP) rose 2.8% YoY in January, compared to the previous reading and the expectations of 2.8%.

The European Central Bank (ECB) has lowered borrowing costs five times since last June and hinted at more policy easing. Traders expect the ECB to deliver three more interest rate cuts this year amid risks of inflation undershooting the central bank’s target of 2%. The ECB already reduced its Deposit Facility Rate by 25 bps to 2.75% in the January meeting.

Source: FXSTREET

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Owen Li

Economic

The US Dollar (USD) struggles to find demand early Thursday after having failed to capitalize on January inflation data on Wednesday. The European economic calendar will feature Industrial Production data for December. Later in the day, January Producer Price Index (PPI) data from the US will be watched closely by market participants, who will also be awaiting new headlines surrounding US President Donald Trump's trade policy.

US Dollar PRICE This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Euro.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-1.01%	-0.90%	1.79%	-0.21%	-0.24%	0.12%	0.20%
EUR	1.01%		0.18%	2.96%	0.92%	0.77%	1.23%	1.29%
GBP	0.90%	-0.18%		2.62%	0.71%	0.59%	1.05%	1.11%
JPY	-1.79%	-2.96%	-2.62%		-2.02%	-1.93%	-1.65%	-1.56%
CAD	0.21%	-0.92%	-0.71%	2.02%		0.01%	0.30%	0.37%
AUD	0.24%	-0.77%	-0.59%	1.93%	-0.01%		0.45%	0.52%
NZD	-0.12%	-1.23%	-1.05%	1.65%	-0.30%	-0.45%		0.06%
CHF	-0.20%	-1.29%	-1.11%	1.56%	-0.37%	-0.52%	-0.06%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The US Bureau of Labor Statistics announced on Wednesday that the annual Consumer Price Index (CPI) rose by 3% in January, coming in above the market expectation and December's increase of 2.9%. Meanwhile, the core CPI rose by 0.4% on a monthly basis, following the 0.2% rise recorded in the previous month. With the immediate reaction, the USD gathered strength against its rivals. The improving risk mood, however, caused the USD to lose its footing later in the American session.

President Trump said that he had a "lengthy and highly productive" phone call with Russian President Vladimir Putin to begin negotiations to end the war in Ukraine. In the meantime, Trump refrained from announcing reciprocal tariffs. According to CNBC, Trump could still unveil his reciprocal tariff plan before he meets with Indian Prime Minister Narendra Modi on Thursday. After closing marginally lower on Wednesday, the USD Index continues to push lower and was last seen near 107.50.

The UK's Office for National Statistics reported on Thursday that the Gross Domestic Product (GDP) expanded at an annual rate of 1.4% in the fourth quarter. This reading came in above the market expectation for an expansion of 1.1%. GBP/USD gathers bullish momentum following the upbeat data and trades above 1.2500.

The Bank of Canada's (BoC) Meeting Minutes showed late Wednesday that impending trade tariffs from the United States (US) have become a key risk to policy guidance looking forward. "BoC Governing Council felt that retaliatory measures by Canada and other nations would put upward pressure on inflation," the document read. USD/CAD stays under bearish pressure and trades at its lowest level since mid-December near 1.4250 early Wednesday.

After falling toward 1.0300 with the immediate reaction to US inflation data on Wednesday, EUR/USD regained its traction and ended the day marginally higher. The pair continues to push up toward 1.0450 to begin the European session.

USD/JPY gathered bullish momentum on Wednesday, supported by rising US yields, and gained more than 1% on a daily basis. The pair stages a downward correction toward 154.00 early Thursday.

Gold fell toward $2,860 in the early American session on Wednesday but managed to erase its daily losses. XAU/USD holds its ground on Thursday and rises toward $2,920.

Source: FXSTREET

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Justin

Economic

Forex

Thailand's baht emerged as the major gainer among a group of developing Asian currencies on Thursday, supported by the upbeat mood in the gold markets, while equities in Manila advanced ahead of an expected rate cut by the central bank.

Thailand is a major trading hub for gold and the metal's advance over the past week amid concerns of a global trade war helped offset currency volatility fuelled by US President Donald Trump's tariff plans.

The baht gained as much as 0.5% against the US dollar, while the Singapore dollar and its Taiwanese counterpart were mostly steady.

Poon Panichpibool, a market strategist at Krung Thai Bank, attributed the baht's gain to the rise in gold prices and improving sentiment over the prospects of a peace deal in Ukraine.

The South Korean won and Malaysian ringgit added 0.3% and 0.1% respectively.

Overnight, data showed January US consumer inflation rose at its fastest pace in nearly 18 months, reinforcing the Federal Reserve's message that it was in no hurry to resume easing rates.

"Currency markets are also waving risk-off flags — the US dollar has broken higher, moving above its 50-day moving average, suggesting higher levels ahead for the safe haven currency," said Jessica Amir, market strategist at Moomoo Australia.

Equities rose in Asia trade on Thursday, as investors looked past the US inflation data and bet on an end to the war in Ukraine after Trump held separate phone calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy.

Shares in Seoul added 0.8% while those in Taipei gained 0.2%.

The Malaysian benchmark index and the Indonesian stock market, meanwhile, lost 0.6% and 1% respectively.

The Philippine central bank is set to meet later in the day with markets expecting a 25-basis-point interest rate cut to bolster an economy that has missed its growth target for two straight years.

The Philippine peso was flat while equities in Manila gained 0.8%.

Source: Theedgemarkets

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Market Focus Shifting From Risk Of Tariffs To Positives From End To War In Ukraine

Markets

Source: ACTIONFOREX

Stock Market Today: Asian Shares Mostly Rise After Trump-Putin Talks on Ending Ukraine War

Source: AP

London Pre-Open: Stocks Seen Flat; UK Economy Unexpectedly Expands in Q4

WTI Falls to Near $70.50 as Supply Concerns Ease Following Trump-Putin Discussion

Source: FXSTREET

EUR/GBP Drifts Lower Below 0.8350 On Upbeat UK GDP Data

Source: FXSTREET

US Dollar Stays Under Pressure as Mood Improves

US Dollar PRICE This week

Source: FXSTREET

Thai Baht Top Gainer Among Asian FX; Manila Stocks Rise Ahead Of Central Bank Meeting

Source: Theedgemarkets

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