NZD/USD Price Forecast: Remains Subdued Below Nine-day EMA At 0.5650

Source: Reuters

Officials work at a dealing room of Hana Bank in Seoul, Feb. 13. 

Korean stocks rose to the highest level in about three months Thursday, led by gains of tech and auto shares, on growing hopes for an exemption from U.S. tariffs. The local currency rose against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) added 34.78 points, or 1.36 percent, to close at 2,583.17, extending a winning streak to a third session.

It marked the highest level since Nov. 4, 2024, when the index finished at 2,588.97.

Trade volume was heavy at 669.19 million shares worth 16.82 trillion won ($11.61 billion), with winners outnumbering losers 571 to 309.

Institutions bought a net 656.27 billion won worth of local shares, while foreign and retail investors sold a net 102.86 billion won and 601.93 billion won worth of shares, respectively.

The index opened higher and had risen further, though the U.S. data showing strong inflation led to speculation that the Federal Reserve would delay interest rate cuts.

Investors welcomed the news that U.S. House of Representatives Speaker Mike Johnson said he believes President Donald Trump is considering exemptions to reciprocal tariffs on the auto and pharmaceutical industries.

Eyes are also on talks between Trump and Russian President Vladimir Putin on ways of ending the Russia-Ukraine war.

In Seoul, tech and auto shares led the upturn of the index.

Market bellwether Samsung Electronics added 0.18 percent to 55,900 won, and chip giant SK hynix surged 1.81 percent to 202,500 won.

Leading electric vehicle (EV) battery maker LG Energy Solution soared 3.1 percent to 349,000 won.

No. 1 carmaker Hyundai Motor went up 4.24 percent to 206,500 won, and its sister affiliate Kia jumped 3.27 percent to 94,700 won.

Top steelmaker POSCO Holdings rose 4.34 percent to 240,500 won following recent sharp losses.

Major bio shares traded mixed. Leading bio firm Samsung Biologics climbed 1.3 percent to 1,172,000 won, while Celltrion lost 0.11 percent to 178,500 won.

Among decliners, leading portal operator Naver lost 2 percent to 220,500 won, and Kakao, the operator of the country's top mobile messenger, tumbled 3.81 percent to 40,400 won.

The local currency was quoted at 1,447.5 won against the greenback at 3:30 p.m., up 5.9 won from the previous session.

Bond prices, which move inversely to yields, closed higher. The yield on three-year Treasurys shed 2 basis points to 2.631 percent, and the return on the benchmark five-year government bonds fell 1.2 basis points to end at 2.732 percent. 

Source: Koreatimes

The oil price selloff accelerated on Wednesday after U.S. President Donald Trump took the first big step towards ending Russia’s war in Ukraine three weeks after his inauguration. 

In Asian trading on Thursday, Brent crude for April delivery sank nearly a percentage point to trade at $74.48 per barrel at 00.53  ET, while WTI crude for March delivery declined the same to $70.70 per barrel. 

On social media, Trump said he and Putin "agreed to have our respective teams start negotiations immediately, and we will begin by calling President Zelenskiy, of Ukraine, to inform him of the conversation, something which I will be doing right now."

A ceasefire to the Russia-Ukraine war could be bearish for oil prices if Trump pushes for removal of sanctions on the Russian energy industry, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Geopolitical stability may also "largely extinguish the still simmering 'fear bid' in the oil market." The latest sanctions by the Biden administration roughly tripled the number of directly sanctioned Russian crude oil tankers, enough to affect around 900,000 barrels per day (bpd). Whereas it’s highly likely that Russia will try to circumvent the sanctions by employing even more shadow fleet tankers and ship-to-ship transfers, StanChart sees 500,000 bpd of displacements over the next six months.

However, the oil price selloff kicked off before Trump’s latest mediation efforts in the Ukraine war thanks to rising U.S. crude stockpiles and hawkish remarks from Fed Chair Jerome Powell. Jerome Powell said on Tuesday that the Fed is not rushing to cut interest rates further because the economy is in a good place, but it is prepared to do so if inflation drops or the job market weakens. Higher interest rates increase the cost of borrowing, which can slow economic activity and weaken oil demand. The U.S. consumer price index (CPI) increased at a faster-than-expected clip in January, reinforcing the Federal Reserve's wait-and-see stance before cutting interest rates further amid growing uncertainty over the economy. The CPI jumped 0.5% last month, up from 0.4% in December, and advanced 3.0% in the 12 months through January after advancing 2.9% in December. 

Source: OILPRICE

In focus today

From the US, January PPI and weekly jobless claims are due for release. It will be interesting to see if the PPI-figures come in higher than expected like yesterday’s CPI.

In the euro area, focus turns to industrial production data for December, which is expected to show a small decline of 0.6% m/m by consensus. However, the decline will likely be larger than 0.6% m/m as German industrial production declined 2.4% m/m in a sign of a still weak industrial sector.

In Sweden, Riksbank’s vice governor Per Jansson holds a speech at 08:00 CET on “Trust and flexibility going forward”. We will be watching to see if Jansson aligns with Aino Bunge’s dovish tones from yesterday.

Economic and market news

What happened overnight

In Japan, wholesale inflation for January printed higher than expected at 4.2% y/y (cons: 4.0%), while the monthly print was 0.3% m/m, as expected. This was the fifth consecutive acceleration in wholesale inflation, reflecting persistent price pressures and bolstering the case for further BoJ rate hikes this year, as we project.
What happened yesterday

In geopolitics, Trump and Putin had a 90 min call yesterday and the two countries have agreed to kick off negotiations to end the war in Ukraine. Trump later had a separate call with Ukraine that did not last as long, and it remains unclear what will Zelensky’s/ Ukraine’s role be in the upcoming talks, or if there is any. US defence secretary Pete Hegseth said that its unrealistic for Ukraine to restore its pre-2014 borders or for Ukraine to become a member of NATO.

In the US, January CPI surprised sharply to the topside as headline CPI grew by 0.5% m/m SA (cons. +0.3%, Dec +0.4%) and core inflation accelerated to 0.4% m/m SA (cons. +0.3%, Dec. +0.2%) – for more detail please see Global Inflation Watch – Tariff Uncertainty blurs the outlook, 12 February. Additionally, we will evaluate our dovish Fed view of four rate cuts in 2025 over coming days.

While having not signed any tariffs yet, Trump repeated his plans to impose reciprocal tariffs very soon. The comment comes shortly before a visit from Indian Prime Minister Narendra Modi, and the Trump administration having complained about India’s high tariffs on U.S. imports. With a U.S. CPI-release on Wednesday that surprised to the upside, economists have once again highlighted the possible inflation risks associated with tariffs. Later today, we host a webinar at 10.00-10.45 CET providing an update on the whole tariff situation.

In the euro area, Bundesbank President Nagel stated that the ECB should ease its policy gradually rather than attempting to reach the elusive “neutral” interest rate, which is estimated to be between 1.75% and 2.25%, according to last week’s r*-publication from the ECB. That said, the remarks are not surprising given that Nagel is viewed as one of the über-hawks of the ECB.

In Sweden, Riksbank Vice Governor Bunge was on the wire, talking about the state of the economy and monetary policy. Bunge emphasized that inflation has been close to 2% and indicators suggest that inflation will align with the target going forward. Looking at the upside surprise in January, she pointed out that it remains to be seen what caused this and stressed that individual figures should be interpreted with caution. Overall, her remarks were somewhat dovishly twisted.

Equities: Equity investors took the inflation surprise with ease. Global equities were admittedly slightly lower (MSCI World -0.1%) but that did not stop the buying in Europe and especially Germany, a full 1% higher (11% YTD). Even Nasdaq was in positive. So, inflation did not trigger a clear-cut risk off session, which we argue it should not. However, it is still surprising to see markets coping so well with negative news and yield jumps. Remember new tariffs also taken with a shrug earlier this week.

Perhaps this comes down to the not overly aggressive positioning in markets. Our correction monitor admittedly shows overbought conditions but far from an outright sell signal. Defensives outperformed, but only marginally. The only sector sticking out was energy, reverting -2%. Small caps underperformed again, as has been the case the last week, taking underperformance to 1.3p.p. YTD globally. Futures are higher this morning.

FI: US Treasury yields rose significantly on the back of higher-than-expected US inflation data and the market continues to reduce expectations for future rate cuts by the Federal Reserve. Currently just one rate cut is priced in for the rest of 2025, which is a significant reduction from the autumn 2024, when 6-7 rate cuts were priced in for 2025. The negative reaction from US also sent European government bond yields upwards across the yield curve.

FX: Whipsaw action in EUR/USD with an initial flurry to the low 1.03’s on the back of yesterday’s hotter-than-expected US CPI print, before turning around and retracing all the way to 1.04 on Trump’s announcement of his call with Putin. The EUR found broad support, with EUR/JPY and EUR/CHF moving firmly higher, the former rallying close to 1.5%. Scandies did not benefit from the EUR-move and instead ended the day close to session highs vs EUR. CEE currencies did however benefit, with PLN, CZK and HUF all outperforming the single currency.

Source: ACTIONFOREX

(Feb 13): Britain registered unexpected growth at the end of 2024, a reprieve for the Labour government after a woeful run of economic indicators.

Gross domestic product rose 0.1% in the fourth quarter, an acceleration from the flat performance in the third quarter, the Office for National Statistics said Thursday. It was better than the 0.1% fall in output expected by economists and the Bank of England. It came as output in December alone grew a faster-than-forecast 0.4%.

The figures provide Chancellor of the Exchequer Rachel Reeves some respite after a disappointing start to Labour’s ambitions to turbocharge growth. Signs of a small pick-up may brighten the mood in government ahead of crucial new forecasts from the Office for Budget Responsibility next month. The economy is now slightly larger than before Labour took office in July.

The pound extended gains after the data, rising 0.6% to US$1.2517, the highest in over a week. The move, which was also supported by a broadly weaker dollar, extends sterling’s weekly advance to 0.9%.

The ONS said growth in December was driven by pubs and bars, which had a “strong month,” alongside wholesale, film distribution, manufacturing of machinery and the pharmaceutical industry. Computer programming, publishing and car sales were down.

When accounting for population increases, the picture was more disappointing, however. GDP per capita fell 0.1%, declining for a second consecutive quarter.

GDP grew just 0.9% in 2024 as a whole. The BOE expects the economy’s weakness to spill over into 2025, and last week halved its growth forecast for this year to 0.7%.

The UK’s faltering performance is curbing Labour’s spending ambitions. Bloomberg reported on Tuesday that Office for Budget Responsibility projections delivered to Reeves last week suggest she is facing a small hole in her plans when it delivers its full forecasts on March 26.

Labour has announced a blitz of decisions to improve the supply side of the economy since returning to power, and signaled it is willing to take on controversial issues, such as approving a third runway at Heathrow Airport.

However, businesses have hit out at the first budget containing over £40 billion (US$50 billion or RM222.6 billion) of tax rises, which included a £26 billion hike in employers’ national insurance contributions that surveys suggest may trigger job losses.

The figures are also vital for the BOE, as its rate-setters weigh sticky inflation against a need to support the economy.

Last week they voted for the third interest-rate reduction of the current cutting cycle, though stuck by their guidance for a cautious easing of policy. Doves on the BOE committee are growing increasingly concerned that a growth slowdown requires bigger rate cuts.

Source: Theedgemarkets