Trump Administration Starts Sanction Campaign Against Iran

Political

Summary:

The Department of Treasury has issued a fresh round of sanctions targeting several individuals and vessels involved in the sale and transportation of Iranian crude to China.

“The oil was shipped on behalf of Iran’s Armed Forces General Staff (AFGS) and its sanctioned front company, Sepehr Energy Jahan Nama Pars (Sepehr Energy). This action includes entities and individuals in multiple jurisdictions, including the PRC, India, and the United Arab Emirates (UAE), as well as several vessels,” the Treasury said.

The move follows President Trump’s statement he would return to a “maximum pressure” approach to Iran to prevent it from developing a nuclear weapon.

Trump said on Tuesday that he would once again seek to reduce Iranian oil exports to zero, stating “With me, it's very simple: Iran cannot have a nuclear weapon.” Trump did, however, allow for a non-aggressive resolution of the situation and Iran also signaled a potential readiness to negotiate.

At the same time, however, Iranian president Masoud Pezeshkian urged OPEC to create a united front against U.S. sanctions on Tehran. “I believe that if OPEC members are united and work together, the U.S. would not be able to sanction and pressure one of them,” Pezeshkian told OPEC secretary-general Haitham al Ghais.

Iran’s oil minister noted the destabilizing effect new sanctions would have on oil markets, telling the top OPEC official that “Depoliticising the oil market is a vital issue for energy security. Imposing unilateral sanctions against major oil producers and putting pressure on OPEC will destabilize oil and energy markets as well as harm consumers around the world.”

Meanwhile, Treasury Secretary Scott Bessent said “The Iranian regime remains focused on leveraging its oil revenues to fund the development of its nuclear program, to produce its deadly ballistic missiles and unmanned aerial vehicles, and to support its regional terrorist proxy groups.”

“The United States is committed to aggressively targeting any attempt by Iran to secure funding for these malign activities,” Bessent also said.

Source: OILPRICE

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Warren Takunda

Economic

Anti-coercion, antitrust, and targeted tariffs are among deployments that the EU could unleash in a response to a keenly anticipated tranche of tariffs from the Trump White House, but defence budgets might also come into play, experts Euronews spoke to have suggested.

Having hit Mexico, Canada and China, the EU now appears in Donald Trump's sights with the bloc and its trade surplus described as “an atrocity” by the US president last week.

While repeating that trade between the US and the EU benefits both blocs, with a goods surplus of 155.8 billion for Europeans and a services surplus of 104 billion for Americans, the EU is sharpening its strategy and reviewing its trade weapons.

Faced with targeted tariffs, the answer may well be targeted tariffs. “Very specific customs duties could be applied to everyday consumer goods such as Harley Davidsons and jeans like the EU did in 2018,” Elvire Fabry, expert at the Delors Institute, said. “We would not target pharmaceutical products or components that can't be obtained elsewhere.”

In 2018, during his first term in office, Donald Trump already led the charge against Europeans with tariffs on European steel (25%) and aluminium (10%). The EU retaliated by taxing Bourbon whiskey, Harley-Davidsons and a range of other products. Tariffs were abolished under the Biden administration, but only until March this year.

March will be decisive for the EU-US trade talks. Not only is the truce over the steel and aluminium trade dispute coming to an end, but by 25 March the Commission must decide whether Alphabet (which owns Google), Apple and Meta comply with the Digital Markets Act (DMA), the landmark digital regulation which is the bête noire of the tech giants which seem now fully to have lent support to the Republican president.

Anti-coercion instrument on the cards?

“Over and above the trade deficit issues, there is Trump's annoyance with European regulations. His attack may be more structural. We would then be entering the realm of economic coercion,” Elvire Fabry said.

Since 2023, the Europeans have an anti-coercion arsenal to protect the EU from duress from third countries. If dialogue with the Trump administration fails, the regulation includes restrictions on the right to participate in public procurement tender procedure, restriction on licence, or for instance restrictions on trade in services and trade-related aspects of intellectual property rights. The Financial Times has reported that the Commission is indeed readying this as a response, citing officials with knowledge of the plans, who have pointed to the ACI as the toughest response available without breaching international law.

“We would be well advised to aim for US digital dependence on the European market,” Fabry assessed, adding: “The EU could target the granting of licences in the digital services sector. Access to data is essential for the Americans. This is black gold."

Aiming for intellectual property rights would up the ante in any trade dispute, but not all commentators agree this would work. “This is a nuclear option compared to tariffs being sort of a conventional war option,” Fredrik Erixon, director of the European Centre for International Political Economy (ECIPE) said, adding: “That instrument has to be proportionate to the actions that you're retaliating against, because if you invalidate, for instance, a patent or a trademark, that is the same thing as you are pulling away property rights.”

On top of that, the expert explained that IP rights are not traditionally part of the EU competence and are governed by international rulebooks. “Member states have obligations under the European Patent Convention that goes beyond what the EU can do.”

Whatever weapons Donald Trump brandishes, the fate of US Big Tech could hang in the balance. Could antitrust then become a commercial weapon? China has opened an antitrust investigations against Google after the US imposed 10% tariffs on its imports. The European Commission claims antitrust will not be used in a trade war with the US, however.

“When it comes to enforcement of EU antitrust competition law, it is agnostic to the country of establishment of the company involved,” Commission spokesperson Lea Zuber claimed on Tuesday, “We don’t think that competition enforcement should become a tool in trade disputes.”

Those competition investigations are however more likely to trigger reaction from the US than reactivation of the steel and aluminium retaliatory tariffs, according to Erixon. He said that EU antitrust investigations on Big Tech are already part of EU- US trade diplomacy nexus. “The Biden administration was already frustrated with what they perceived as digital protectionism in Europe and started to draw up a couple of trade sanctions against European actions,” he said.

With Europe planning expansion of military spending, arms could also come into play in any trade dispute. “There is a lot of more trade going on here now,” Erixon foreseen. “NATO countries point towards a 3% spending target, which would be strongly in the US interest.” Leaning towards defence procurement as open as possible to collaboration with American suppliers "would be a powerful tool in their hand”, according to Erixon.

He also thinks that lowering automotive tariffs to zero could soften up the Americans. The EU already has such deals with Japan, South Korea and Turkey. “ This option is not going to lead to much more automotive exports from America to Europe. But still you are handing Americans an opportunity for more market access,” he said.

No trading on end of liberal democracy

Whatever happens, a potential trade war will once again test the unity of Europeans. But they would need to react rapidly to Donald Trump's actions. Will the 27 Member States be able to get their act together quickly? Not everyone is sure.

“Not every countries are going to be offered the same deal, it will be very difficult to maintain the unity,” according to Fabian Zuleeg, chief executive and chief economist at the European Policy Centre said, adding: “Those that Trump sees as being friendlier to the US will be offered a way out.” The expert predicts that countries like Hungary, which the US president sees as like-minded, could be promised investments and better economic relations.

Moreover, the deals struck by Canada and Mexico in the days following the announcement of the US trade sanctions show that it's not all about trade. Mexicans and Canadians have reached agreements on migration and border controls.

“We now have the range of different trade defence instruments which will be used. But the situation might require a much wider political response of the Europeans which also addresses all the other issues which are on the table, including, for example, Greenland,” Zuleeg said.

For Europeans, the security stakes are also in the balance. “The argument will be too around European security, about Ukraine, about all the other issues the Europe is scared about,” the expert added.

If negotiations are down to the bottom line, however, Zuleeg's assessment appears bleak.

“I think that what Trump wants is the destruction of the EU and the end of liberal democracy. But now these are not concessions we can give,” he said.

Source: Euronews

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Justin

Economic

The US Dollar’s (USD) bearish momentum has eased into today’s US jobs release. Most of the tariff shock from last weekend has been absorbed, and markets are also probably reconsidering the optimism on a US-China deal. Beijing’s retaliatory tariffs are due to come into effect on Monday, and the chances of a de-escalation before then have decreased. Also helping the dollar were some comments by Treasury Secretary Scott Bessent, who said the strong dollar policy remains in place, ING’s FX analysts Francesco Pesole notes.

A move to 107.0 in DXY is warranted

“The biggest driver for FX should be US payroll figures for January. The consensus is for a slowdown from 256k to 175k, but our estimate is closer to 160k. A lot of focus will be on annual benchmark revisions.”

“Last year's provisional revisions indicated that, upon cross-referencing with tax data, the Bureau of Labor Statistics had overestimated job creation by approximately one-third. This points to significant issues with their model, and we anticipate substantial adjustments to the monthly payroll numbers.”

“So, despite some support potentially coming from souring sentiment on China, we have a negative bias on the dollar today. Markets are pricing in 43bp of easing by year-end and there is room for a dovish repricing on the back of softer economic data. A move to 107.0 in DXY is warranted.”

Source: FXSTREET

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Warren Takunda

Central Bank

India's central bank has cut interest rates for the first time in nearly five years to counter slowing growth in Asia's third largest economy.

The Reserve Bank of India (RBI) reduced its repo rate from 6.5% to 6.25%, in line with the expectations of many economists.

The repo rate is the level at which the central bank lends to commercial banks.

The latest cut happens when India's GDP growth is seen slowing to a four year low of 6.7%.

RBI governor Sanjay Malhotra said the bank was keeping its policy stance "neutral", which would open more space to support growth, signalling further rate cuts.

Investment growth and urban consumption in the world's fastest growing major economy have been flagging. Corporate profits have also shrunk in the first half of this financial year.

But moderating inflation, an increase in rural demand and good agricultural output will help growth, said Mr Malhotra.

The rate cut could lead to marginally lower mortgage and credit card interest rates as well as cheaper borrowing costs for companies.

The central bank's rate reduction follows a range of measures previously announced, including an injection of $18bn (£14.48bn) into the domestic banking system, to ease a cash shortage in the economy.

It had also cut the cash reserve ratio - or the reserves commercial banks need to maintain with the RBI - by half a percent in December.

The RBI's rate move follows the Union Budget's $12bn tax cut for the struggling middle class.

Despite this, Mr Modi's government aims to curb spending to reduce the budget deficit. With limited room for fiscal stimulus, economists expect the central bank to cut rates further by 0.5% –1% to support growth, according to various estimates.

However, global uncertainties due to US President Donald Trump's tariff war, an outflow of foreign investor money and a depreciating currency - which could further weaken if rates come down - have complicated the RBI's task.

The Indian rupee is trading near record lows due to heavy foreign investor outflows from stock markets in recent months.

Source: BBC

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Alex

Commodity

Citigroup Inc expects gold prices to hit a record US$3,000 (RM13,304) an ounce within three months, with geopolitical tensions and trade wars stoked by US President Donald Trump boosting demand for safe-haven assets.

Trump jolted markets with the prospect of tariffs that could slow economic growth, reignite inflation and disrupt global commerce. Investors will continue to seek bullion’s security and central banks are likely to keep building out their reserves, analysts including Kenny Hu wrote in a report.

“The gold bull market looks set to continue under Trump 2.0,” the Citi analysts said, citing risks such as slower growth and high interest rates.

Gold hit successive records in the past few days as concerns about the tug of war between the US and China, as well as the possibility Trump will impose duties on other nations, support bullion’s role as a store of value in uncertain times.

Citi upgraded its three-month price target for gold from US$2,800 an ounce, which the precious metal has already surpassed. Spot gold slipped as much as 1.2% to US$2,834.26 an ounce on Thursday.

The bank also said that an appreciating US dollar will increase the incentive for central banks from emerging economies to boost gold holdings in order to support their own currencies, while investors will turn both to physical gold and exchange-traded funds.

Trade-war fears have also led dealers in London to shift metal to the US, fearing the possibility that bullion won’t be excluded from potential tariffs. Premiums as of Wednesday implied a roughly 20% chance of Trump including gold in a 10% blanket global tariff, Citi said.

“A Russia/Ukraine peace deal, and confirmation of whether gold would be exempt from broad tariffs (or not), could provide a buying opportunity over the next two to three months,” the Citi analysts said.

The bank raised its average price target for the year by US$100 to US$2,900 an ounce, while leaving its six- to 12-month target price of US$3,000 unchanged.

Silver and palladium edged lower, while platinum rose. The Bloomberg Dollar Spot Index was little changed.

Bullion rose earlier in the week after President Donald Trump said the US could take over Gaza, a comment that his aides sought to tone down, and that he wants to start working on a new nuclear deal with Iran. Washington is also expected to present a plan to end Russia’s war on Ukraine next week.

Source: Theedgemarkets

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Cohen

Forex

Outlook is mixed; GBP could trade between 1.2390 and 1.2500. In the longer run, for the time being, GBP is likely to trade in a 1.2310/1.2550 range, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

GBP cad continue to trade in a choppy manne

24-HOUR VIEW: “Yesterday, we expected GBP to ‘consolidate in a 1.2460/1.2540 range.’ Our expectation was incorrect, as GBP plummeted to 1.2361 before rebounding strongly to close at 1.2438 (-0.54%). The price action has resulted in a mixed outlook. Today, GBP could continue to trade in a choppy manner, likely between 1.2390 and 1.2500.”

1-3 WEEKS VIEW: “Following GBP rise to 1.2550 two days ago, we indicated yesterday (06 Feb, spot at 1.2505) that ‘upward momentum is increasing, but not enough to suggest a sustained advance.’ We added, ‘for a sustained advance, GBP has to break and remain above 1.2550.’ Yesterday, GBP plummeted to a low of 1.2361. The breach of our ‘strong support’ level of 1.2370 indicates that the buildup in momentum has faded. To put it another way, GBP is not ready to break above 1.2550. For the time being, it is likely to trade in a 1.2310/1.2550 range.”

Source: FXSTREET

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Warren Takunda

Economic

The Pound to Euro exchange rate dropped by as much as half a per cent on the day the Bank of England cut Bank Rate by 25 basis points, slashed growth forecasts, and two Monetary Policy Committee (MPC) members voted for a much bigger 50bp cut.

What got tongues wagging was the switch of MPC member Catherine Mann to vote for a 50 basis point cut. She has been a staunch 'hawk', often resisting the urge to cut or voting for a 50 basis point hike when others were voting for a more modest 25bp hike.

This prompted a slight rerating in interest rate expectations, and the market has now moved to price in three further rate cuts this year.

But the FX market reaction was more exciting. The Pound-Euro fell to a low of 1.1940 on the day and Sterling was lower against all its peers, with losses against the Dollar extending to over a per cent at one point.

However, the scale of the FX move outpaces the scale of the move in interest rate markets, which is the first sign the Pound can recover further.

The halving of growth forecasts underpins Mann's thinking and dominates financial news headlines on Friday; no wonder the decision was considered a 'dovish' one.

But the dovish assessment runs skin deep. Despite the surprise of the vote split and the GDP cut, there is overwhelming evidence the Bank will retain its cautious approach, which will underpin the Pound.

"EUR/GBP moved higher on the announcement with the dovish vote split taking centre stage," saysKirstine Kundby-Nielsen, an analyst at Danske Bank. However, "the still cautious guidance delivered today highlights the more gradual approach of the BoE compared to European peers," she adds.

Given this, Danske Bank strategists predict Pound-Euro will move higher in the coming quarters driven by a relatively hawkish Bank of England and a growth pickup in the UK relative to the euro area in 2025.

The most prominent 'hawkish' development is the jacking up of UK inflation forecasts in 2025 to a peak of 3.7% in the third quarter of this year. This is up from November's forecast for a rise to 2.8% in Q3.

The projections show inflation will suddenly drop to 'target' from 2026 onwards, but what confidence do the Bank's forecasters have that this will happen given the inherent difficulty of forecasting at longer-term timeframes?

Fade Pound-to-Euro Rate's Weakness, The Bank is as 'Hawkish' as Ever_1

Image courtesy of Lloyds Bank.

Most of the MPC are aware of the counter-intuitive and confusing message that would be sent by accelerating rate cuts into rising inflation. The MPC deploys a forecasting framework that is based on three scenarios it thinks will evolve, and the minutes show scenarios two and three are now favoured.

These scenarios mean most MPC think interest rates will continue to fall at their current pace or even slower.

The statement itself reinforced this, stating that rate cuts would be "gradual", that rates need to remain "restrictive for sufficiently long", and that it would be "careful" when considering further cuts.

The more we look into the details of the day, the more we see that this was as 'hawkish' an event as any.

For the Pound, this means that any weakness from the decision itself should be faded. In fact, the outlook could become a whole lot more hawkish if inflation starts to beat expectations, which is what numerous economic surveys are signalling at the start of the year.

"We remain convinced that the BoE will have to stop cutting interest rates earlier than most expect amid strengthening inflation," says Andrew Wishart, Senior UK Economist at Berenberg Bank.

"We have been here before," he adds:

Just over a year ago, investors priced in a fall in bank rate to 3.25% by end-2025. The resulting drop in fixed interest rates available to companies and households helped drive a pick-up in GDP and pay growth that delayed the first cut until August.

"A boost to demand from rate cuts at the same time as firms are facing a large increase in costs that they are keen to pass on will push up inflation to well over 3% yoy in the second half of the year. The BoE will find it difficult to justify further loosening in that environment," says Wishart.

Source: Poundsterlinglive

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Trump Administration Starts Sanction Campaign Against Iran

Source: OILPRICE

How to Counter Trump's Trade War? Anti-Coercion, Antitrust, and Targeted Tariffs in View

Anti-coercion instrument on the cards?

No trading on end of liberal democracy

Source: Euronews

USD: Annual Revisions May Be Big

Source: FXSTREET

India Cuts Interest Rates for the First Time in Five Years

Source: BBC

Citi Sees Gold Soaring to US$3,000 On Tensions Triggered by Trump

Source: Theedgemarkets

GBP/USD: Likely to Trade In A 1.2310/1.2550 Range

Source: FXSTREET

Fade Pound-to-Euro Rate's Weakness, The Bank is as 'Hawkish' as Ever

Image courtesy of Lloyds Bank.

Source: Poundsterlinglive

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