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Message: [QUOTE="katetrades, post: 241452, member: 21862"] [JUSTIFY][B]Forex Major Currencies Outlook (Feb 24 – Feb 28)[/B] PCE and GDP from the US and Canada will highlight the rather barren week, from the economic news standpoint, ahead of us. [B]USD[/B] Talks regarding ending of war in Ukraine were held in Saudi Arabia but they included only Russia and United States as no representatives of Ukraine were present. US Secretary of Stated Rubio stated that these talks were just a beginning to determine how serious Russia is about a deal and that when situation progresses both Ukraine and Europe will be a part of “real negotiations”. President Trump announced that he will be implementing tariffs on semiconductors, cars, lumber and pharma. He also pledged to refill SPR and cut taxes on domestic producers of oil and gas. In his post on Truth Social Trump called Ukraine president Zelensky “a modestly successful comedian” and a “dictator”. The yield on a 10y Treasury started the week at 4.48%, rose to 4.57% and finished the week at around 4.42%. The yield on 2y Treasury started the week at 4.27% and reached the high of 4.32%. Spread between 2y and 10y Treasuries started the week at 22bp and finished the week at 23bp as curve returned to bear steepening. FedWatchTool sees the probability of a 25bp rate cut at March meeting at around 3%, while probability of a no cut is around 97%. June is the first meeting that sees above 50% probability of a rate cut. This week we will have second reading of Q4 GDP and Fed’s preferred inflation measure PCE which is expected to tick down. Important news for USD: [I]Thursday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]GDP[/JUSTIFY] [/LIST] [JUSTIFY][I]Friday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]PCE[/JUSTIFY] [/LIST] [JUSTIFY][B]EUR[/B] ECB Executive Board member Panetta warned that signs of weakness in the economy are more persistent than projected. The bank was hoping for a consumer driven recovery but that simply did not materialize. Executive Board member Schnabel stated that concept of neutral rate cannot be a reliable guide for monetary policy in real time. She added that both domestic inflation and wage growth are still high but both should start to decelerate. She warned that risks to inflation are still skewed to the upside. Preliminary PMI data for the month of February painted an interesting picture. Manufacturing improved to 47.3 from 46.6 in January while services declined to 50.7 from 51.3 the previous month and 51.5 as was expected. On the back of a big drop in French reading. Services remain in expansion but are slowing down while manufacturing is slowly picking up and after a long time hints at a brighter future. Composite was unchanged at 50.2. There was a stronger division between German and French readings as latter fell off the cliff as we move further away from boost to growth provided by Summer Olympic Games. PMIs showed increasing input costs that are in part being transferred onto consumer. [B]GBP[/B] January saw payroll change increase 21k after falling 14k in December. The unemployment rate for December stayed at 4.4% while markets were seeing a tick up to 4.5%. Wages continued to surge and are now at 6% 3m/y for average weekly earnings and 5.9% 3m/y for average weekly earnings ex bonus. They were both at 5.6% 3m/y in November. ONS is still declaring issues with data, but the jump in wages looks very concerning for future inflation. Inflation report of the month of January saw headline number print 3% y/y vs 2.8% y/y as expected and up from 2.5% y/y in December. Higher food and airfare prices led to increase in inflation. Core CPI printed 3.7% y/y as expected and up from 3.2% y/y the previous month. Services inflation surged to 5% y/y from 4.4% y/y in December and although this number looks worrying expectations were for even a bigger surge. BoE will proceed cautiously with future rate cuts. Preliminary February PMI data point to a growing divide between sectors in the UK economy. Manufacturing slumped to 46.4 from 48.3 in January while services improved to 51.1 from 50.8 the previous month. Manufacturing output index continued to slump while services recorded a slowdown in business activity. On top of that, there are rising inflation pressures coming from the rising staff costs which in turn would force companies to raise output prices and thus transfer some of the increased costs directly onto consumers. Low growth and higher inflation prospects will cause a lot of concern for the BoE. Composite ticked down to 50.5 as expected from 50.6 in January. [B]AUD[/B] RBA delivered a widely expected 25bp rate cut and brought the rate down to 4.1%. The statement started with remarks about underlying inflation moderating but warned that upside risks remain and that outlook is uncertain. There were also declines in growth but labor market is tighter than expected. The board assessed that monetary policy was restrictive and will still stay restrictive even after the cut with warning that “if monetary policy is eased too much too soon, disinflation could stall, and inflation would settle above the midpoint of the target range.” The board remains data dependent. This statement shows that they are in no hurry to cut rates further and the text can be interpreted as hawkish leaning, thus a “hawkish cut”. New forecasts see GDP lower at 2% in June 2025, 2.3% in June 2026 and 2.2% in June 2027. The unemployment rate is also seen lower at 4.2% in June 2025, 4.2% in June 2026 and 4.2% in June 2027. Headline inflation (CPI) is projected to be at 2.4% in June 2025, 3.2% in June 2026 and 2.7% in June 2027. Trimmed mean inflation (core CPI) is seen at 2.7% in June 2025, 2.7% in June 2026 and 2.7% June 2027. All of these forecasts are based on technical assumption that cash rate will be at 4% in June 2025, 3.4% in June 2026 and 3.5% in June 2027. RBA governor Bullock stated at the press conference that there was an active debate whether to ease or leave rate unchanged. She added that it is clear that higher rates have worked and added that it is premature to declare victory on inflation. The policy will remain restrictive with today’s cut. She also clarified that they cannot guarantee further cuts implied by the market thus adding to the hawkishness of their statement. She warned that cutting rates too quickly could lead to inflation increasing above their 2-3% target range. January provided us with another stellar employment report. The report saw economy add 44k jobs vs 20k as expected. This makes it a tenth straight month of job gains and twelfth in the last thirteen. The unemployment rate ticked up to 4.1% as expected but it was due to participation rate rising to the highest level ever of 67.3%. All of the jobs added were full-time jobs 54.1k while part-time jobs declined by 10.1k. When we combine the hawkish sounding RBA with strong jobs report we see bank on a hold for the foreseeable future. [B]NZD[/B] RBNZ has delivered a widely expected 50bp rate cut thus bringing the Official Cash Rate (OCR) to 3.75%. Inflation is seen coming down and that is the main reason for a rate cut and if economy continues Economic growth is subdued but is expected to pick up during the year as lower rates and higher prices of key export commodities lead to higher income from exports. New projections see OCR lower than previously and at 3.45% in June 2025 and 3.1% in March 2026 where it is expected to be in March of 2028. Annual CPI is seen at 2.2% by March of 2026. The statement concludes with “If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” Minutes warned that escalation of trade tensions, tariffs, will have a negative impact on economic activity in New Zealand. RBNZ governor Orr reiterated dovish stance seen in the statement by saying that rate cuts in April and May seem about right and should be two 25bp cuts. He added that current rate of 3.75% is the high end of the neutral rate range. He sees slower growth as near-term risk while threat of US tariffs are seen as a long-term risk and on the currency front he sees NZD as fairly valued. Additionally, governor Orr ruled out a possibility of further 50bp rate cuts stating that they will go for it only in case of emergency. [B]CAD[/B] January inflation CPI saw headline number print 1.9% y/y as expected, up from 1.8% y/y seen in December. The increase is entirely due to rise in energy price, natural gas and gasoline, while food prices fell. However, all three core readings increased with common printing 2.7% y/y vs 2.6% y/y the previous month, median rising 2.2% y/y after 2% y/y increase in December and trim at 2.4% y/y vs 2.3% y/y the previous month. This week we will have Q4 GDP data. Important news for CAD: [I]Friday[/I]:[/JUSTIFY] [LIST] [*][JUSTIFY]GDP[/JUSTIFY] [/LIST] [JUSTIFY][B]JPY[/B] Q4 GDP smashed expectations as it came in at 2.8% annualised while markets were seeing a 1% increase. The economy grew by 0.7% in Q4 vs 0.3% as was expected. Private consumption rose by 0.1% q/q while markets were seeing it drop by 0.3% q/q. There was a big boost from external demand which added 0.7pp with exports rising 1.1% q/q. GDP deflator printed 2.8% y/y as well indicating strong inflationary pressures. This combination of higher growth and higher inflation should bring rate hikes from BoJ and if Shunto wage negotiations bring strong wage increases we could see next rate hike in May. Inflation data for the entire country of Japan saw headline number rise 4% y/y after a 3.6% y/y increase in December. Food prices have jumped 21.9%. Excluding fresh food CPI printed 3.2% y/y vs 3.1% y/y as expected and up from 3% the previous month. It has reached a new nineteen month high. Ex fresh food and energy category came in at 2.5% y/y as expected and up from 2.4% y/y in December. Additional increases in inflation just increase chances of future BoJ hikes and first one is now seen in May. Preliminary February PMI data saw improvements across the board with manufacturing rising to 48.9 from 48.7 in December on the back of increases in new orders. Still, the sector has been in contraction since July and services have to prop up the economy. Services printed 53.1, a tick up from 53 the previous month and thus lifted composite to 51.6 from 51.1 print in December. The yield on 10y JGB reached 1.44% which is the highest level since 2009. [B]CHF[/B] SNB total sight deposits for the week ending February 14 came in at CHF432.5bn vs CHF438.1bn the previous week. Sight deposits moving to the new lows as new SNB rules made it less attractive for banks to keep money in Swissy.[/JUSTIFY] [/QUOTE]

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