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In focus today

The Sentix indicator will give us the first indication of European investor confidence in February.

In Denmark, inflation data for January is released. January data is always extra exciting because many businesses only adjust prices at the turn of the year. Sales also increases uncertainty. Particularly fuel prices have increased due to higher energy fees but also higher oil prices. Even so, we expect a decline in annual inflation to 1.5% from 1.9% in December, driven by particularly electricity, as a big increase in tariffs and fees in January 2024 exits the inflation measure.

In Norway, January inflation figures are always extra uncertain. This is the time when most administrative prices are regulated, and the effects can be large in some years. In addition, there can be large variations in the price offers in the January sale. Prices normally drop in January, but as prices were unchanged last year, we expect that the annual growth in core inflation slowed to 2.6% in January, in line with Norges Bank's forecast from the December MPR. The high inflation figures from Sweden for January obviously imply a certain upside risk for the Norwegian figures, because there are some similar seasonal and administrative factors in January as in Norway.

In Sweden, the figures for industrial orders and monthly household consumption for December are being released. We anticipate some improvement in the household consumption figures, as December's retail sales and the latest consumer confidence surveys have been encouraging.

For the remainder of the week, the key data release will be the US January CPI, while US politics will also remain in focus. Attention in the US will also be on Fed Chair Powell's congressional testimony on Wednesday and US retail sales on Friday. In China, focus will be on whether a call between Xi Jinping and Trump, cancelled last week due to China's retaliation to Trump's 10% tariffs, will take place. In the euro area, data releases are limited, but Q4 employment data on Friday will be a highlight. On Friday the Munich Security Conference begins, where the war in Ukraine and possible peace talks will be in focus.

Economic and market news

What happened since Friday

In the US, the labour market report was to the strong side again. The establishment survey showed nonfarm payrolls for January grew by 143k SA, close to our forecast of +150k (cons. +170k), while data for the past two months was revised up by 100k. Average hourly earnings growth accelerated to 0.5% m/m SA, but this largely reflected a drop in average hours worked.

The household survey was heavily distorted by updated population controls, which boosted labour force and household employment estimates by 2.2m. This effect is purely statistical and has no market impact. The unemployment rate declined to 4.0% (from 4.1%), but as it is based on the household survey, it is difficult to gauge if this really reflects the labour market re-tightening. The annual benchmark revisions to NFP data from April 2023 to March 2024 was -598k, slightly less negative than the preliminary estimate suggested (-818k). Overall, nothing in the report is particularly hawkish or dovish for the markets, when you look past all the possible distortions.

Consumer sentiment fell from 71.1 in January to 67.8 in February. Notably 1y inflation expectations ticked higher to 4.3% from 3.3%, while 5y expectations were largely unchanged. While Republican respondents were much more optimistic about the future back in November and December, it seems that now both Democrats and Republicans have become much more concerned with the negative consequences of tariffs. However, Chicago Fed President Goolsbee (dovish and non-voting member) did not express new worries about inflation, repeating that the US is on its path back to 2% inflation.

Turning to the geopolitical front, Trump has reportedly spoken with Putin during the weekend about ending the war in Ukraine. Putin has indicated he is willing to discuss a Ukraine peace deal but rules out making any territorial concessions.

On Sunday, U.S. President Donald Trump announced plans to introduce new 25% tariffs on all steel and aluminium imports, on top of existing duties. These tariffs, along with reciprocal tariffs to match other countries' rates, are set to be announced today.

In the euro area, the most discussed piece on ECB staff updates on r* was published on 7 February. While the piece emphasised do and don'ts of using the estimates for real time monetary policy decisions, it underlines that the broad range of estimates can be summarized as neutral rate being in the range of 1.75% to 2.25% in nominal terms.

In Germany, industrial production numbers were weak again in December, with production declining 2.4% m/m, leaving total Q4 production 0.9% lower than in Q3. The decline was especially due to the automotive industry and capital goods. Hence, the problems in the German industry are not over and we expect to see a continued decline in production the coming quarters. Yet, rebounding manufacturing PMIs in January gives a small ray of light in combination with the outlook for further rate cuts from the ECB, which should stabilize the industry from the second half of this year.

In Norway, manufacturing production increased 3.2% m/m in December, which seems to be a shift in the negative trend seen since last summer. Hence, manufacturing activity was down 0.8% in Q4 and will act as a headwind to GDP (due this week).

In China, CPI was stronger than expected showing a rise in the headline inflation from 0.1% y/y to 0.5% y/y (consensus 0.4% y/y) lifted by an increase in core inflation increased from 0.4% y/y to 0.6% y/y. Holiday spending from the Chinese New Year likely contributed to the increase. It is positive that inflation moved higher and further away from deflation territory, but overall price pressures are still low in China. Producer prices showed a decline again being unchanged at -2.3% y/y.

Equities: Equities were generally lower on Friday, ending just off worst levels (MSCI World -0.7%). It was a bit of a reversal of the risk appetite from the prior session, with all sectors lower and the VIX rising. Europe outperformed US, with US big tech being the notable laggard. The usual drivers were in play: yields edging higher due to a double whammy of rising wage inflation and household inflation expectations were coupled with disappointing guidance from Amazon (currency related) on top of massive capex plans. However, it was not a full risk-off session, as banks and industrials held up relatively well. Equity markets are not startled by Trump's steel tariffs, with US futures higher this morning and Hong Kong gaining a full 1.7%. We do not know details yet (such as exceptions). However, tariffs tend to gain Nordic producers which are local US producers in a net importer market and benefitted when tariffs were introduced the last time.

FI: Global rates sold off with a knee-jerk reaction on the US labour market report on Friday, despite the headline print of 143k new jobs in January was consensus. 10y UST rose 5bp on the announcement and stayed there for the rest of the trading session. For policy signals, Friday's print is difficult given the statistical uncertainties and revisions as per usual with the January print. Initially the US reaction took 10y Bund higher, albeit that reversed during the afternoon, thus with 10y Bunds ending the day broadly unchanged. Markets price 85bp worth of ECB rate cuts until year end. BundASW tightened into -3bp, a new low.

FX: Trump's new weekend pledge to impose tariffs on all steel and aluminium imports is hurting commodity currencies such as AUD and CAD. There might be even more to come this week, as Trump has threatened to unveil reciprocal tariffs on "everyone". EUR/USD is starting the week's trading in the low 1.03's whereas Scandies are close to Friday's closing levels again, following a temporary overnight sell-off. The ZAR suffers as the US has frozen all aid to South Africa.

Daily Pivots: (S1) 186.70; (P) 188.14; (R1) 189.24; More...

Intraday bias in GBP/JPY remains on the downside for 100% projection of 198.94 to 189.31 from 194.73 at 185.10. Decisive break there will target 138.2% projections at 181.42. On the upside, above 189.57 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 194.73 resistance holds, in case of recovery.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 152.11 will bring deeper fall to 100% projection of 208.09 to 180.00 from 199.79 at 171.70, even still as a correction.

Daily Pivots: (S1) 155.49; (P) 156.75; (R1) 157.64; More...

Intraday bias in EUR/JPY remains on the downside for 100% projection of 166.7 to 156.16 from 164.89 at 154.38. Firm break of 154.40 support will resume whole fall from 175.41 and target 152.11 key fibonacci support. On the upside, above 158.00 minor resistance will turn intraday bias neutral first. But risk will remain on the downside as long as 159.74 support turned resistance holds, in case of recovery.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall to 100% projection of 175.41 to 154.40 from 166.57 at 145.56, even still as a correction.

Daily Pivots: (S1) 0.8312; (P) 0.8334; (R1) 0.8349; More...

Intraday bias in EUR/GBP remains neutral for the moment. Near term outlook is mixed for now. On the upside, above 0.8376 minor resistance will bring stronger rally towards 0.8472. However, on the downside, break of 0.8290 will resume the fall from 08472 to retest 0.8221 low.

In the bigger picture, rebound from 0.8221 medium term bottom could extend higher through 55 W EMA (now at 0.8435). However, medium term outlook will be neutral at best as long as 0.8624 cluster resistance zone (38.2% retracement of 0.9267 to 0.8221 at 0.8621) holds. Another decline through 0.8221 would remain mildly in favor.

Daily Pivots: (S1) 1.6428; (P) 1.6493; (R1) 1.6531; More...

Intraday bias in EUR/AUD remains on the downside for the moment. A double top reversal pattern (1.6800, 1.6789) could be formed. Deeper fall should be seen to 61.8% retracement of 1.5963 to 1.6800 at 1.6283. On the upside, however, break of 1.6593 minor resistance will dampen this bearish case and turn bias back to the upside for retesting 1.6800 instead.

In the bigger picture, with 1.5996 key support (2024 low) intact, larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

Daily Pivots: (S1) 0.9377; (P) 0.9404; (R1) 0.9424; More....

EUR/CHF is staying in consolidations above 0.9359 and intraday bias remains neutral. While another recovery cannot be ruled out, risk will stay on the downside as long as 0.9516 resistance holds. Firm break of 0.9336 support will solidify the case that corrective rebound from 0.9204 has already completed at 0.9516. Deeper fall would then be seen to retest 0.9204 low.

In the bigger picture, the rejection by 55 W EMA (now at 0.9489) argues that rebound from 0.9204 has completed as a corrective move after failing to sustain above 38.2% retracement of 0.9928 to 0.9204 at 0.9481. Firm break of 0.9204/9 support zone will confirm larger down trend resumption.

Daily Pivots: (S1) 1.0289; (P) 1.0345; (R1) 1.0383; More...

Intraday bias in EUR/USD remains neutral and consolidation from 1.0176 could extend. But outlook stays bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. On the downside, break of 1.0176 will resume whole fall from 1.1213. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

Daily Pivots: (S1) 150.73; (P) 151.57; (R1) 152.26; More...

Intraday bias in USD/JPY remains neutral with focus on 38.2% retracement of 139.57 to 158.86 at 151.49. Strong bounce from there, followed by break of 153.70 support turned resistance, will retain near term bullishness, and turn bas back to the upside for retesting 158.86. However, sustained trading below 151.49 will suggest that whole rise from 139.57 has completed, and bring deeper fall to 61.8% retracement at 146.32 next.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.2364; (P) 1.2417; (R1) 1.2458; More...

Intraday bias in GBP/USD remains neutral for the moment. Initial bias stays neutral this week first. While corrective rebound from 1.2099 might still extend, upside should be limited by 38.2% retracement of 1.3433 to 1.2099 at 1.2609. On the downside, break of 1.2248 support will bring retest of 1.2099 low. Firm break there will resume whole fall from 1.3433. However, decisive break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

Daily Pivots: (S1) 0.9059; (P) 0.9083; (R1) 0.9122; More…

Intraday bias in USD/CHF remains neutral and consolidation from 0.9200 could extend further. But overall outlook stays bullish with 0.8956/64 support zone intact. On the upside, firm break of 0.9200/9223 will resume the whole rally from 0.8374 and carry larger bullish implication. However, sustained break of 0.8964 will be a sign of reversal and turn bias back to the downside.

In the bigger picture, decisive break of 0.9223 resistance will argue that whole down trend from 1.0342 (2017 high) has completed with three waves down to 0.8332 (2023 low). Outlook will be turned bullish for 1.0146 resistance next. Nevertheless, rejection by 0.9223 will retain medium term bearishness for another decline through 0.8332 at a later stage.