Sample Category Title

US30, Daily

US30 bounced from the crucial 45000 resistance level and faces the 44000 support level.

• %R and MFI leave the overbought zone, with the price breaches below the DEMA and TEMA lines, giving a bearish sentiment.
• Consider a short trade if it breaks below the 44000 support level, with the target at 43300.

GBP/USD failed to climb above 1.2500 and trimmed all gains. EUR/GBP is declining and trading below the 0.8400 support level.

Important Takeaways for GBP/USD and EUR/GBP Analysis Today

• The British Pound is showing bearish signs below 1.2400.
• There is a short-term declining channel forming with resistance near 1.2280 on the hourly chart of GBP/USD at FXOpen.
• EUR/GBP is declining and showing bearish signs below 0.8400.
• There is a key bearish trend line forming with resistance at 0.8370 on the hourly chart at FXOpen.

GBP/USD Technical Analysis

On the hourly chart of GBP/USD at FXOpen, the pair started a fresh decline from the 1.2470 zone. As mentioned in the previous analysis, the British Pound struggled to extend gains and declined below the 1.2360 support level against the US Dollar.

There was a clear move below the 1.2320 level. The pair even settled below the 1.2300 level and the 50-hour simple moving average. The pair tested the 1.2250 support zone.

A low was formed at 1.2249 and the pair is now consolidating losses. On the upside, the GBP/USD chart indicates that the pair is facing resistance near 1.2280 and a short-term declining channel. The next major resistance is near the 1.2320.

A close above the 1.2320 resistance zone could open the doors for a move toward the 50% Fib retracement level of the downward move from the 1.2471 swing high to the 1.2249 low at 1.2360.

Any more gains might send it toward the 61.8% Fib retracement level of the downward move from the 1.2471 swing high to the 1.2249 low at 1.2385. If not, the pair could resume its decline below 1.2250. On the downside, there is a key support forming near 1.2220.

If there is a downside break below the 1.2220 support, the pair could accelerate lower. The next major support is near the 1.2150 zone, below which the pair could test 1.2050. Any more losses could lead the pair toward the 1.2000 support.

EUR/GBP Technical Analysis

On the hourly chart of EUR/GBP at FXOpen, the pair struggled to gain pace for a move above 0.8420. The Euro settled below 0.8400 and started a fresh decline against the British Pound.

There was a clear move below the 0.8350 pivot level. The EUR/GBP chart suggests that the pair settled below the 50-hour simple moving average and 0.8340. A low is formed near 0.8307 and the pair is now consolidating losses.

Immediate resistance is near the 50% Fib retracement level of the downward move from the 0.8389 swing high to the 0.8307 low at 0.8350.

The next major resistance could be near the 50-hour simple moving average and the 61.8% Fib retracement level of the downward move from the 0.8389 swing high to the 0.8307 low at 0.8370. There is also a key bearish trend line forming with resistance at 0.8370.

A close above the 0.8370 level might accelerate gains. In the stated case, the bulls may perhaps aim for a test of 0.8420. Any more gains might send the pair toward the 0.8450 level.

Immediate support sits near 0.8325. The next major support is near 0.8305. A downside break below the 0.8305 support might call for more downsides. In the stated case, the pair could drop toward the 0.8265 support level.

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As promised during his election campaign, US President Donald Trump introduced tariffs just two weeks after his inauguration:

→ 25% on goods from Canada and Mexico, prompting both countries to vow retaliatory measures.

→ 10% on Chinese goods, with China announcing plans to challenge the decision at the World Trade Organization.

The tariffs will take effect on 4 February. Trump acknowledged potential economic pain but justified the measures as necessary to combat illegal immigration and drug trafficking, arguing that the long-term benefits would outweigh the costs.

Trump’s decision:

→ Led to a decline in US stock indices, as analysts fear a potential trade war and global stagflation (sluggish economic growth amid high inflation). Further tariffs on Europe may follow.

→ Strengthened the US dollar, which gained around 1% against major currencies.

According to the USD/CAD chart, the Canadian dollar is trading around 1.4700 against the US dollar—a level last seen in early 2003.

On 30 January, our USD/CAD technical analysis highlighted the significance of a key trendline supporting the uptrend since last autumn. Now, by drawing a parallel line through December’s peak (A), we can identify a resistance level where the pair is currently stabilising.

A large bullish gap has also formed on the chart. The lower boundary around 1.4600 may act as technical support in the short term, though broader price movements will likely be driven by fundamental factors.

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Markets

The US Tariff Man walked the talk. From tomorrow February 4, 12:01 am EST, additional tariffs for Canadian imparts will be 25% with an exemption of 10% applying for energy or energy resources. Mexico faces a similar 25% tariff rate, again in addition to any other existing duties. The tariff rate on China will be 10%. Even though there’s a tight deadline, there’s still some room for de-escalation with White House documentation providing no explicit criteria for lifting the tariffs apart from “an improvement in the immigration and fentanyl situations”. US President Trump invoked the International Emergency Economics Power Act, to sign the executive orders, leaving US courts and a legal challenge as a wildcard. Affected countries won’t let them be bullied around. Canada already announced 25% tariffs against some C$30bn of US goods with significantly more to come (C$125bn) in three weeks’ time. They also started a national “buy Canadian” campaign in an effort to boycott US goods. Mexican President Sheinbaum also pledged retaliation with China vowing corresponding countermeasures. The US White House highlighted its “retaliation clause” suggesting the President may increase or expand in scope the duties imposed to ensure the efficacy his actions”.

The tariff escalation triggers risk aversion this morning. Main Asian stock markets lose around 3% with European and US equity futures pointing at losses of around 2.5%. Chinese markets are still closed for Lunar New Year celebration but the off-shore yuan trades back near multi-year lows (USD/CNY 7.35 area). USD strength is a global theme, but first resistance holds apart from affected countries. The trade-weighted greenback spikes from a 108.37 close on Friday to currently 109.50. The YTD top and resistance at 110.17 remains out of reach. EUR/USD set a minor new low at 1.0141 in the illiquid start of the trading week, but changes hands above the 1.0178/1.0201 support area for the moment. The picture obviously remains extremely fragile. The Canadian loonie (USD/CAD > 1.47 for first time since 2003) and Mexican peso (USD/MXN > 21 for first time since 2022) stand with the back against the wall. JPY is the only one to keep pace with the dollar, trading broadly unchanged around USD/JPY 155. The US yield curve flattens with the front end of the curve adding up to 5 bps (higher inflation threat) and the long end losing around 2 bps (hit to growth & risk aversion). We err on the side of caution this week until first dust settles.

News & Views

Belgian political parties have agreed on a government, seven months after the June 2024 elections. Bart De Wever from the Flemish nationalist party N-VA is prime minister of a five-party coalition that includes CD&V, Les Engagés, MR and Vooruit. The overarching goal is to save some €23bn to reduce the budget deficit to (below) 3% by 2030. To do so (amongst many other things) a capital gain tax of 10% on financial assets (with the first 10k exempted) is introduced, a bonus-malus system is attached to the pension system and unemployment benefits are limited in time (two years). A €6.5bn big fiscal reform includes €4.4 bn lower taxes on labour in a complementary move to incentivize people to work if they are able to. The government estimates this should in time generate around €8bn in additional revenue. Almost €5bn is earmarked for new policies, including police, justice, migration as well as defense. The Arizona coalition in its calculations assumes a 7-yr adjustment period to address the budgetary situation instead of four but this is pending on the EC’s approval. Belgium has until April to deliver a detailed budget proposal. Rating agency Fitch will have the opportunity to assess the budget this Friday. After having lowered the outlook to negative back in March 2023, it’s make or break for Belgium’s current double AA-rating.

Czech prime minister Fiala in a televised appearance yesterday said he would like for the central bank to ease monetary policy faster. His comments, accompanied by stressing he respects the central bank’s independence, come ahead of Thursday’s policy meeting. The Czech National Bank is expected to lower policy rates from 4% to 3.75%, bringing it in close proximity of what is considered a neutral rate (3.5%). Fiala also criticized CNB governor Michl for not having discussed a proposal to potentially invest some of the country’s monetary reserves in crypto currencies, including Bitcoin. The Czech crown slips to EUR/CZK 25.2 this morning in a move shared by regional peers amid general risk off.

• GBP is left vulnerable given the UK’s fragile position with a high public debt, public deficit and current account deficit.
• BoE preview – we expect the BoE to reiterate the message of a favouring gradual approach to the cutting cycle (page 2).
• We are strategically bearish on EUR/GBP; we recommend fading debt concern related rallies. Balance of risk on Thursday’s BoE meeting is for a weaker GBP.

When Chancellor Reeves presented her latest full budget accompanied by a report from the independent fiscal watchdog OBR end October 2024, she was left a historically slender headroom of GBP 9.9bn for meeting her fiscal objective. She presented an expansionary budget, which focused on increasing public investments and while partly funded by tax rises, the majority is set to be funded by increasing borrowing. As we have previously argued, we think the government is set to either roll back some of its measures or hike tax rates further at the next fiscal event in March.

With the recent rise in long-end Gilt yields and growth coming in weaker than expected by the OBR, this headroom is most likely gone, shedding a new light on the unsustainability of public finances. The combination of high interest rates, muted growth expectations and a primary deficit leaves a tricky backdrop for the UK as growth does not act as an aiding force (chart 1). Additionally, this is currently set to leave the UK unable to run with a deficit on its public finances without increasing the debt already running at close to 100% of GDP.

Hence, the fragile fiscal position combined with conducting an expansionary fiscal policy leaves the UK vulnerable to the global backdrop. Especially when we see a substantial tightening of global financial conditions, a sharp move higher in global rates combined with historically elevated levels in global long-end yields. This is further amplified in an environment characterised by a sharp sell-off in risk where liquidity becomes scarce since the UK runs a large current-account deficit, which makes GBP vulnerable whenever capital inflows fade. This scenario materialised at the beginning of the year where Gilt yields rose sharply and GBP weakened substantially.

Going forward, we expect the Labour government to either roll back some of its expansionary measures, cut spending further or hike taxes in the statement presented on 26 March to meet the budget rules. Additionally, the BoE earlier this week introduced the Contingent Non-Bank Financial Institution Repo Facility (CNRF) which will lend to NBFIs during episodes of “severe gilt market dysfunction” to help maintain financial stability. While the fragile fiscal backdrop leaves GBP susceptible to a sell-off every time focus turns to fiscal sustainability or we see a sharp sell-off in risk and long-end yields rise notably, we ultimately think this will fade, as seen most recently. We continue to be bullish on GBP as we think a relatively hawkish BoE, and a growth pickup in the UK relative to the euro area in 2025 will weigh on the cross in the coming quarters. This is further amplified by continued tight credit spreads and a return to the positive GBP-USD correlation in a USD positive investment environment.

BoE preview: a gradual rate cutting cycle remains base case

We expect the Bank of England to cut the Bank Rate by 25bp to 4.50% on Thursday 6 February in line with consensus and market pricing. We expect the vote split to be 8-1 with the majority voting for a cut and hawk Catherine Mann voting for an unchanged decision. Note, this meeting will include updated projections and a press conference following the release of the statement.

Overall, we expect the BoE to stick to its previous guidance noting that “a gradual approach to removing monetary policy restraint remains appropriate”. Since the last monetary policy decision in December, the economy has stagnated, the labour market has continued its gradual loosening while price pressures continue to be elevated. The economy ended 2024 on a weak note and the preliminary PMI data for January indicates that growth remains muted, increasing the downside risks to the growth outlook. We expect the BoE to revise growth downwards across the forecast horizon and believe the more muted growth outlook opens the door for a slight dovish twist to the BoE’s communication.

In the labour market, while conditions continue to ease with vacancies edging lower and unemployment coming in higher than the BoE expected in November, wage growth continues to spell trouble. In the private sector regular wage growth rose to 6.0% in the three months to November, set to overshoot the BoE’s Q4 forecast of 5.1%. This is likely to concern the hawkish camp of the MPC.

On the inflation front, service inflation has surprised to the downside relative to the MPC’s November expectation, dropping to 4.4% with momentum also showing signs easing. The latest PMI report for January however revealed that both input and output price pressures remain not only elevated but are gaining momentum. We expect the BoE to lift the inflation forecast in the near-term and pencil in a slight undershoot of the 2% target further out given that the more hawkish implied Bank Rate conditioning path.

BoE call. We expect the BoE to stick to quarterly cuts, leaving the Bank Rate at 3.75% by YE 2025, which is lower than markets are expecting. Markets are pricing around 75bp for 2025. However, we highlight that the risk is skewed towards a swifter cutting cycle in 2025, given the clearly dovish bias within the MPC as evident from the December meeting.

Market reaction. We expect the market reaction to be rather muted upon announcement with a cut fully expected by markets. On balance, we tilt towards a dovish twist during the press conference with downside risks to growth tentatively materialising. This could suggest some slight EUR/GBP topside and lower UK rates following the release of the statement. More broadly, we expect EUR/GBP to move lower in the coming quarters driven by a relatively hawkish BoE, and a growth pickup in the UK relative to the euro area in 2025. The key risks are reignited debt concerns and a more forceful policy easing stance from the BoE.

Risk sentiment is on the floor this morning after Donald Trump imposed 25% tariff on most Mexican and Canadian imports and 10% tariff on Chinese imports which will take effect from tomorrow – a move, I believe, will certainly backfire and end up in tears for everyone. But it will first add volatility and chaos to the financial markets.

The first market reaction on Monday’s open is a swift move to the US dollar. The Mexican peso gap-opened at the lowest levels since March 2022 and the USDCAD jump-opened and flirted with the 1.48 level with the prospect of melting Canadian exports toward the US and shattered growth outlook which will require a strong support from the Bank of Canada (BoC) in the coming months. Note that, the latest growth numbers from Canada already looked bad, but with Trump’s tariffs, things could snowball toward worse in a short period of time. This being said, the doji candlestick formation on the USDCAD hints at hesitation on whether the pair should travel toward the 1.50 knowing that such tariffs on the country’s two biggest trading partners – that together stand for more than a quarter of the US imports – will boost inevitably US inflation, cut the dream of further Federal Reserve (Fed) cuts short, and could require rate hikes, instead, to deal with a likely price shock. The hawkish shift in Fed expectation and flight to safety explain why the US dollar is widely in demand this morning. But the tariffs will also weigh on the US growth expectations, and the latter should limit the dollar’s upside potential and weigh on equity valuations.

European markets are set to open deeply in the red, the US futures are deeply in the negative as well, provided that the tariffs will severely increase many companies’ costs and hit their profit margins.

And oh, as per Europe, Trump ramped up his tariff threats and the EU said it would retaliate. The EURUSD is also heavily sold at the weekly open, but here as well, the doji candlestick formation hints that the Trump trade can not be one-sided. The US will also suffer from such dramatic tariff increases, the monstruous tariffs will immediately weigh on the US growth outlook as well and prevent the US dollar from fully benefiting from Trump’s America First Policies. Instead, the US could end up in a less appetizing America Alone setting.

Now coming back to the fundamentals, Friday’s PCE numbers from the US came in line with market expectations, while the softer-than-expected German inflation reinforced the dovish European Central Bank (ECB) bets – that are stronger this morning with the fear that Trump would wake up one morning and impose huge tariffs on European imports as well. Overall, the upside pressure in the US dollar will likely remain until the dust settles, but the risk of retaliation, the fact that the tariffs will likely boost US inflation and hit the US growth prospects should quickly build a barrier in front of the US dollar bulls’ path toward the north. And the risk selloff will likely lead to correction in equity markets on both sides of the Atlantic Ocean. Even robust earnings will hardly improve global risk sentiment this week. Big companies including Alphabet, Amazon, AMD, Novo Nordisk and Qualcomm are due to announce their earnings this week.

Inside Oil

Exxon announced better-than-expected earnings and income in Q4 thanks to increased production in the Permian Basin and Guyana. But earnings from the energy products unit dropped significantly with weaker refining margins and reduced global fuel demand, especially from China. Exxon also reduced its share repurchases. Trump’s tariffs will likely further squeeze profit margins and keep risks tilted to the downside. The picture is worse on the Canadian side of the border, of course, as the 25% tariff on Canadian imports will make the European and Asian exports toward the US more competitive. As such, the Canadian Imperial Oil shed more than 6.5% on Friday, other Canadian oil companies were severely pressured as well, while Saudi Arabian oil is 0.18% down in Tadawul this morning.

As per crude oil, the price jumped as a kneejerk reaction to Trump tariffs, as Canadian and Mexican crude oil imports are particularly impactful, given that these countries are among the largest suppliers of crude oil to the US. But the gains remained short-lived above the 200-DMA and the price of crude is back to Friday’s closing level as the shattered prospects of global growth will likely outweigh the geopolitical risks and keep the upside potential limited. Brent on the other hand gives a different reaction to Trump’s tariff threats as Brent is less exposed to the US trade policies. While Brent is expected to follow WTI due to general market sentiment, the effect should be less pronounced because its supply chain is not directly affected by US tariffs.

In focus today

Today, focus turns to French politics as lawmakers reach the final stage of negotiating a budget agreement. Sources indicate that Bayrou intends to reduce the public deficit to 5.4% of GDP from last year's 6.2%. The budget draft will be debated in the National Assembly today, and Bayrou is likely to pass the bill without a majority.

Attention also shifts to the euro area inflation data for January. HICP inflation rates in Germany, France, and Spain were broadly unchanged compared to last month. We also forecast that euro area HICP inflation will remain at 2.4% y/y. Core inflation is projected to slightly decrease to 2.6% y/y (prior: 2.7%) due to lower services inflation. Additionally, the final release of manufacturing PMI for January should confirm the flash release that rose more than expected.

For the US, we get the ISM manufacturing index for January. Its preliminary PMI counterpart released earlier pointed towards recovering activity at the beginning of the year.

At 8.30am CET, the Swedish manufacturing PMI will be released. Recent PMIs have consistently exceeded the 50-mark (last print 52.4) outperforming France and Germany. Although the NIER manufacturing survey fell in January, we still expect a solid print above the 50-mark.

The week is packed with US data releases, including key events such as the ISM service index, JOLTs and the jobs report. On Thursday, the Bank of England will announce its rate decision.

New feature from the Danske Bank Global Research team: Personal customers in Denmark, Sweden and Finland now have access to a selection of research articles in Danske Bank's Mobile App. You will find the new feature under Investments.

Economic and market news

What happened during the weekend and overnight

Overnight in China, Caixin's early January PMI were released, mirroring last week's weak official PMI. It fell short of expectations at 50.1 (cons: 50.5, prior: 50.5), indicating slowed factory activity growth. The decline in foreign orders and average selling prices highlights pressure from rising competition and global uncertainties. However, manufacturers' sentiment has improved due to signs of increasing domestic demand and anticipated government support measures.

Over the weekend, Trump imposed new tariffs on Canada, Mexico and China, initiating a trade war with three of the US's largest trading partners. The executive order enforces a 25% tariff on imports from Canada and Mexico, excluding Canadian oil and energy products, which faces a 10% levy. Chinese imports are hit with an additional 10% tariff. The changes apply to all goods imports from countries that together account for around 45% of all US imports. In retaliation, Canada announced 25% tariffs on US goods like alcohol, clothing, household appliances and lumber, while Mexico's President Sheinbaum said the country would also launch retaliatory tariffs and other measures.

What happened Friday

In France, inflation was slightly below expectations in January, with the HICP inflation index remaining at 1.8% y/y (cons: 1.9%, prior: 1.8%). The monthly increase in seasonally adjusted services inflation was 0.0%, reinforcing the argument for further ECB rate cuts.

In Germany, CPI inflation was lower than expected in January, although the details on core services and HICP were not as weak as indicated by regional data, CPI inflation declined to 2.3% y/y (cons: 2.6%, prior: 2.6%) while HICP inflation, the measure prioritised by the ECB, remained unchanged at 2.8% y/y as expected.

In the US, the Employment Cost Index was slightly above expectations, exceeding levels that would be comfortable for the Fed if productivity growth returns to its typical pre-pandemic pace. The impact on firms' unit labour costs will be clearer this week with the release of Q4 growth productivity data. December PCE inflation aligned closely with expectations, as indicated by Thursday's Q4 figures. The EUR/USD fell slightly lower on the ECI data.

Equities: Global equities ended lower on Friday, dragged down by the US and news of US trade tariffs. Last week's and Friday's performances are somewhat secondary, as the tariffs are shifting focus and having a significant impact on markets this morning. However, let's be clear: these tariffs are being introduced at a time when we have strong macroeconomic conditions, loosening monetary policy, solid earnings and with global equities at an all-time high. Hence, the markets will be more resilient than if we were facing macroeconomic, monetary, and earnings headwinds. Nonetheless, as we are close to all-time highs after a solid January, markets will naturally get hit by the negative effects of the tariff announcements. In the US on Friday: Dow -0.8%, S&P 500 -0.5%, Nasdaq -0.3%, and Russell 2000 -0.9%.

Unsurprisingly, most Asian markets are lower this morning, including Japan, South Korea, and Taiwan, which are down by approximately 3%, despite not being the direct targets of the tariffs. However, we believe this is logical, as the tariffs should be seen through the lens of their effects on global growth. European and US futures are down 1.5-3% this morning.

FI: European rates dropped sharply on the German inflation data missing expectations. 2y German yields were down 4bp on the release, as markets may have to rethink the inflationary profile for the euro area this year. That said, with new weights and menu price adjustments it is too early to make firm conclusions. The weekend confirmation that the US is imposing 10/25/25% tariff on China/Canada/ Mexico is set to impact trading appetite this morning. While this is less than the worst-case scenarios, the announcement confirmed the tariff induced volatility on Friday. That trading sessions will continue to be vigilant on potential tariff headlines. Canada and Mexico have already said they will retaliate, while China will do "corresponding countermeasures". UST futures are up, thus 10y UST is down about 5bp in the overnight session.

FX: Tariffs shook the markets on Friday with a volatile session in FX. At the end of the day, US equity indexes closed in negative territory and the USD gained vs its G10 peers. President Trump confirmed over the weekend that steep tariffs on Canada, Mexico and China will apply from Tuesday alongside threats that EU will be targeted as well. Canada immediately responded by setting tariffs on US goods, while other counterparties indicate that they are ready to retaliate. EUR/USD has dropped further to around 1.02 from Friday's close at 1.0362, USD/CAD has traded a multi-year high just shy of 1.48 and the MXN is being hit as well. Equity futures are firmly in red indicating a sour opening. While the correlation between equities and EUR/Scandies has been poor recently, the risk in EUR/SEK and EUR/NOK is probably skewed to the upside if markets stay sour although the fundamental impact would also depend on the design of any possibly tariffs directed toward Europe. Besides tariff jitters, focus is on today's EA CPI and the global batch of confidence numbers.

Daily Pivots: (S1) 191.32; (P) 192.18; (R1) 193.17; More...

Intraday bias in GBP/JPY remain son the downside as fall from 194.73 continues. Firm break of 189.31 support will suggest that corrective pattern from 180.00 has completed. But before that, the pattern could still extend. Break of 194.73 will bring stronger rebound instead.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Daily Pivots: (S1) 159.94; (P) 160.72; (R1) 161.54; More...

EUR/JPY's strong break of 159.74 support confirms resumption of whole fall from 164.89. Intraday bias is back on the downside for 156.16 support next. Overall, consolidation pattern from 154.40 could still extend. Above 161.48 minor resistance will turn bias back to the upside for 164.07 resistance.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

Daily Pivots: (S1) 0.8346; (P) 0.8367; (R1) 0.8379; More...

EUR/GBP's strong break of 55 D EMA (now at 0.8355) suggests that rebound from 0.8221 has completed at 0.8472 as a corrective move. Intraday bias stays on the downside for retesting 0.8221 low. On the upside, above 0.8388 minor resistance will turn intraday bias neutral first.

In the bigger picture, a medium term bottom should be in place at 0.8221, just ahead of 0.8201 key support (2022 low). Sustained trading above 55 W EMA (now at 0.8442) will pave the way to 0.8624 cluster zone (38.2% retracement of 0.9267 to 0.8221 at 0.8621), even just as a correction to the down trend from 0.9267 (2022 high). But still, medium term outlook will be neutral at best as long as 0.8621/4 holds.