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Market movers today

Today, we get the final January CPI data from Germany and IFO index for February. FOMC minutes will be released tonight but considering the upside surprises in US data lately and the hawkish remarks by several FOMC members, the message from the minutes may well be outdated by now.

The 60 second overview

Geopolitics: In his speech yesterday, Russian President Putin announced his country would suspend its observation of the new START nuclear weapons treaty with the US. US Secretary of State Blinken called this move irresponsible, while President Biden vowed his support for Ukraine sending a clear message to Putin that Russia will not win the war. A top US Treasury Department official Wally Adeyemo warned yesterday that companies around the world, including in China, could be sanctioned if they continue to violate US sanctions against Russia. Meanwhile, China's top diplomat Wang Yi, after his meeting with Russian Security Council Secretary Nikolai Patrushev, said the ties between the two countries were "solid as a rock and will stand the trials of the changing international situation".

RBNZ: As widely expected, the Reserve Bank of New Zealand hiked rates by 50bp to 4.75%. The RBNZ still sees the peak rate at 5.5% but now thinks they will reach it in the fourth quarter of 2023 instead of the third. The central bank is yet to fully assess the impacts from Cyclone Gabrielle that hit the island state last week. While its impact on economic growth near term will be negative, it may also cause supply side bottlenecks and add to capacity constraints in the construction sector, which would be inflationary. For now, the markets are pricing in a 40% probability of a 50bp hike in April.

US data: US February Flash PMIs continued the streak of upside macro data surprises, as the manufacturing index edged higher to 47.8 (Jan. 46.9) and the services index rebounded back to growth territory at 50.5 (Jan 46.8). Notably, output price and employment indices ticked higher, although input price pressures eased. Even though the January NFP figures were most likely supported by positive seasonality, overall labour market conditions appear to have remained strong in February as well. January home sales disappointed by declining modestly, but the strong PMIs were enough to support another leg higher in US yields, while the S&P500 had the worst day of the year so far (-2.0%). Market fully prices in 3x25bp Fed hikes by summer, and around 15-20% probability of Fed moving back to 50bp hikes in March. We think the latter still appears unlikely, but keep a close eye on inflation expectations for further signs of more persistent inflation risks.

Euro area data: French flash PMI beat expectations in February driven by growth in the service sector. The French economy seems to be a tale of two stories: strong services PMI at 52.8 (exp. 49.8.) while manufacturing returned to contractionary territory with index at 47.9 vs. exp. 51. New orders fell in both services and manufacturing, while price components signalled a further weakening of cost pressures across the country. German PMIs painted a similar picture as in France, but with smaller changes to the prints. Services was slightly higher than consensus at 51.3 vs. 51.0 while manufacturing suffered again to 46.5 vs. 48.1 consensus. German manufacturers maintained a preference for higher output charges despite seeing purchasing costs fall. On employment, the private sector saw a further rise, although the job creation was the joint-weakest over the past two years. The German ZEW index also came in stronger than expected with both current (-45.1 vs. -50.5) and expectations (28.1 vs. 23) components beating estimates. The slew of better than expected data certainly puts a 50bp rate hike in play for ECB in May. While a 50bp hike in March is fully priced in, markets are now also pricing in a roughly 50% chance of a similar hike in May.

FI: The sell-off in the US Treasury market continued yesterday with 10Y US Treasuries close to breaking through 4% on the back of a robust US economy and the expectations for more rate hikes from the Federal Reserve. European bond yields also continue to rise given the expectations for ECB to do more and we have seen the terminal rate for both the Federal Reserve and the ECB rise. Furthermore, the risk is that policy rates will remain "high for long" rather than seeing rates cuts already late in 2023/early 2024.

FX: The sell-off in the US Treasury market continued yesterday with 10Y US Treasuries close to breaking through 4% on the back of a robust US economy and the expectations for more rate hikes from the Federal Reserve. European bond yields also continue to rise given the expectations for ECB to do more, and we have seen the terminal rate for both the Federal Reserve and the ECB rise.

Credit: The soft sentiment yesterday was also reflected in the credit market as CDS indices widened. iTraxx Main was wider by 3bp to 81bp, while Xover widened by 16bp to 425bp. Even so, primary issuance continued with especially FIG issuers being active in euros, bringing a total of EUR2.2bn to the market in unsecured format comprising both senior and subordinated deals. That being said, the softer sentiment is also visible in the primary market where new issue concessions have been creeping higher again.

Nordic macro

New Riksbank Governor Erik Thedèen talks about the economic outlook and current monetary policy at 09.00 CET at a seminar on the residential property market arranged by Fastighetsvärlden. He will be available for media comments after the speech so look out for any flashes afterwards.

Daily Pivots: (S1) 162.10; (P) 162.93; (R1) 164.37; More...

Intraday bias in GBP/JPY remains on the upside for the moment. Correction from 172.11 should have completed with three waves down to 155.33. Further rise should be seen to retest 169.26/172.11 resistance zone. For now, further rally will remain in favor as long as 160.44 minor support holds, in case of retreat.

In the bigger picture, corrective decline from 172.11 medium term should have completed at 155.33. With 38.2% retracement of 123.94 to 172.11 at 153.70 intact, medium term bullishness is retained. That is, larger up trend from 123.94 (2020 low) is still in progress. Break of 172.11 high to resume such up trend is expected at a later stage.

Daily Pivots: (S1) 143.35; (P) 143.76; (R1) 144.16; More....

Intraday bias sin EUR/JPY stays on the upside at this point, despite loss of upside moment. Corrective fall from 148.38 should have completed at 137.37. Further rally should be seen to 146.71 resistance. On the downside, though, below 142.84 minor support will turn intraday bias neutral first.

In the bigger picture, as long as 55 week EMA (now at 139.03) holds, larger up trend from 114.42 (2020 low) is still in progress for 149.76 long term resistance. However, firm break of 55 week EMA will bring deeper fall to 38.2% retracement of 114.42 to 148.38 at 135.40. Sustained break there will raise the chance of trend reversal, and target 61.8% retracement at 127.39.

Daily Pivots: (S1) 0.8758; (P) 0.8823; (R1) 0.8855; More...

Intraday bias in EUR/GBP remains on the downside at this point. Rebound from 0.8545 might have completed at 0.8977 already. Further fall would be seen to 0.8720 support first. Break there will bring deeper decline to retest 0.8545. For now, risk will stay on the downside as long as 0.8927 resistance holds, in case of recovery.

In the bigger picture, focus is back on 55 day EMA (now at 0.8804). Sustained trading below there will argue that fall from 0.9267 is in progress. Such decline is seen as a leg inside long term range pattern from 0.9499 (2020 high). Break of 0.8545 will pave the way back to 0.8201 (2022 low).

Daily Pivots: (S1) 1.5483; (P) 1.5515; (R1) 1.5564; More...

Range trading continues in EUR/AUD and intraday bias stays neutral. On the upside, break of 1.5650 resistance will revive that case that correction from 1.5976 has completed at 1.5254. Intraday bias will be back on the upside for 1.5749 resistance first. On the downside, firm break of 1.5254/71 will carry larger bearish implication and resume the fall from 1.5976.

In the bigger picture, it's still early to confirm if rise from 1.4281 represents bullish trend reversal. But as long as 1.5271 support holds, such rally is in favor to continue. Break of 1.5976 will target 1.6434 key resistance next. On the other hand, firm break of 1.5271 will retain medium term bearishness instead.

Daily Pivots: (S1) 0.9850; (P) 0.9876; (R1) 0.9905; More....

Intraday bias in EUR/CHF remains neutral and outlook is unchanged. In case of another fall, downside should be contained by 38.2% retracement of 0.9407 to 1.0095 at 0.9832, to complete the corrective pattern from 1.0095. Break of 0.9923 will turn bias back to the upside for stronger rebound towards 1.0067/0095 resistance zone.

In the bigger picture, the rejection by 55 week EMA (now at 1.0025) mixed up the outlook. On the upside, sustained trading above 55 week EMA will raise the chance of bullish trend reversal. Rise from 0.9407 should then target 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484). However, firm break of 0.9832 support will revive medium term bearishness and bring retest of 0.9407 low instead.

Daily Pivots: (S1) 1.0623; (P) 1.0661; (R1) 1.0683; More...

Outlook in EUR/USD remains unchanged. Intraday bias remains neutral and further decline is in favor with 1.0803 resistance intact. On the downside, break of 1.0610 will resume the corrective fall from 1.1032 and 38.2% retracement of 0.9534 to 1.1032 at 1.0463. Strong support should be seen around there to bring rebound, at least on first attempt.

In the bigger picture, the rally from 0.9534 low (2022 low) is a medium term up trend rather than a correction. Further rise is in favor to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 next. This will remain the favored case as long as 1.0482 support holds.

Daily Pivots: (S1) 1.2017; (P) 1.2082; (R1) 1.2177; More...

Intraday bias in GBP/USD remains neutral first. Another fall could be seen as long as 1.2269 resistance holds. ON the downside, break of 1.1914 will resume the fall from 1.2446, as the third leg of the corrective pattern from 1.2445, to 1.1840 support and possibly below. Nevertheless, firm break of 1.2269 will bring retest of 1.2445/6 resistance.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1644 resistance turned support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759. Sustained break there will pave the way back to 1.4248.

Daily Pivots: (S1) 0.9246; (P) 0.9265; (R1) 0.9296; More...

Range trading continues in USD/CHF and intraday bias stays neutral. On the upside, break of 0.9331 will resume the rebound from 0.9058 to 38.2% retracement of 1.0146 to 0.9058 at 0.9474. However, break of 0.9135 will indicate that the rebound has completed and bring retest of 0.9058 low.

In the bigger picture, decline from 1.0146 is seen as part of a long term sideway pattern. As long as 38.2% retracement of 1.0146 to 0.9058 at 0.9474 holds, another fall is in favor through 0.9058. However, sustained trading above 0.9474 will indicate that the medium term trend has reversed, and open up further rally to 1.0146 again.

Daily Pivots: (S1) 134.48; (P) 134.85; (R1) 135.40; More...

USD/JPY is trying to resume after brief consolidation and intraday bias is back on the upside. Rebound from 127.20 would target 38.2% retracement of 151.93 to 127.20 at 136.64. Strong resistance could be seen there to complete the corrective rebound. On the downside, break of 133.91 minor support will turn bias back to the downside for 129.79/132,89 support zone.

In the bigger picture, prior break of 55 week EMA (now at 131.54) raises the chance of medium term bearish reversal, but that's not confirmed yet. Strong rebound from current level, followed by sustained break of 38.2% retracement of 151.93 to 127.20 at 136.64 will argue that price actions from 151.93 is merely a corrective pattern. However, rejection by 136.64 will solidify medium term bearishness for 61.8% retracement of 102.58 to 151.93 at 121.43 and 38.2% retracement of 75.56 to 151.93 at 122.75.