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Market movers today

The delayed German January inflation figures are on the agenda today. The consensus and our expectation is a temporary rebound in headline inflation on the back of higher energy inflation, after the one-off government subsidy from December falls out of the calculation. However, there is significant uncertainty about how the statistical office will take account of the electricity and gas price brake. A figure above 8.6% for German HICP leaves risks of upside revisions for the final euro area January HICP print.

In Sweden, a rate hike of 50bp today is widely expected. We also expect another 25bp in April, see below.

The weekly jobless claims in the US might be worth keeping an eye on, given the intense focus on the labour market from the Fed. So far, jobless claims have not shown any signs of increasing.

The 60 second overview

Fed speak: Yesterday, we heard some more hawkish comments by FOMC members. Kashkari noted that most members expected the rates to rise above 5%. Williams echoed these comments saying that a 5-5.25% level is a reasonable view for a peak rate. Waller said continued upward pressure on inflation comes in part from the tight labour market. He also pointed that rates may stay higher for longer than some are currently expecting.

Riksbank: We expect the Riksbank to lift the policy rate by 50bp to 3.00% and that the new policy rate path will guide for another c.25bp later this spring (we expect a 25bp hike in April). This would also be in line with current market pricing. Markets however expect the policy rate to be cut already from September, which is perhaps the most pressing issue for the Riksbank if they want to tighten financial conditions. The Riksbank had a relaxed stance to the weakening SEK during 2022, but have voiced more concerns as of late given the poor start of 2023 and new highs in EURSEK. We believe the Riksbank may address the weak krona in some form, but also note that they are quite limited in what they can do. The Monetary Policy Report with new projections will be released in conjunction with the decision at 9.30 CET. New Riksbank Governor Erik Thedéen will hold a press conference at 11.00 CET (in Swedish). The policy rate becomes effective Wednesday 15 February. For a full preview, see Reading the Markets Sweden, 3 February.

Turkey-Syria earthquake: The death toll from this week's earthquakes that took place in the border region between Turkey and Syria has risen to 14,000. Apart from the human suffering, the earthquake and its aftermath could have important implications for Turkey's domestic politics. General election, where both the president and parliamentary members are to be elected, will be held in mid-May. Erdogan who has been ruling the country for two decades, is now for the first time during his reign, facing a real test as his support has fallen to all-time lows. Same time, six opposition parties have joined forces and are due to announce their joint candidate in mid-February. Erdogan's rise to power in 2002 elections has been linked to the earthquake in 1999 near Istanbul, where 18,000 people were killed. At the time, government's slow response and inadequate preparations led to public criticism and ultimately paved the way for a new regime. This time, the public will again evaluate the rescue and reconstruction efforts, whether building codes have been complied with, and whether there was sufficient preparation and readiness to respond at the government level.

FI: The Federal Reserve continues to tell the market that they are not done yet given a string of comments from various Fed officials. However, the US Treasury market is not really "listening" as US Treasury yields declined 3-5bp across the curve. There has been modest movement in the European bond yields on the back of the announcement from ECB about giving government deposits €str-20bp rather than just €str or the ECB deposit rate. The Schatz ASW-spread widened modestly, while Bund ASW-spread tightened modestly.

FX: USD, GBP and CHF were top performing G10 currencies, where AUD, NZD and JPY were the biggest losers on a day where rising US rates set the tone in markets. NOK finally found a bid supported by the rise in oil prices. EUR/NOK dropped towards the 11.00 level again.

Credit: Yesterday, credit markets saw a slightly mixed day with both CDS indices closing marginally wider with iTraxx Main (+0.8bp) at 76.2bp, while iTraxx Crossover (+2.3bp) closed at 399.9bp. The primary Eurobond market was still very active with 19 borrowers raising debt where Volvo Treasury AB, General Motors Co., and ING Bank were among the largest announced deals.

Daily Pivots: (S1) 157.91; (P) 158.38; (R1) 159.13; More...

Range trading in GBP/JPY continues and intraday bias stays neutral. On the downside, break of 155.33 low will resume the fall form 172.11 to 153.70 fibonacci level next. On the upside, sustained trading above 55 day EMA (now at 161.21) will turn bias to the upside, for stronger rise back to 169.26/172.11 resistance zone.

In the bigger picture, as long as 163.02 support turned resistance holds, decline from 172.11 medium term top is expected to continue to 38.2% retracement of 123.94 to 172.11 at 153.70. Sustained break there will raise the change of trend reversal and target 61.8% retracement at 142.34. Nevertheless, break of 163.02 support turned resistance will argue that the decline has completed, and retain medium term bullishness.

Daily Pivots: (S1) 140.41; (P) 140.72; (R1) 141.15; More....

Range trading continues in EUR/JPY and intraday bias stays neutral. On the upside, decisive break of 142.84 will argue that the correction from 148.38 has completed at 137.37 already. Further rise would be seen to 146.71 resistance next. On the downside, firm break of 155.33 will resume the whole decline from 148.38 to 135.40 fibonacci level.

In the bigger picture, as long as 55 week EMA (now at 138.82) 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) 0.8863; (P) 0.8888; (R1) 0.8902; More...

Outlook in EUR/GBP remains unchanged and intraday bias stays neutral. Further rise is expected as long as 0.8720 support holds. On the upside, break of 0.8977 will resume whole rise from 0.8545 to 100% projection of 61.8% projection of 0.8545 to 0.8896 from 0.8720 at 0.9071.

In the bigger picture, the notable support from 55 day EMA (now at 0.8780) retains near term bullishness. Break of 0.8896 should target 0.9267 (2022 high) and possibly above, to resume whole up trend from 0.8201 (2022 low). However, break of 0.8270 support and sustained trading below 55 day EMA will set the stage for 0.8545 and below.

Daily Pivots: (S1) 1.5404; (P) 1.5446; (R1) 1.5516; More...

Deeper fall could be seen in EUR/AUD to retest 1.5254/71 support zone. Firm break there will carry larger bearish implication and resume the fall from 1.5976. On the upside, above 1.5650 will resume the rebound to 1.5749 resistance.

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) 0.9855; (P) 0.9876; (R1) 0.9887; More....

EUR/CHF's corrective pattern from 1.0095 is extending and deeper decline could be seen. But downside should be contained by 38.2% retracement of 0.9407 to 1.0095 at 0.9832 to bring rebound. On the upside, break of 0.9942 minor resistance will turn bias back to the upside for retesting 1.0067.95 resistance zone.

In the bigger picture, the initial rejection by 55 week EMA (now at 1.0039) 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) 1.3388; (P) 1.3419; (R1) 1.3479; More....

Intraday bias in USD/CAD stays neutral and outlook is unchanged. While the choppy fall from 1.3704 might still extend lower, strong support is expected to 1.3224 key support to bring rebound. On the upside, above 1.3519 minor resistance will confirm short term bottoming, and turn intraday bias back to the upside for retesting 1.3704 resistance. However, decisive break of 1.3224 would carry larger bearish implication.

In the bigger picture, as long as 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) holds, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 high at a later stage. However, firm break of 1.3222/3 will indicate that the trend might have reversed. Deeper fall would be seen to next cluster support at 1.2726 (61.8% retracement at 1.2758).

Daily Pivots: (S1) 0.6897; (P) 0.6946; (R1) 0.6974; More...

AUD/USD is staying in consolidation above 0.6854 and intraday bias stays neutral. Correction from 0.7156 could still extend lower. But downside should be contained by 38.2% retracement of 0.6169 to 0.7156 at 0.6779 to bring rebound. On the upside, sustained break of 4 hour 55 EMA (now at 0.6989) will bring retest of 0.7156 high.

In the bigger picture, corrective decline from 0.8006 (2021 high) should have completed with three waves down to 0.6169 (2022 low). Further rally should be seen to 61.8% retracement of 0.8006 to 0.6169 at 0.7304. Sustained break there will pave the way to retest 0.8006. This will now remain the favored case as long as 0.6721 support holds.

Daily Pivots: (S1) 130.85; (P) 131.19; (R1) 131.79; More...

Intraday bias in USD/JPY remains neutral for the moment. Further rally is still mildly in favor. On the upside, above 132.89 will resume the rebound from 127.20 short term bottom to 38.2% retracement of 151.93 to 127.20 at 136.64. Nevertheless, sustained break of 4 hour 55 EMA (now at 130.65) will bring retest of 127.20 low.

In the bigger picture, prior of 55 week EMA (now at 131.39) 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.

Daily Pivots: (S1) 0.9182; (P) 0.9206; (R1) 0.9234; More...

Intraday bias in USD/CHF remains neutral for the moment. On the upside, firm break of 0.9287 resistance will confirm short term bottoming at 0.9058, and bring stronger rise to 0.9407 resistance. On the downside, however, sustained break of 0.9058 will resume larger decline from 1.0146 instead.

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall from 1.0146 should be a medium term down trend itself. Next target is a test on 0.8756 low. Strong support should be seen there to bring rebound. Still, further decline will now be expected as long as 0.9407 resistance holds, in any case.