Morning Report

February 08, 2024

“Much of the G10 have entered a short period of consolidation in the tail end of the week amid a lack of fresh data. We and the markets are now looking closely at a raft of headline economic data next week that should shake up the order, particularly for sterling, where we have CPI, GDP, wage growth, and unemployment claims.”

Sam Cornford – Head of Trading


Main Headlines

India’s central bank maintained its key repo rate at 6.50% for the sixth consecutive meeting, indicating a pause in interest rate cuts as it prioritises achieving its 4% medium-term inflation target and recognises the economy’s resilience. The decision reflects the Monetary Policy Committee’s focus on addressing the ‘last mile of disinflation’ while keeping a watchful eye on economic conditions.

Britain’s upper house of parliament released a report on Thursday advocating for the establishment of a superwatchdog to enhance accountability over increasingly politicised regulators in the post-Brexit era. The proposed watchdog aims to ensure regulators operate independently while maintaining clarity in their mandates. The report addresses concerns about regulatory independence and the need for clearer remits in various sectors, including finance, utilities, education, and care.


Sterling has consolidated in a tighter trading range as markets prepare for a slew of headline economic data next week. It has steadily crept up against the dollar, buoyed still by expectations for more distant rate cuts and more persistent inflation. The British economic calendar has provided little over the past few days to jolt the pound into action, but heightened volatility will surely come with wage growth, employment, CPI, and GDP data next week. BoE Deputy Governor Breeden said yesterday that she was becoming less concerned that further hikes would be required and stuck to the narrative offered at the policy decision last week. Catherine Mann may disagree when she speaks this afternoon, however, given that she voted for policy tightening despite promising disinflation forecasts.


Hawkish messages from ECB policymakers have struggled to budge market expectations for eurozone rate cuts as the euro drifts above its near three-month low reached on Monday. Resident hawk Schnabel again pushed back against early easing yesterday, reemphasising her concern over a slowdown in the disinflationary process in the so-called ‘last mile’ of the cycle. Hawkish speeches should come again from Vujcic and Wunsch later today, with markets still looking at a 60% probability for an April cut. Elsewhere in Europe, the Swiss franc slid 0.6% against the euro yesterday – the likely data driver here was an increase in FX reserves, that hinted at an end to the excessive appreciation of the franc generated by Swiss National Bank intervention.


The dollar seems to have settled in a new, higher range after receiving a leg up from an anomalously strong jobs market last week. A broad pullback from its fresh 12-week peak has trimmed some of these gains, but it has ultimately held onto much of its strength amid a dearth of data this week. There seems to be a growing acceptance that the specific timing of the spring/summer cut is less relevant than the pace and magnitude of easing over the next few years – the persistent resilience of the US economy and the possibility of a ‘no landing’ instead of a ‘soft landing’, where the economy avoids suffering significant damage altogether, have broadly raised the prospects for the greenback this year. The Fed’s Collins yesterday said that ‘policy remains well positioned’ and seemingly felt no urgent pressure to begin cutting in the first half of the year. A speech from Barkin is worth looking out for this afternoon, alongside the weekly jobless claims figure, which is not expected to move too wildly.


The S&P 500 approached 5000 for the first time in yesterday’s session as economic optimism continues to improve, although traders were evidently hesitant to push it above the psychological hurdle just yet. This contrasts with the bad fortunes of the Chinese asset markets, where promised measures to revive market sentiment have managed to lift stocks from their five-year lows. Meanwhile in Japan, a dovish BoJ pushed the Nikkei index back to a fresh 34-year peak.

Main Economic Events (All Times CET)

2:30am: Chinese CPI and PPI
10:00am: ECB Economic Bulletin
2:30pm: US Unemployment Claims
2:30pm: Fed’s Barkin speaks
4:00pm: BoE’s Mann speaks
11:30pm: Reserve Bank of Australia’s Gov Bullock speaks