Confidence that the US economy will be able to cope with the series of rate hikes that are penciled in by the Fed has returned – at least for now. Markets are also positioning for another hike from the BoE next week, while the ECB is increasingly under pressure to justify the commitment to ongoing net asset purchases for much of the year.

• Geopolitics:  Biden Administration warned a Russian invasion of the Ukraine is imminent.
• Economic Data: The stronger than expected US GDP numbers helping to lift indexes out of negative territory. Australia’s PPI rate jump to a whopping 3.7% y/y in Q4, which added to inflation concerns, but didn’t prevent local bonds from rallying, after the sharp sell off yesterday.
• USDIndex gapped up to 97.35.
• 10-year rate has lifted 1.6 bp to 1.182%. JGB rates are up 0.7 bp at 0.16%.US 2-yr yield hits highest since Feb. 2020.
• Equities – GER40 and UK100 futures are mixed thought, with the GER40 futures down -0.1%, the UK100 future up 0.17%, after European markets managed to close with broad gains yesterday. By contrast Topix and Nikkei are up 1.9% and 2.6% respectively and the ASX rallied 2.2%. USA100 declined -1.4% but currently back to 14100 area, with the USA500 -0.54% lower but currently back to 4350 area.
• China bourses underperforming ahead of the Lunar New Year holidays and with concern over China’s slowing growth, Covid policies and regulatory crackdowns weighing.
• Earnings: Apple posted record revenue of $123.9bn in the Q4 of 2021, an 11% gain from a year before as its services business expanded and chip shortages were largely confined to iPad sales.
• USOil – steady at $86.00.
• Gold – extended losses below 200-DMA to $1791.
• FX markets – EUR has remained under pressure and EURUSD slipped to 1.1125, while GBP strengthened, with Cable at 1.3370, and EURGBP slipping to 0.8311. As risk appetite improved, USDJPY is at 115.66.

European Open –  The March 10-year Bund future is fractionally higher, Treasury futures are underperforming slightly, while in cash markets the US 10-year rate has lifted 1.6 bp to 1.82%, as stock market sentiment continued to improved, also helped by positive earnings reports from Apple.

Today –Today’s data calendar has preliminary GDP readings for Germany, France and Spain, as well as Eurozone ESI economic confidence. In US, the focus will be on Q4 ECI, personal income and Michigan consumer sentiment.

Biggest FX Mover @ (07:30 GMT) GBPJPY (+0.34%) – Breached 155 breaking 38.2% of Decembers downleg. Fast MAs turn flat now with all momentum indicators keep pointing further higher. ATR (H1) at 0.176 and ATR (D) at 1.064.

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Andria Pichidi

Market Analyst

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