GGMA Morning Brief: JGBs under pressure after Takaichi picks two reflationists to join BOJ, Strong AU CPI, Two Fed officials see no rush for policy action, Today: EZ CPI report, RBA, ECB & Fed speak
Good morning,
I hope all is well.
Here are the main overnight news and market movers:
Markets: Asian stocks keep rallying, JGBs under pressure, yields higher,
Asian equities surged to record highs in Wednesday’s session as the multi-week AI disruption scare eased following Anthropic’s decision to position Claude as an enterprise integration layer rather than a replacement for existing business workflows. MSCI Asia-Pacific climbed approximately 1.5% to an all-time high, with the Nikkei 225 jumping 2.2% and KOSPI breaking above 6,000 for the first time. The US dollar weakened broadly — the DXY fell 0.23% to 97.65. Treasury yields edged higher. Gold extended its record run to $5,191/oz while silver surged 3.7%, and Bitcoin recovered to $65,000 after its recent selloff. All eyes turn to Nvidia’s fiscal Q4 earnings after the US close, which will either validate or further unsettle the AI spending narrative.
Japan’s Takaichi picks two reflationists to join BOJ board
Japan’s Prime Minister Sanae Takaichi nominated two reflationist academics, Ayano Sato and Toichiro Asada, to the Bank of Japan policy board, replacing Asahi Noguchi and Junko Nakagawa. This move suggests a cautious approach to raising interest rates and may cause tension with Washington after recent US support for the yen. The yen initially weakened but later stabilised, while JGB yields increased. (BBG – Continue Reading)
Australia’s faster-than-expected inflation boosts rate-hike bets
Australia's January inflation was higher than expected, mainly due to housing costs, prompting traders to increase bets on another interest rate hike this year. The trimmed mean consumer prices rose 3.4% annually—above economists' 3.3% estimate—marking the seventh consecutive month above the Reserve Bank's 2-3% target range. Following the data release, AUDUSD and Australian bond yields climbed. (BBG – Continue Reading)
Fed officials see no urgent need for policy change
Two Federal Reserve officials on Tuesday signalled no near-term appetite to change the setting of central bank interest rate policy. Markets expect the Fed to lower rates again this year. Still, officials, faced with a stabilising job market and uncertainty over whether inflation pressures will moderate back to target, have not given much guidance on the prospect of further reductions in the cost of short-term borrowing. “I think that it's quite likely that it'll be appropriate to hold in the current range for some time,” Federal Reserve Bank of Boston President Susan Collins said as part of a panel discussion at a conference on technology held by her bank. But she added, “There are different scenarios that are possible, and so it'll be important to continue to really take that patient, deliberate approach to making policy decisions.” (RTRS – Continue Reading)
Trump defends his tariffs in the State of the Union speech
President Donald Trump addressed Capitol Hill to advocate for his tariff agenda. He highlighted trade agreements, claimed that tariffs supported peace deals, and suggested that tariff revenue could eventually replace income taxes. Trump criticised the Supreme Court's recent decision against his emergency tariffs and announced plans to implement a revised tariff system using established federal authority. (Politico - Continue Reading)
Today’s Macro Roadmap: EZ CPI report, RBA, ECB & Fed speak
Recently, RBA Governor Bullock defended the Board’s decision to raise the cash rate by 25bps to 3.85% — the first hike since November 2023 — citing underlying (trimmed mean) inflation rising unexpectedly to 3.4% by December 2025, materially above RBA forecasts. She told Parliament that inflation “with a three in front of it” is unacceptable and emphasised that stronger-than-expected aggregate demand was pushing up against supply capacity. Today’s fireside chat follows just hours after the January CPI release, making it a critical opportunity for post-data forward guidance.
In his last speech, the Fed’s Barkin described the economy as “remarkably resilient” but stressed that inflation still remains above target and has been since 2021 — a sustained miss he said he “takes seriously.” He emphasised that today’s inflation numbers significantly influence tomorrow’s, signalling concern that inflation expectations may become unanchored. On the labour market, he flagged extreme concentration: 97% of net private-sector job creation in 2025 was in healthcare and social assistance. He views tariff-related pricing power as constrained by competitive dynamics, suggesting firms may absorb costs rather than pass them through fully.
The Fed’s Musalem has taken a moderately hawkish stance in his recent comments, describing current policy as “well positioned” and calling rate cuts “unadvisable” given inflation at 2.8% — still above the 2% target. In his most recent appearance on February 20, he discussed the Supreme Court tariff ruling, noting that if replacement tariffs are “essentially one-for-one substitutes” for those struck down, his economic outlook would not change significantly. In his January 30 speech at the University of Arkansas, he estimated tariffs accounted for only about half of excess inflation above target through November. He expects inflation to resume its path toward 2% as tariff effects diminish later in 2026, but sees no urgency to ease policy. He views the labour market as at roughly full employment (4.4% unemployment) and sees continued economic resilience supported by tax changes and productivity gains.
Good luck today, and feel free to ping me in the chat to discuss markets and views!