GGMA Morning Brief: Oil higher on US-Iran tensions, Japan headline CPI falls, but core still high, UK budget surplus, Dovish RBNZ, Today: IEEPA tariff, US GDP, PCE, UoM, Fed speak
Good morning,
I hope all is well.
Here are the main overnight news and market movers:
Markets: Oil higher on US-Iran tensions, Gilts outperform
Geopolitical risk dominated overnight sentiment as escalating U.S.–Iran tensions drove Brent crude above $72 for the first time since August 2025, while gold consolidated near the $5,000/oz milestone. The U.S. dollar is on course for its strongest weekly performance since October, buoyed by hawkish Fed minutes, resilient labour data and haven demand. U.S. equity futures point to a modestly higher open, recovering from the precious day’s decline. During Thursday’s regular session, the S&P 500 fell as financials led the decline following Blue Owl Capital’s decision to tighten investor liquidity. Asian equities traded mixed.
Traders face a pivotal session with the release of Q4 GDP and December PCE inflation data, as well as a potential Supreme Court ruling on the legality of IEEPA tariffs.
Bitcoin rebounded 1.24% to $67,806 in overnight trade, recouping some of this week’s losses after touching $65,994 on Thursday. UK Gilts outperformed after better-than-expected budget numbers.
Trump weighs initial limited strike to force Iran into nuclear deal
President Trump is weighing an initial limited military strike on Iran to force it to meet his demands for a nuclear deal, a first step that would be designed to pressure Tehran into an agreement but fall short of a full-scale attack that could inspire a major retaliation. The opening assault, which if authorised could come within days, would target a few military or government sites, people familiar with the matter said. If Iran still refused to comply with Trump’s directive to end its nuclear enrichment, the U.S. would respond with a broad campaign against regime facilities—potentially aimed at toppling the Tehran regime. (WSJ)
Supreme court IEEPA tariff decision could come as early as Friday
The US Supreme Court is poised to hand down its decision on whether President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping reciprocal tariffs is lawful. Lower courts ruled that Trump exceeded his authority, and the justices are scheduled to return from recess on February 20 with a ruling possible that day. As of Tuesday, Polymarket traders assign a 75% probability that the court will strike down the tariffs, which generated roughly $133.5 billion in revenue through mid-FY2026 and account for approximately 60% of total tariff collections. Treasury Secretary Bessent has acknowledged the government could face tens of billions in refund obligations if the tariffs are overturned. The effective US tariff rate stands near 17%, the highest since the early 1930s. (BBG / CNBC)
Japan CPI falls below BOJ 2% target for first time since March 2022
Japan’s headline consumer price index rose just 1.5% year-on-year in January 2026, down from 2.1% in December and below the 1.6% consensus forecast. This marks the first time in 45 months that inflation has fallen below the Bank of Japan’s 2% target. The decline was driven by falling energy costs following the expiration of fuel subsidies and a slowdown in food inflation to a 15-month low of 3.9%. Core CPI (excluding fresh food) matched expectations at 2.0%, while core-core (excluding fresh food and energy) eased to 2.6% from 2.9%. (CNBC)
The drop in Japan’s headline inflation below the BoJ’s 2% target poses a communication challenge for the central bank, which held rates at 0.75% in January with an 8-1 vote. However, economists note the slowdown is largely driven by energy subsidies and volatile food prices, while the core-core measure at 2.6% shows underlying price pressures remain firm. A majority of Reuters-polled economists still expect the BoJ to raise rates to 1% by end-June, with the spring wage negotiations (Shunto) seen as the key catalyst. Services inflation held steady at 1.4%, indicating wage-driven price gains have yet to accelerate meaningfully. (Investing.com)
Meanwhile, the au Jibun Bank Flash Manufacturing PMI rose to 52.8 in February from 51.5 in January, marking the strongest expansion in factory activity since May 2022. Manufacturing output climbed to 53.9 from 51.6, the sharpest production rise in over four years. Export orders expanded at the fastest pace in eight years, driven by a rebound in goods exports and strong demand for semiconductors and AI-related technology. The Composite PMI also rose to 53.8 from 53.1, the highest since May 2023, extending the current growth streak to 11 months. Backlogs of work rose at a record pace since the series began in September 2007, and selling prices increased at the quickest rate since May 2024. (Investing.com)
UK posts record monthly budget surplus as self-assessment receipts surge
The UK public sector recorded a record £30.4 billion surplus in January 2026, double the January 2025 figure and £6.3 billion above the OBR's forecast — the highest monthly surplus since records began in 1993. The outsized result was driven by self-assessed income and capital gains tax receipts of £46.4 billion, up £10.5 billion year-on-year. Cumulative borrowing for the financial year to January fell 11.5% to £112.1 billion, or 3.7% of GDP, though it remains the fifth-highest April-to-January total on record. The current budget deficit narrowed by nearly a quarter to £55.9 billion, while central government posted a net cash surplus of £39.8 billion — 161% larger than a year ago. Despite the improving flow picture, the stock of public sector net debt remains elevated at 92.9% of GDP, levels last seen in the early 1960s. (ONS)
RBNZ Gov Breman sees economic recovery without inflation
New Zealand’s economy has room to recover this year without generating excessive inflation, Reserve Bank Governor Anna Breman said. “We expect declining tradables inflation to bring New Zealand’s inflation rate back within our target range, while the more persistent inflation pressures continue on their gradual path lower,” Breman said in a speech Friday in Christchurch. “This will provide the New Zealand economy with room to further recover, without a lift-off in inflation.” (BBG – Continue Reading)
Meanwhile, recent comments from RBNZ’s chief economist suggest that New Zealand’s economy is on track for a year of steady recovery, with the central bank expected to maintain a laserlike focus on a somewhat troubling inflation problem while avoiding any urge to rush into raising interest rates. The central bank won’t be “trigger-happy” on interest rates, given the degree of spare capacity still in the economy and its expectation that inflation will cool, said Paul Conway, chief economist at the Reserve Bank of New Zealand, in an interview. “We think we can keep interest rates accommodative and give growth a chance. We can see the recovery strengthening while inflation comes down,” he said. “We don’t want inflation falling through the bottom of the [1% to 3%] target range, which would be a risk if we put the brakes on too early,” Conway added. (WSJ)
Australia Flash PMIs Cool Across the Board in February
The S&P Global Flash Australia PMI for February 2026 shows that Australia's private sector economy continued to expand but at a weaker pace than January, with the Composite Output Index falling to 52.0 from 55.7, still marking a seventeenth consecutive month above the 50.0 growth threshold. Both manufacturing (51.5, down from 52.3) and services (52.2, down from 56.3) recorded slower expansions, reflecting softer upturns in new business and output. Employment grew at its strongest pace in nearly a year, particularly in the service sector, though business confidence fell to its weakest in over a year and a half amid concerns about economic conditions and elevated competition. Cost pressures intensified significantly, with input costs for goods producers rising at the strongest rate in ten months due to higher supplier prices and raw materials costs, while service firms faced rising wage and electricity expenses — pushing overall cost and charge inflation to their highest levels since September 2025. (S&P)
Today’s Macro Roadmap: EZ PMIs, US GDP & PCE, UoM consumer confidence, Fed speak
We have two Fed speakers today. Bostic (15:45 CET) delivers one of his final public appearances before retiring Feb 28, and Logan (19:45 CET), who remains firmly hawkish and recently stated she is ‘not yet fully confident inflation is heading all the way back to 2 per cent.’ Both are non-voters in 2026.
Good luck today, and feel free to ping me in the chat to discuss markets and views!