GGMA Morning Brief: Risk-off, JGB yields decline, Ex-BOJ policymaker sees April rate hike, $ positioning, RBA minutes, NZ food prices surge, Today: CA CPI, US ADP, N.Y. Empire, NAHB, Fed & ECB speak
Good morning,
I hope all is well.
Here are the main overnight news and market movers:
Markets: Risk-off tone across markets, JGB yields decline
US equity futures are lower (S&P 500 −0.5%, Nasdaq −0.8%) after the Nasdaq's fifth consecutive losing week, driven by AI-disruption fears. The Nikkei 225 fell 290 points (−0.5%) to 56,610, pressured by a sharp 6.2% drop in SoftBank. Precious metals are under sharp pressure (gold −2.6%, silver −3.7%) on profit-taking and a firmer dollar. Oil is steady near $63 ahead of high-stakes US–Iran nuclear talks in Geneva. In rates, Treasuries are bid (10Y yield ~4.02%) while JGBs are flat. The yen strengthened after Bloomberg reported that a former BOJ board member sees an April rate hike as most likely. The RBA's February minutes confirmed that the Board judged inflation risks had “shifted materially,” justifying its 25 bp hike to 3.85%.
In Japan, JGB yields are declining, and the yield curve is flattening. Here is some colour from the WSJ: Monday’s meeting between BOJ Governor Ueda and Prime Minister Takaichi took place just under three months after their last meeting, two SMBC Nikko Securities’ Financial Market & Economic Research members say in commentary. The gap between the meetings is shorter than the average 4½-month interval between BOJ governors and Prime Ministers in the past. Hence, “this timing provides fodder for speculation that Takaichi is trying to talk Ueda out of early rate hikes,” the members say.
Emerging and developed Asian markets saw the largest net buying by hedge funds last week since 2016, driven by optimism about AI infrastructure firms, Bloomberg reports. The Goldman desk noted that buying of information technology, industrials, staples and materials outpaced selling in all other areas, while consumer discretionary, communication services and financials were sold most heavily.
Sterling weakened after the release of the UK labour market report.
BHP reported stronger-than-expected underlying profit and dividend, driven by a surge in copper prices. (RTRS)
Former BOJ policymaker sees April as the most likely window for the next rate increase
Former Bank of Japan board member Seiji Adachi told Bloomberg that the central bank’s next interest-rate increase is more likely to occur in April than in March. Adachi argued that a March move would rest too much on forward-looking expectations. In contrast, the late-April policy meeting would give policymakers access to hard data on wages, business sentiment and the BOJ’s own updated economic outlook. Prime Minister Sanae Takaichi may not derail the BOJ's decision, as she is sensitive to market developments, and telling the BOJ not to raise rates could lead to a depreciation of the yen.
BofA: Dollar positioning reached its most negative in more than 14 years
Dollar positioning reached its most negative in more than 14 years in February, according to the Bank of America’s latest foreign exchange and rates sentiment survey. Short positioning in the dollar, or bets on it falling, is the largest since January 2012, the earliest year for which the BofA has data. The survey also shows that fund managers’ exposure to the dollar in February fell below the lows reached last April. Concerns about the Federal Reserve’s independence abated after President Trump’s nomination of Kevin Warsh as Fed Chair. However, this didn’t translate into greater demand for the dollar nor renewed optimism for U.S. assets. Survey respondents see further signs of U.S. labour market weakness as the main risk for a lower dollar. (WSJ)
UK unemployment rate climbs to 5-year high, wages cool
UK unemployment rose to a near five-year high and wage growth eased as the labour market continued to weaken, setting up a potential interest-rate cut by the spring. The jobless rate climbed to 5.2% in the final quarter of last year, the Office for National Statistics said Tuesday, above the 5.1% economists were forecasting. Regular private sector wage growth, the Bank of England’s preferred pay indicator, fell to 3.4%, the lowest level in over five years. Separate tax figures showed the number of employees on payroll fell by 11,000 in January. Together, the data are likely to reassure BOE policymakers that inflationary pressures in the labour market are easing fast enough to warrant another interest rate cut, according to Bloomberg.
RBA sees no set path for future rates, following Feb hike
Australia's central bank concluded that inflation would remain stubbornly high if it had not hiked interest rates this month and was not yet sure whether further tightening would be necessary. Minutes of the Reserve Bank of Australia's board meeting released on Tuesday showed members were concerned that the risks to its inflation and employment mandates had "shifted materially", making the case for a stronger policy response. "Members agreed that the data received since the previous meeting had strengthened their concern that, without a policy response, inflation would remain persistently above target for too long," the minutes showed. (RTRS) Trimmed mean inflation was projected to peak at 3.7% by mid-2026 before falling to slightly below 3% by mid-2027, only returning near the target midpoint around mid-2028. (Investing)
According to Westpac, the minutes highlighted that model-based measures of the neutral interest rate are poor guides for policy—a new comment that they were regarded as a "misleading signal of the stance of monetary policy prior to the pandemic." More concerning, the minutes were dismissive of the exchange rate's role in containing inflation. Westpac argues that some part of the AUD appreciation is driven by the exogenous USD sell-off and associated hedging activity, which the RBA appears not to have accounted for. This is a source of downside risk for inflation over the next year or so that the RBA have clearly missed, with the potential impact assessed at 0.1–0.2 percentage points off trimmed mean inflation. The broader strategy of "seeking to bring inflation back to target within a reasonable timeframe while preserving as many of the gains in employment as possible" is still seen as appropriate by the Board. Westpac sees this as signalling that the RBA is not pivoting to an inflation-only view, which adds weight to its base-case view that the next increase in the cash rate will come in May, not March.
Bank of England to cut rates in March, timing of further cuts unclear: Reuters poll
The Bank of England will cut interest rates in March, according to a majority of economists in a Reuters poll, and is expected to follow up with a second reduction later this year, though they were not sure when. Over 60% of respondents (41 of 63) expected the Bank of England to cut Bank Rate by 25 basis points to 3.50% on March 19. The poll was conducted February 10–16. At its February meeting, the Bank of England held Bank Rate at 3.75% in a knife-edge 5–4 vote — the third straight narrowly split decision by the Monetary Policy Committee. Governor Andrew Bailey, who has switched positions in recent meetings, voted to keep rates unchanged. (RTRS)
New Zealand food prices surge 4.6% annually in January
Stats NZ reported food prices rose 4.6% year-on-year in January 2026, accelerating from 4.0% in December. The monthly increase of 2.5% was the largest in four years, driven by grocery foods (+4.0% y/y), meat/poultry/fish (+8.9% y/y), and sharp rises in chocolate prices (+62.8% m/m for boxed chocolate). Fuel prices provided some offset, with petrol down 4.8% and diesel down 4.9% year-on-year. Westpac’s first impressions noted flat rents and broadly in-line readings, reducing the likelihood of an RBNZ policy surprise.
Today’s Macro Roadmap: CA CPI, US ADP, N.Y. Empire, NAHB, Fed & ECB speak
The main event today will be the Canadian CPI. Wells Fargo expects headline to rise to 2.5% YoY as base effects peak. These base effects reflect the temporary GST/HST holiday that lowered prices between December 2024 and February 2025. Underlying measures (trimmed and weighted median) are expected to decline. 3-month averages of the trimmed and weighted medians are 1.45% and 1.85%, respectively. Their nowcast for the February report indicates the headline will fall to 1.8% — below the 2% target. The narrative is expected to shift from “elevated headline noise” to “cooling underlying core inflation.”
Fed Governor Barr is scheduled to speak on February 18 at 18:45 CET, delivering remarks titled "Artificial Intelligence and the Labour Market" at the New York Association for Business Economics (NYABE). He voted with the majority to maintain the federal funds rate at 3-1/2 to 3-3/4 per cent at the January 28, 2026, FOMC meeting.
President Daly is scheduled to deliver keynote remarks on "AI and the U.S. Economy" on Tuesday, February 17, 2026, at 20:30 CET, her first major public appearance since the January FOMC meeting. Following her remarks, she will participate in a moderated conversation with Bloomberg Tech's Ed Ludlow and take audience questions. Daly identified a “risky economic disconnect” between businesses and workers in her February 6 interview. Businesses remain “cautiously optimistic” with solid growth, easy hiring, and rising productivity. Workers, however, are less confident, worried about employment security in what Daly described as a “low-hiring, low-firing environment” that could shift quickly. She views risks to price stability versus maximum employment as “relatively balanced,” but sees vulnerabilities tilted toward the labour market. She indicated there is room to cut interest rates.
Good luck today, and feel free to ping me in the chat to discuss markets and views!