GGMA Morning Brief: US Dollar still under pressure, RBA still worried about inflation, Will US January CPI come in hot?, Oil rises on Middle East tensions, Today: ECB, BOE, BOC & Fed Speak, US NFP
Good morning,
I hope all is well.
Here are the main overnight news and market movers:
Markets: US Dollar still under pressure
The US dollar is trading softer against its major peers this morning after yesterday’s weaker-than-expected data, which also led to a rally in US Treasuries. Bloomberg reported the dollar dropped for a fourth consecutive day as investors increased bets on Federal Reserve rate cuts following weaker-than-expected retail sales data. The greenback has been under pressure since President Trump characterised dollar weakness as "great" in late January, sending it to four-year lows. U.S. Commerce Secretary Howard Lutnick said on Tuesday that he views the weaker dollar as at a "more natural" level, which would promote U.S. exports and expand economic growth. Lutnick, asked about recent dollar weakness at a U.S. Senate Appropriations subcommittee, said that for many years the dollar had been artificially inflated by other countries to encourage more exports to the U.S., but President Donald Trump was changing trade dynamics. (RTRS) Today’s US labour market report will be crucial for the further direction of the Greenback, I think.
The Aussie rose as well against the Greenback. RBA’s Hauser made some hawkish remarks (see story below), but interestingly, government bond yields in Australia declined, mirroring those in other major global bond markets.
Oil prices rose as tensions in the Middle East (see story below), centred on Iran, outweighed a US industry report pointing to a significant rise in stockpiles. The American Petroleum Industry reported inventories swelled by 13.4 million barrels last week. If confirmed by official data, that would be the largest jump in barrel terms since November 2023.
Precious metals prices are firmer this morning on the back of a softer US dollar and lower yields.
Bitcoin fell to its lowest level since last Friday’s selloff, diverging from the moves in equities. The largest cryptocurrency dropped as much as 2.8% to $66,664 during Asian trading hours on Wednesday. Ether, the second-biggest coin, fell 3.5% to an intraday low of $1,938. (BBG)
An artificial intelligence tool designed to develop tax strategies triggered a sell-off in wealth-management stocks, as investors worry the sector could be threatened by automated advice. The new tool, introduced by Altruist Corp., assists financial advisers in tailoring strategies for clients and preparing documents, and its launch seemed to catch Wall Street by surprise. The decline appears connected to wider concerns about AI disrupting the financial advice and wealth-management sector, with investors focusing on worries about efficiencies being eroded and possible shifts in market share. (BBG)
US weighs seizing Iranian oil tankers to pressure Tehran
Trump administration officials have considered whether to seize additional tankers involved in transporting Iranian oil but have refrained, worried about Tehran’s near-certain retaliation and the effect on global oil markets, U.S. officials said. The US has seized several ships that carried Iranian oil as part of its two-month-old blockade of sanctioned tankers serving Venezuela. The tankers, which form the so-called shadow fleet, assist in transporting illicit oil from numerous sanctioned countries to China and other buyers. (WSJ – Continue Reading)
U.S. President Donald Trump on Tuesday said he was considering sending a second aircraft carrier to the Middle East, even as Washington and Tehran prepare to resume negotiations aimed at averting a new conflict. Oman facilitated talks between Iran and the U.S. last week, which a spokesperson for Iran's foreign ministry said had allowed Tehran to gauge Washington's seriousness and showed enough consensus for diplomacy to continue. (RTRS)
Meanwhile, Israeli Prime Minister Benjamin Netanyahu is expected to press Donald Trump to take a hard line in talks with Iran during his seventh visit to the US since the start of the president’s second term, the FT reports. Netanyahu said on Tuesday that he would present Israel’s “perceptions of the principles in the negotiations” to Trump during their meeting on Wednesday, which would focus “first and foremost” on US discussions with Tehran.
Trump Tariffs Face Rebuke as Johnson Fails to Block Votes
House lawmakers could vote as early as Wednesday on whether to reject some of President Donald Trump’s tariff policies. Democrats and a group of Republicans rejected a last-minute attempt from House Speaker Mike Johnson to block the votes, with Representative Don Bacon saying "Congress needs to be able to debate on tariffs." Passing legislation in the House to abandon the tariffs would be a significant rebuke to the president. However, it is unlikely to force him to back down without a two-thirds majority in both chambers to override his veto. (BBG)
Why US inflation in January may be about to come in hot
Some on Wall Street are preparing for a possible January inflation spike, as consumer prices have historically risen more sharply in January. A Boston Fed study shows that since 1985, seasonally adjusted January inflation has been 0.03 percentage points higher than in other months. Data monitored by software firm Adobe revealed sharp price rises for goods purchased online in January, possibly indicating that tariffs are being passed on. (WSJ) The CPI report is due on Friday at 14:30 CET.
Australia's central bank reiterates concern over high inflation
A leading Australian central banker stated on Wednesday that inflation was too high and that policymakers were determined to do whatever was necessary to bring it under control, citing the strength of credit growth as a sign that rates were not restrictive. Speaking at a business lunch, Reserve Bank of Australia Deputy Governor Andrew Hauser said many parts of the economy were performing well, but overall growth was approaching capacity limits. "Inflation at this level is too high, and we all remember the cost excessively high inflation poses," said Hauser. "We will continue to do whatever is necessary to ensure that inflation does return to the target band." (RTRS)
Bank of Japan's $615bn ETF trove eyed by lawmakers as sales continue
The Bank of Japan's 95 trillion yen ETF portfolio has become politically contentious as parties propose using it to fund tax cuts. Still, the BOJ resists because the holdings generate over 1 trillion yen in annual dividends, which are now essential to its profitability as rising interest rates squeeze its finances. The current century-long disposal timeline ensures steady treasury payments but leaves the central bank vulnerable to political pressure that could threaten its independence. (Nikkei)
China's consumer inflation rose more slowly than anticipated in January, while producer price deflation continued
China’s consumer inflation rose less than expected in January, while producer price deflation persisted, indicating continued deflationary pressure in the absence of stronger stimulus. The consumer price index rose 0.2% in January from a year earlier, China’s National Bureau of Statistics data showed on Wednesday, below economists’ forecast of 0.4% increase in a Reuters poll. That followed a 0.8% growth in December, its highest level in nearly three years. Prices rose 0.2% month-on-month, below economists’ forecast of a 0.3% increase. Core CPI, which strips out volatile food and energy prices, jumped 0.8% year over year, easing from 1.2% in December. The producer price index declined 1.4% from a year ago, better than economists’ expectations of a 1.5% drop, official data showed, moderating from a 1.9% drop in December. On a month-on-month basis, producer inflation rose 0.4%, improving for a fourth straight month, partly driven by the surge in global gold prices in recent months. (CNBC)
Today’s Macro Roadmap: ECB, BOE, BOC & Fed Speak, US non-farm payrolls
The January 2026 employment report, originally scheduled for 6 February and delayed by a partial federal government shutdown, will be the main focus today. This report is particularly important because it includes the final annual benchmark revisions for the twelve months ending March 2025. The preliminary estimate published in September 2025 showed a significant downward revision of 911,000 jobs, roughly 76,000 fewer jobs per month than originally reported. However, the final revision may differ from this preliminary figure, as evidenced by last year's experience when a preliminary revision of -818,000 jobs was eventually finalised at -589,000. Economists currently expect a downward revision to the final figure, bringing the job total closer to 700,000 rather than the initial estimate. If near the preliminary level, this would represent the largest downward revision since 1979, surpassing the March 2009 revision of -902,000 jobs during the financial crisis.
Effective with the January report, the Bureau of Labour Statistics, which compiles the data, will also update the birth-and-death model by incorporating current sample information each month. This model, which is a method the BLS uses to try to estimate how many jobs were gained or lost because of companies opening or closing in a given month, has been blamed for an overcounting of payrolls. The update to the birth-and-death model follows the same methodology applied to the April-October 2024 estimates post-benchmark. Economists at Goldman Sachs estimated the update could contribute 30,000-50,000 fewer jobs to payroll growth than in recent months. They expected downward revisions to payrolls data from April to December 2025. (YF)
We will also be monitoring wages and the unemployment rate with particular interest.
ECB Executive Board member Schnabel, the most hawkish (hawk-dove score: 1.5), is due to speak today. Her messaging has moderated significantly since her December 2025 Bloomberg interview, in which she stated she was "rather comfortable" with market pricing for a rate hike and warned that "inflation risks are tilted slightly upward". However, on January 28, 2026, she signalled rates are "expected to remain at current levels for an extended period", marking a notable shift toward stability. (ES)
ECB policymaker Cipollone is also due to speak. He has adopted a dovish-to-neutral stance. In a February 8 interview with the Cyprus News Agency, he confirmed the ECB “does not have a specific target for the exchange rate, but obviously considers it as an input in projections” — signalling that the euro’s recent rally will be a key factor in the March staff forecast revision.
Michelle Bowman, Vice Chair for Supervision, has made a notable dovish shift. She now predicts three rate cuts in 2026 — describing current policy (3.50-3.75%) as “moderately restrictive” with “significant room to continue easing.” However, she asserts the Fed can “afford to take time” and prefers a “measured pace” towards neutral. Regarding the labour market, she described conditions as “increasingly fragile,” with the Conference Board’s job availability index falling to its lowest since 2021. Today’s speech gains extra significance coming just hours after the NFP release — her commentary will be among the first Fed reactions to the data. (Fed)
The Bank of Canada publishes a summary of its January meeting, at which it held the overnight rate at 2.25%. Canada’s labour market picture was mixed: December employment fell by 24.8K, but full-time jobs rose by 44.9K, and unemployment fell to 6.5% (driven by labour force contraction rather than hiring). Wells Fargo continues to expect the BoC to remain on hold through 2026.
Good luck today, and feel free to ping me in the chat to discuss markets and views!