The FP Markets research team produce First Light News during the early hours of the European session, ensuring traders and investors have the news needed to begin their day.

Last Week’s Highlights

Good morning.

Headline risk events last week were centred on US and UK inflation data, along with Fed commentary and Aussie employment figures.

Annual inflation in the US cooled to 6.4%, a seventh consecutive deceleration since peaking in June 2022. Thursday also welcomed the latest US PPI data; producer prices increased 6.0% from 12 months to January, following December’s 6.5% print (vs +5.6% expected). This—coupled with US Fed Members Mester and Bullard revealing they sought a 50 basis-point push in the previous Fed meeting—opens the floor to whether any other Fed members believed the same at the last meeting and whether this could increase the probability of a larger rate hike at the March meeting. This is why Wednesday’s FOMC minutes is a key event for the week ahead. Interestingly, short-term interest rate markets (STIRs), as of writing, are currently pricing in an 80% chance of another 25 basis-point hike over a 20% probability for a 50 basis-point increase. In the UK, annual inflation slowed for a third consecutive month to just north of 10.0% in January. Finally, Australia observed a second successive decline in employment.

The closing bell on Friday observed major US equity indices close the week in the red; the Dow Jones Industrial Average, the S&P 500 and the Nasdaq 100 fell 1.2%, 1.4% and 1.2%, respectively. Energy stocks ended the week down more than 6.0% and served as a clear laggard, while consumer discretionary stocks rallied 1.6%, followed by utility stocks rallying 1.1%. Lastly, US Treasury yields wrapped up the week higher across the curve.

It would be remiss not to mention the crypto space last week, with BTC/USD touching gloves with highs not seen since mid-June 2022 and pencilling in a 10.0+ gain.

Markets Today

Major Asia Pac equity indices were subdued in overnight trading, though did manage to eke out marginal gains. The Nikkei 225, South Korea’s KOSPI and Australia’s ASX 200 gained 0.1%, 0.2% and 0.1%, respectively. Volatility is likely to remain lacklustre in today’s sessions; not only are US banks closed in observance of Presidents’ Day, but the economic calendar lacks tier-1 economic data. In Europe this morning, however, major equity indexes are lower, yet remain quiet. The FTSE 100 is flat, while the DAX, the CAC and the Euro Stoxx 50 are down 0.2%, 0.3%, and 0.2%, respectively.

Tuesday offers a more energetic vibe. We kick off things with the latest RBA minutes at 12:30 pm GMT, a comprehensive report detailing the last rate decision which was a 25 basis-point hike that brought the Cash Rate to 3.35%. Subsequently, we have manufacturing and services PMIs to look forward to out of Europe, the UK and the US, as well as Canadian inflation data.

Technically this morning, short-term price action on XAU/USD shows the precious metal holding resistance-turned-support at $1,843, a level bolstered by daily support from $1,828. BTC/USD recently rebounded from $24,000, and is perhaps eyeing a breakout north of $25,000, targeting a daily close above daily resistance at $24,666. Also of technical relevance this morning is the US Dollar Index holding above its 50-day simple moving average at 103.31, potentially taking aim at daily resistance coming in from 104.86.

Tier-1 Economic Data in Focus for the Day Ahead:

N/A

Currency Markets are red across the board aside from the AUD/USD as of 10:05 am GMT:

EUR/USD: $1.0687 -0.1%

GBP/USD: $1.2030 -0.1%

AUD/USD: $0.6905 +0.4%

USD/JPY: ¥134.06 -0.1%

NZD/USD: $0.6228 -0.3%

USD/CAD: C$1.3466 -0.1%

USD/CHF CHF0.9239 -0.1%