GGMA Morning Brief: Risk assets keep rallying, RBA hikes interest rate to curb inflation, US-India reach trade deal, Oil: US-Iran to meet, PBOC cuts key loan rate to boost growth, Today: ECB, Fed & RBA speak, US JOLTS & NZ labour market reports
Good morning,
I hope all is well.
Here are the main overnight news and market movers:
Markets: Risk assets keep rallying
Risk sentiment, which began to rebound early yesterday morning, continued to improve during the Asian and early European sessions.
Among the stock markets, the Nikkei was the primary market mover. Polls show Prime Minister Sanae Takaichi's Liberal Democratic Party heading for a landslide victory at the weekend's election, which might have been the trigger for the sharp rally.
In foreign exchange, the US Dollar has been trading softer against most of its peers. The Australian Dollar rose significantly after the RBA rate hike decision.
In fixed income, demand fell slightly at Japan’s auction of 10-year government bonds on Tuesday, reflecting wariness among investors about piling into positions before a snap election at the weekend, Bloomberg reports.
Spot gold climbed after falling in the previous session, extending a slump on Friday that was the steepest in more than a decade. Silver rose, erasing the previous day’s loss, before paring gains. (BBG)
Oil prices fell for a third consecutive day amid reduced geopolitical tensions and uncertainty surrounding a US-India trade deal. President Trump indicated negotiations with Iran on a new nuclear agreement may start soon, following Tehran's willingness to talk. (BBG)
Bitcoin investors liquidated $2.56 billion in recent days, according to data provider CoinGlass, as cryptocurrencies slumped following a sell-off in other risk assets, including equities and precious metals. The wipeouts in both short and long bitcoin positions are far below the record $19 billion in crypto liquidations the market experienced after U.S. President Donald Trump announced new tariffs on China. Even so, analysts say the fresh cascade of wipeouts demonstrates how sensitive the crypto market has become to risk-off sentiment. (RTRS)
RBA hikes interest rate to curb inflation
The Reserve Bank of Australia became the first major central bank to hike rates in 2026, raising the cash rate to 3.85% to combat persistent services inflation and a tight labour market. This unanimous decision diverges from the easing path of peers such as the Federal Reserve, reflecting an economy operating near capacity, with core inflation now forecast to remain above target through 2027. Although Governor Michele Bullock described the move as a discrete "adjustment" rather than the start of a new tightening cycle, the decision spurred a rally in the Australian dollar and fueled market expectations for potentially higher rates ahead, Bloomberg reports.
Commonwealth Bank (CBA): Strategist Michael Tang called the press conference "less hawkish than the statement but still hawkish," suggesting the RBA wants to keep financial conditions tight without pre-committing to more hikes. Like Westpac, CBA forecasts this may be the only hike for now. (TA)
Trump, Modi reach trade deal that cuts tariffs on Indian goods to 18%
The U.S. and India have finalised a trade agreement, with President Trump announcing that India will stop buying Russian oil. In return, U.S. tariffs on Indian goods will drop from 25% to 18%, compared to 15% in a deal with Japan and 19% with Malaysia and Cambodia in 2025. (Nikkei)
U.S., Iran to meet in Istanbul; Trump issues warning
White House envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi will meet Friday in Istanbul to discuss a nuclear deal that could prevent a U.S. military strike, according to regional officials. The meeting follows efforts by Turkey, Qatar, Egypt, and others to bridge differences between Washington and Tehran and revive talks that ended last June after airstrikes on Iran’s nuclear sites. (WP)
France adopts budget after premier survives no-confidence votes
France's parliament has approved the 2026 budget after Prime Minister Sebastien Lecornu successfully navigated two no-confidence motions. The finalised budget features more modest spending reductions and tax increases than earlier drafts, resulting in a higher year-end deficit than previously projected. This approval is expected to usher in a period of political stability, as opposition parties are expected to shift their attention to the upcoming municipal elections in March and the presidential election in 2027. (BBG)
PBOC cuts key loan rate to boost growth
China lowered its one-year policy loan rate to a record low, with the People’s Bank of China charging some banks as little as 1.5% in January, down from 1.55% in December. This move aims to boost economic growth after nine months without a rate cut. (BBG)
Today’s Macro Roadmap: FR CPI, ECB, Fed & RBA speak, US JOLTS & NZ labour market reports
On the data front, the most important release today will be the US JOLTs report at 16:00 CET. The consensus expects a decline in job openings. However, some labour market indicators have stabilised recently, including the Indeed series.
We will watch out for the quits rate, which correlates well with wages.
Richmond Fed President Thomas Barkin will speak following his recent comments emphasising the need for "finely tuned" policy adjustments. In early January, Barkin noted that interest rates are now "within the range of estimates of neutral," and stressed that both sides of the Fed's dual mandate require careful monitoring: unemployment remains historically low but has ticked up, while inflation has declined but stays above the 2% target.
In her January 30, 2026, address, Governor Michelle Bowman defended the Federal Reserve's decision to hold interest rates steady at 3.50%–3.75%, arguing that after aggressive easing late last year, the central bank should "keep policy powder dry" to assess economic data currently distorted by government shutdown "noise". Despite voting to pause, Bowman identified the "increasingly fragile" labour market—marked by 4.4% unemployment and "low-hiring" dynamics—as the greater risk facing the economy, and dismissed recent inflation spikes as "one-off tariff effects" masking a broader trend already near the 2% target. Consequently, she maintained a baseline forecast for three additional rate cuts in 2026, signalling that while prudence dictated the recent hold, she remains poised to lower rates further to defend employment against any "sudden and significant deterioration".
Good luck today!