GGMA Morning Brief: Yen firms and JGB yields decline, Trump wants 15% growth, AU consumer confidence drops, BOE’s Mann: China raising export prices to UK, Today: US NFIB, ADP, retail sales & ECI, Fed
Good morning,
I hope all is well.
Here are the main overnight news and market movers:
Markets: Yen firms and JGB yields decline
The yen is trading firmer this morning against most major currency peers. Recent market activity surrounding the Japanese yen has focused on two key developments: heightened scrutiny of Japan's $1.4 trillion foreign exchange reserves as a potential source of funding for fiscal policy, and intervention warnings that have stabilised the currency following Prime Minister Takaichi's landslide election victory.
Japan’s Nikkei 225 continued its post-election rally and reached new highs on Tuesday, amid gains in the broader Asian markets. The Japanese market continues to ride the “Takaichi trade” in the wake of Prime Minister Sanae Takaichi’s landslide victory in the Lower House. (CNBC) The Bank of Japan has begun selling off its accumulated 95 trillion yen ($610 billion) in exchange-traded funds, a slow process that is likely to leave the impact of its enormous monetary easing program lingering for decades, the Nikkei reports.
US bond futures are consolidating this morning after yesterday’s rally, and JGB yields declined across the curve.
Precious metals and copper are trading lower, while oil prices are only a little changed. OPEC's oil output fell in January due to lower supply from Nigeria and Libya, a Reuters survey found on Monday, offsetting increases from members, including Venezuela, after the U.S. capture of Nicolas Maduro and the lifting of an oil blockade.
Bitcoin is under pressure this morning. Yesterday, Federal Reserve Governor Christopher Waller said some of the euphoria in the crypto world surrounding the current administration is fading amid a selloff. The Fed governor said that ups and downs are common in the crypto market and that recent volatility could be driven by regulatory uncertainty and risk-management moves. (BBG)
Fed's Miran: Data suggests Americans aren't shouldering tariff hit
Federal Reserve Governor Stephen Miran stated that tariffs primarily affect foreign businesses, not Americans, even though data show Americans bear the cost. Miran, appointed by President Trump, made these comments on Monday. (RTRS – Continue Reading) Regarding the Fed’s balance sheet, Miran said it should be smaller, but that shouldn’t preclude policymakers from pursuing large-scale asset purchases during an economic crisis. Shrinking the Fed’s balance sheet would reduce its footprint in financial markets and give policymakers options in the event of a future crisis, Miran said. “Expanding our balance sheet when you’re at the zero-lower bound, at the middle of a financial crisis, is the right move,” Miran said Monday in a podcast recording. “But you should keep your powder dry for when you need to make a move like that.” (BBG)
Trump claims that Fed nominee Warsh could boost economic growth to 15%
President Donald Trump said his pick to lead the Federal Reserve can stoke the economy to grow at a 15% rate. This overly optimistic target underscores the pressure Kevin Warsh will face if confirmed. Trump, speaking in an interview with Fox Business, said Warsh was the “runner up” in his last search and that it was a big mistake to pick Fed chair Jerome Powell. Trump's comments suggest he is betting that Warsh can boost the economy ahead of the midterm elections. Still, Warsh's Senate confirmation may be delayed due to a Justice Department probe and a Federal Reserve building renovation project. (BBG)
Japan PM’s landslide election win points to looser fiscal policy
Prime Minister Sanae Takaichi’s emphatic win in Japan’s election points to more expansionary fiscal settings over the coming years, Fitch Ratings says. We had already assumed post-election fiscal easing and widening deficits in our January 2026 affirmation of Japan’s sovereign rating (A/Stable). For now, Fitch believes this baseline remains intact; however, there is a risk that fiscal stimulus measures under Prime Minister Takaichi could exceed our baseline, adding pressure to the fiscal trajectory and, over time, to the credit profile. (Fitch – Continue Reading)
Takaichi's effort to raise real wages is challenged by inflation and low productivity
The Nikkei reports that, in some industries, nominal wage growth is beginning to slow. Manufacturing wages rose 4.3%, up from 3% the previous year. In contrast, wage growth in the food service industry slowed to 2% from 2.2%, while pay in transportation and postal services fell 1.8% after rising 2.6% the year before. One reason is the slow pace of efforts to boost productivity through such measures as digitisation.
Australian consumer confidence fell in February
Sentiment slipped further this month, reacting to the RBA’s February rate hike, according to Westpac. The Westpac–Melbourne Institute Consumer Sentiment Index declined 2.6% to 90.5 in February from 92.9 in January. The weakening was a little smaller than seen following previous hikes, though the Index level of 90.5 is consistent with firm rather than extreme pessimism. Inflation and interest rate developments are clearly affecting consumers, who are bracing for more, but so far, they are not panicking. Near-term expectations for the labour market also held relatively steady, at 129.8 (0.3% higher), with higher readings on this index indicating more consumers expect unemployment to rise over the year ahead. This is a relatively firm read in line with historical averages.
Meanwhile, the latest NAB business survey points to a sluggish start to 2026. The headline business conditions index fell from +9 to +7 in January, paring back December gains to match its long-run average. While conditions remain well above the lows seen in early 2025, the January result suggests that the positive momentum that emerged late last year is stalling, according to Westpac.
BoE’s Mann: US tariffs are causing China to increase export prices
Bank of England policymaker Catherine Mann stated that President Trump’s trade wars are causing UK inflation, as China increases export prices to offset US tariffs. Mann rejected claims that the UK will gain from disinflation due to redirected Chinese trade and compared Britain’s slow growth to a “horse and pony.” (BBG – Continue Reading)
Today’s Macro Roadmap: US NFIB, ADP, retail sales & ECI, Fed & Buba speak, API inventories
Today brings a densely packed US data session headlined by December retail sales, the Q4 Employment Cost Index, and December import prices, all due at 14:30 CET. The day also features the January NFIB Business Optimism Index (12:00 CET) and three central bank speeches in the afternoon.
The consensus expects retail sales growth to slow in December, while the Chicago Fed CARTS indicator points to solid growth.
The employment cost index (ECI), which has a decent correlation with the PCE core services index, is expected to rise 0.8% qoq, matching Q3’s pace. If realised, the year-over-year rate would edge down to 3.5% from 3.6% — the slowest pace in the current cycle, though still above pre-pandemic levels of approximately 2.5–3.0%.
Hammack has described the current funds rate as ‘only barely restrictive, if at all’ and warned against premature easing, projecting inflation around 3% by year-end. Logan opposed October’s rate cut and emphasised inflation remains ‘too high, taxing the budgets of businesses and families.’ Their remarks will be closely watched for any shift, given recent weaker labour data—particularly the sharp JOLTS decline and softening ADP readings.
Good luck today, and feel free to ping me in the chat to discuss markets and views!