Morning wrap (29.01.2025)

Indices from the Asia-Pacific region are trading mostly in positive territory. The CH50cash index is gaining 0.60%, while other indices from China are not trading today. China is celebrating the Lunar New Year holiday, which will last until February 4th. Therefore, financial markets in this region will remain closed.

The Japanese stock market is trading with little change. The JP225 index is up 0.03% to 39,400 points. The Singaporean SG20cash index is gaining 0.70%, while the Australian AU200cash is trading 0.25% higher.

Futures on European indices point to a mixed opening of the cash session. The German DAX index is up 0.08% and remains above 21,600 points, the UK100 index is down 0.06%, while the European EU50 index is gaining 0.65%.

The most important event of the day is undoubtedly the FOMC decision on interest rates in the US and Jerome Powell`s press conference.

The dollar is weakening in the early part of the day and remains one of the weakest G10 currencies alongside the Australian dollar (following low CPI inflation readings in Australia). The USDIDX index is down 0.10% at the time of publication, trading at 107.6000 points, while EURUSD is up 0.12% to 1.0440. Among the strongest currencies are the Japanese yen and the British pound.

Consumer inflation in Australia increased by 2.4% year-over-year in the fourth quarter, marking the slowest pace since early 2021. The reading came in slightly below expectations of 2.5% year-over-year and down from 2.8% year-over-year in the previous quarter. The CPI index rose by 0.2% quarter-over-quarter, below expectations of 0.3% quarter-over-quarter.

A decline in housing costs helped cool core inflation, opening the door to an interest rate cut as early as next month. Markets are currently pricing in an almost 80% probability that the Reserve Bank of Australia will cut the cash rate by 25 basis points at its next meeting on February 18th.

Earlier in the day, we also received the minutes from the Bank of Japan`s December meeting on interest rates.

• There are possibilities for further interest rate hikes as inflation exceeds the 2% target and wage growth increases.
• Council members expect companies to continue raising wages, in line with BOJ`s economic forecasts.
• BOJ kept interest rates steady in December (0.25%) but raised them to 0.5% in January.
• Governor Ueda has signaled further rate hikes but provided limited guidance on timing and pace.
• It is estimated that the nominal neutral interest rate in Japan is within the range of 1%-2.5%, with many analysts favoring a level around 1%.
• If the interest rate approaches the neutral rate, BOJ may be forced to slow rate hikes to assess the impact on the economy.

WTI crude oil is experiencing slight declines today, down 0.30% to $73.70 per barrel.

In the cryptocurrency market, we observe a recovery following yesterday`s declines toward the end of the day when Bitcoin retested levels around $100,000. At the time of publication, Bitcoin is up 1.10% to $102,300. Ethereum is up 1.90% to $3,130.