CANADA DATA: Ivey PMI Points To Growth Consolidating At Low Level

• RES 4: 159.45 High Jan 14 and the bull trigger 
• RES 3: 159.23 High Jan 23
• RES 2: 157.72 76.4% retracement of the Jan 14 - 27 bear leg 
• RES 1: 156.86 High Feb 04
• PRICE: 156.57 @ 16:53 GMT Feb 4  
• SUP 1: 154.55/152.10 Low Feb 2 / Low Jan 27 and the bear trigger 
• SUP 2: 151.98 38.2% of the Apr 22 ‘25 - Jan 14 bull cycle 
• SUP 3: 151.54 Low Oct 29 ‘25
• SUP 4: 150.99 Trendline support drawn from the Apr 22 ‘25 low 

USDJPY is trading higher as the pair extends the recovery from the Jan 27 low. This week’s gains have resulted in a breach of resistance around the 50-day EMA, at 155.75. The break undermines the recent bear theme and highlights a stronger short-term bull cycle. Sights are on 157.72, a Fibonacci retracement point. On the downside, a reversal would expose the key support at 152.10, the Jan 27 low. 

• Headline HICP inflation slowed to 1.69% Y/Y in Wednesday's flash release for January (softest since Apr 2021), an important update starting to cover start-of-year price resets, having been close to expectations in December at 1.97% Y/Y (softest since May).
• Core HICP inflation slowed to 2.19% Y/Y in January after 2.32% in Dec for a further moderation after the 2.41% in November, leaving core inflation at its lowest since Oct 2021.
• Services inflation slowed to 3.21% Y/Y in January from 3.42% in Dec and 3.47% in Nov, back to low end of the 2025 range of 3.1-4.0% Y/Y, whilst recent momentum is similar at 3.4%.  Likely continuing to carry sizeable weight in ECB deliberations, ECB PCCI metrics held close to the 2% target – the overall eased to 1.97% Y/Y in December after 2.02% whilst core firmed fractionally to 1.96% Y/Y after 1.94%. Alternatively, MNI’s “services common indicator” was little changed at 3.26% Y/Y in December after 3.24% in November, close to a four-year low.
• The ECB hasn't updated its seasonally adjusted data for January yet, leaving core recent momentum at 2.1% on a 3m/3m annualised basis in December whilst services momentum was 3.4% annualised.
• Likely continuing to carry sizeable weight in ECB deliberations, ECB PCCI metrics held close to the 2% target – the overall eased to 1.97% Y/Y in December after 2.02% whilst core firmed fractionally to 1.96% Y/Y after 1.94%. Alternatively, MNI’s “services common indicator” was little changed at 3.26% Y/Y in December after 3.24% in November, close to a four-year low.

Gilts badly lagged across the European government bond space Wednesday on a perceived heightening in political risk.

• The prediction-market implied probability rose that UK Prime Minister Starmer would leave office prematurely amid a scandal involving his appointee as US ambassador (Mandelson). In turn this heightened concerns over the UK fiscal trajectory, seeing the Gilt curve bear steepen.
• Earlier in the session, Eurozone flash January headline HICP was in line with consensus, with some variation in subcomponents; Italian flash inflation printed stronger than expected. Overall data had little impact on EGBs.
• The German curve bull flattened on the day, boosted by a pullback in European equities, with periphery/semi-core EGB spreads widening as part of a risk-off move.
• Industrial data is of some interest Thursday including German Factory Orders, but the clear focus will be central bank decisions.
• Those are of course the BOE (MNI preview) and ECB (MNI preview).

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.9bps at 2.094%, 5-Yr is down 3.2bps at 2.431%, 10-Yr is down 3.2bps at 2.859%, and 30-Yr is down 2.6bps at 3.524%.
• UK: The 2-Yr yield is up 0.7bps at 3.715%, 5-Yr is up 1.3bps at 3.966%, 10-Yr is up 2.9bps at 4.546%, and 30-Yr is up 4.4bps at 5.332%.
• Italian BTP spread up 0.4bps at 61.1bps / French OAT up 1.2bps at 58.8bps