ECB: March Projections: Headline Inflation Seen Stuck Around 2.3% Through 2025
Mar-06 16:03
Headline inflation is now expected to return sustainably to the 2% target in Q1 2026 (vs Q4 2025 in the December projections). While President Lagarde played down the impact of this adjustment in the press conference (being largely driven by the technical assumption cut-off), it’s still another projection round whereby the timeline for getting back to target has been pushed back.
- Somewhat notably, headline inflation is seen at around 2.3% throughout 2025 (on the back of higher food and energy prices), before abruptly moving back to 2.0% in Q1 2026.
- The technical assumptions were as expected: “Higher commodity prices and a weaker exchange rate, while interest rate assumptions are broadly unchanged”.
- Core inflation is still expected to slip below 2% in the latter half of 2026. Disinflation is expected to begin in earnest in early 2025, “as the effects of lagged repricing fade, wage pressures recede and the impact from past monetary policy tightening continues to feed through”.
- Given the projections only account for trade barriers that had been announced at the time of the cut-off: “External price pressures, as reflected in import prices, are expected to remain moderate assuming that EU trade tariff policies remain unchanged”.
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US: Tariffs Are Going To Proceed In A Measured Way - Navarro
Feb-04 16:00
Peter Navarro, the White House senior counsellor for trade and manufacturing and a key strategist of President Donald Trump’s trade policy, has spoken on tariffs at a Politico Live event. Stream. Key remarks below.
- Navarro says he expects a call between Trump and Chinese President Xi Jinping to take place today to discuss tariffs. Says "it's up to [Trump]" if China gets a tariff pause.
- Ask about potential 60% tariffs on China, as floated by Trump on campaign trail. Says the admin is "going to proceed in a measured way using investigative studies... everything is going to be data-driven."
- Navarro says media fundamentally misunderstands intentions of tariffs by fixating on “downsides”. He characterises tariffs as an action against fentanyl: “This is a drug war, this is not a trade war,” later adds it is also a “terrorist war and border invasion war.”
- Navarro says that Secretary of State Marco Rubio is leading a DHS review of narcotic and immigration measures, to be undertaken during the 30-day pause of Canada/Mexico tariff. Says "let's see what happens" when asked if Trump will threaten more action at the end of the pause.
- Navarro addresses logic of threatening tariffs against Canada: “Mexican drug cartels are expanding in Canada…” cites ‘de minimis’ loophole exempting tariffs for packages valued at $800 or less, accuses Canada of allowing terrorists to cross border.
- Navarro: “If Trump succeeds in trade actions, we will structurally shift American economy from over-reliance on income taxes to tariff revenues... Tariff revenues will play an important role, countries won't have to pay tariffs if they invest in US.”
FOREX: Broad Greenback Weakness Extending, EURUSD Above Initial Resistance
Feb-04 15:59
- The US dollar continues to trade with a bearish tone on Tuesday, as Trump's hardline approach on Iran has impacted US yields and the USD in tandem. Furthermore, broader optimism surrounding trade/tariff negotiations has boosted equities, supporting risk sensitive currencies in G10 to their best levels of the session.
- As such, the likes of EUR and AUD are trading with around 0.40% gains on the session, while CAD leads the G10 advance, appreciating 0.69%.
- Highlighting the broad offer for the greenback, USDCNH (0.46%) has also been extending its reversal south, briefly touching below 7.28, a dynamic that has also been solidly supporting emerging market currencies.
- For now, EURUSD gains are considered corrective, however the powerful recovery from yesterday’s cycle lows has seen the pair breach initial resistance at 1.0350, the Jan 31 low and Monday’s high. A stronger recovery would place the focus on 1.0446, the 50-day EMA and then 1.0533, the Jan 27 high and a key resistance.
EGB SYNDICATION: Croatia 12-year CROATI: Allocations
Feb-04 15:54
- Spread set at MS + 90bps (IPTs were +120bp area, guidance: + 95bp area)
- Size: E2bln (MNI expected E1.5bln)
- Final books in excess of E4.4bln
- HR 88% vs 4.00% Jan-37 Bund
- Maturity: 11 February 2037 (12-year)
- Settlement: 11 February 2025 (T+5)
- ISIN: XS2997390153
- Joint Bookrunners: Erste Group, IMI-Intesa Sanpaolo/PBZ, ING (B&D), J.P. Morgan, Morgan Stanley
- Timing: Hedge deadline 16:05GMT / 17:05CET, pricing shortly after
From market source
