BOE: Taylor: Uncertainty has widened; saw 2-sided risks to 25bp cut decision Feb
- Taylor: "My personal view, though, different from the monetary policy report, would be that we probably have a bit more of that of an output gap than we have in the report. We had very big negative news between November and February, and I would have put more of it into the output gap, but we put most of it into supply. So that's a point of difference. So overall, that said to me, that backdrop, we should still be normalising policy gradually. But as I said in November, the risks to me were to the downside."
- "I saw both upside and downside risks, but I weighed them up kind of evenly, and thought we can stay on this gradual path. I saw no strong reason to hold no one else did, and I saw no strong reason to go for 50."
- "Uncertainty has only widened, widened from November up until the February vote, and then from the February vote until up until now. Even in the last three or four days, it's widened considerably. So therefore, I think we do need to be attentive to all signals going forward. And as far as I can see, every meeting coming up for the MPC will be a live meeting. "
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US DATA: Highest Mfg PMI Output Price Inflation Since March 2024
- The S&P Global US manufacturing PMI was surprisingly revised up to 51.2 in the final January print (prelim 50.1) from 49.4 in December, leaving it at its highest since June.
- “Both output and new orders returned to growth in January, while optimism in the year-ahead outlook for production hit a 34-month high. At least part of the jump in confidence and more buoyant demand picture reflected a sense among firms that business conditions will improve under President Trump.”
- “Meanwhile, input costs continued to increase sharply, leading the pace of output price inflation to accelerate for the third month running to reach the highest since March 2024."
- See the full S&P Global press release here.
BUNDS: /SWAPS: Goldman Do Not Find Bund Short Case Compelling
Goldman Sachs write “the key drivers of Bund cheapening vs swap - in particular the increasing availability of safe assets - are still in place. However, we also find evidence that the Bund cheapening over the last 6 months has moved ahead of the incremental fiscal stimulus likely to be delivered in 2025.”
- They believe that “this leaves the market vulnerable to under-delivery, in our view, especially should the German election fail to free up space to ease fiscal policy.”
- As a result, they suggest “the risk-reward for Bund shorts, either outright or vs swap, is not compelling.”
EQUITY TECHS: E-MINI S&P: (H5) Bearish Threat
- RES 4: 6162.28 High Jan 24 and a key resistance
- RES 3: 6057.75 Low Jan 31 and a gap high on the daily chart
- RES 2: 6021.01 50-day EMA
- RES 1: 5988.75 Intraday high
- PRICE: 5984.50 @ 14:39 GMT Feb 3
- SUP 1: 5935.50 Intraday low
- SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5842.50 Low Jan 14
- SUP 4: 5809.00 Low Jan 13 and a key resistance
The S&P E-Minis contract has started the week on a bearish note. The gap lower today and a breach of support at 5948.00, the Jan 27 low, strengthens a bearish threat and cancels - for now - a recent bullish theme. An extension down would open 5892.37, a Fibonacci retracement point. Initial resistance is at 6057.75, the Jan 31 low and a gap high on the daily chart. Clearance of this level would reinstate a bullish theme.
