Market Report.
🏦 The crossfire returns in the statements of members of the world’s largest money machine, the Federal Reserve.
🗣️ According to Chicago Fed President Austan Goolsbee:
📉 The Fed could approve “several more” interest rate cuts this year if inflation resumes its decline towards the 2% target.
🎯 Goolsbee considers a policy rate around 3% to be a “loose target” for a neutral interest rate, which would require 2-3 quarter-point rate cuts if inflation gets on track to 2%.
📌 The Fed’s median projection as of December was for only one further rate cut this year, but there was deep division among policymakers, with 8 seeing at least two quarter-point reductions.
⚖️ However, not everyone agrees.
🏛️ Federal Reserve Governor Michael Barr’s remarks indicate the Fed is likely to hold interest rates steady for some time as it assesses the inflation outlook.
🧭 Barr said the “prudent course” for monetary policy is to take the time necessary to evaluate evolving economic conditions before considering any further rate cuts.
⚠️ He sees a significant risk of persistent inflation above the Fed’s 2% target, which means the central bank needs to remain vigilant.
🤖 Barr believes the AI boom is unlikely to be a reason for the Fed to lower policy rates, as he expects the technology to boost productivity and living standards in the longer run.
🔄 This is at odds with what the successor to the current Fed chairman, Powell, thinks. Let us explain in detail:
👤 The appointment of Kevin Warsh as the next chair of the US Federal Reserve Board has reignited the debate around the relationship between productivity growth and inflation.
📊 Warsh argues that the Fed can cut short-term interest rates because AI-related productivity growth could help suppress inflation, enabling lower rates.
📰 According to the Financial Times report, ECB President Christine Lagarde plans to leave her job before the next French presidential election in 2027 to allow President Macron to have a say in choosing her successor.
🏛️ Lagarde may leave the ECB presidency earlier than expected to give Macron and Merz a greater say in choosing her successor, potentially to avoid complications from a potential far-right victory in the 2027 French election.
🗳️ In other words, let’s choose the successor now, so that the French nationalist right cannot participate in the process if it is elected by the French people. Sounds very democratic.
⏳ Lagarde’s term is set to end in October 2027, but there are concerns that the Le Pen’s French nationalists could win the French presidency in 2027, complicating the selection of the next ECB leader.
🏦 This report comes a week after the Bank of France Governor announced he would step down early, also allowing Macron to appoint his replacement before the 2027 election. While the selection of the next ECB president involves all 21 Eurozone leaders, past practice suggests the successful candidate must have the support of both Germany and France.
💱 The New Zealand dollar fell nearly 0.9% after the Reserve Bank of New Zealand (RBNZ) kept rates unchanged and signalled that expectations of moderating inflation allow it to maintain an accommodative stance.
📈 Inflation in New Zealand remains above the official cash rate, which, in theory, would argue for tighter policy. Under orthodox monetary frameworks, such a configuration would typically pressure the central bank to raise rates — potentially triggering further downside volatility if markets perceive policy as lagging inflation dynamics.
🏛️ The Reserve Bank of New Zealand (RBNZ) said that “if the economy evolves as expected, monetary policy is likely to remain accommodative for some time.”
📉 The central bank added that while inflation rose to 3.1% last quarter, it expects price growth to return to its 1%–3% target range this quarter, suggesting policymakers see recent pressures as temporary.
❓ The key question is: do you believe the central bankers?
💸 Current interest rates are at 2.25%, leaving a negative real interest rate in practice with respect to inflation.
🔍 Interestingly, while USDNZD captures the immediate dollar dynamic, the more compelling cross at present may be EURNZD, where relative monetary divergence between the ECB and the RBNZ could generate cleaner directional moves.
🇺🇸 President Trump’s administration has announced three major investment projects in the U.S. worth a total of $36 billion, to be financed by Japan.
⚡ A $33 billion natural gas power plant in Portsmouth, Ohio, which will be the largest natural gas-fired power plant in history with a capacity of 9.2 gigawatts. It will be operated by SoftBank’s subsidiary SB Energy.
🛢️ A $2.1 billion deepwater crude oil export facility called Texas GulfLink off the Texas coast, which is expected to generate $20-30 billion annually in U.S. crude exports.
💎 A $600 million synthetic industrial diamond manufacturing plant in Georgia, operated by De Beers’ Element Six, that will satisfy 100% of U.S. demand for synthetic diamond grit.
🤝 The projects are part of Japan’s $550 billion investment pledge in the U.S. as part of a trade deal that reduced Trump’s tariffs on Japanese imports.
🌏 U.S. and Japan working together to build supply chains in strategically important fields. More investment deals are expected, with Japan’s economic minister hinting at further announcements during the planned U.S. visit by Japan’s Prime Minister in March.
📦 Japan’s exports jumped 16.8% year-on-year in January, the biggest increase in over 3 years, driven by strong demand from China ahead of the Lunar New Year. Manufacturers’ confidence also rose in February, supported by stronger machinery orders and a weaker yen.
⚠️ However, the economic recovery remains fragile, with risks from higher US import tariffs, foreign competition, and trade tensions with China.
💰 Prime Minister Takaichi’s planned tax cuts and spending could provide a boost, but risk reigniting a selloff in the yen and bonds that jolted investor confidence last month.
🏦 The Bank of Japan is expected to continue raising interest rates to address inflation, which will increase the cost of servicing Japan’s huge public debt.
📢 The IMF warns that Japan’s high debt levels and deteriorating fiscal balance leave the economy exposed to a “range of shocks”, and urges the government to avoid further fiscal loosening.
🛢️ Commodity market: Four months ago, the majority of Russian crude oil shipments were heading to India. However, the situation has changed dramatically, with shipments now largely rerouted to China. The gains from the discounted Russian crude are flowing from Indian refiners straight to Chinese refiners.
📉 India’s imports of Russian crude oil have plunged significantly, from over 2 million barrels per day (mb/d) down to 1.1-1.2 mb/d in early 2026. Forecasts indicate further declines, potentially below 800 kb/d.
💰 If Indian refineries see Russian crude inflows fall to around 800 kb/d, they could face a major financial hit, losing out on more than $220 million per month in savings from the steep discounts on Russian crude.
🏭 Chinese independent refiners are aggressively stepping in to snap up the redirected Russian crude volumes at those attractive prices, pushing their Russian imports to record highs.
Geopolitics.
🕊️ Ukraine and Russia held the first of two days of U.S.-mediated peace talks in Geneva, following previous rounds in Abu Dhabi. The talks focused on “practical issues and the mechanics of possible decisions”, according to Ukraine’s lead negotiator, with negotiations set to resume Today.
⏱️ U.S. President Trump is pressing Ukraine to act fast to reach a deal, though Zelenskyy has complained of pressure on Ukraine to make concessions. The key sticking point remains control of territory in eastern Ukraine, with Russia demanding Ukraine cede the remaining 20% of the Donetsk region it does not control.
🇮🇱 Israel’s Channel 12 reports that the White House has informed Israel that nuclear talks with Iran have reached a dead end, saying Tehran is not prepared to meet President Trump’s demands.
📺 According to Al Jazeera, Trump and Netanyahu have agreed to intensify economic pressure on Iran by targeting its vital oil exports to China through new tariffs.
⚔️ However, they have different strategic endgames – Trump has expressed willingness to negotiate a deal, while Netanyahu is pushing for impossible conditions to sabotage diplomacy and force a military confrontation.
📰 Based on Al Jazeera report, Israel’s objective is not just disarmament, but regime change in Iran to reshape the Middle East by force, regardless of the economic or human cost.
⛪ The Vatican will not join President Trump’s “Board of Peace.”
🕊️ Vatican Secretary of State Cardinal Pietro Parolin said the Holy See “will not participate in the Board of Peace because of its particular nature, which is evidently not that of other States,” signaling that the Vatican views the initiative as incompatible with its unique diplomatic and spiritual role.
Market View.
📊 US equity futures appear to be rebounding from recent lows.
📉 E‑mini S&P 500 futures fell below the 6,800‑point level during yesterday’s session but have since recovered to around 6,875 points.
📈 Similarly, Nasdaq 100 futures dropped beneath 24,450 points before rebounding to approximately 24,830 points.
💵 The US Dollar Index (DXY) climbed above 97.50 during yesterday’s session before easing slightly to around 97.30. This move pushed pairs such as EUR/USD down towards the 1.18 area, with the pair subsequently staging a modest recovery to around 1.1835.
🇪🇺 In Europe, yesterday’s session closed in positive territory, and DAX futures are currently trading above 25,100 points. Euro Stoxx 50 futures have also returned to the 6,050‑point region, reflecting renewed optimism.
🛢️ The oil market remains range‑bound, with spot Brent crude trading around $67.50 per barrel.
🥇 Gold futures briefly fell below the $4,900 per ounce level during yesterday’s session but have since recovered to around $4,950 per ounce.
₿ Finally, Bitcoin continues to trade sideways, hovering around the $68,125 level.
