RUSSIA: Consumer Inflation Expectations Moderate Further in March

Euribor futures are inching away from session lows alongside Schatz and Bunds, after STIRs followed core FI lower overnight amid cautious Fedspeak, prospects of increased European defence spending and weak JGB price action.

• Futures are flat to -2.5 ticks through the blues at typing.
• There are 56bps of easing priced through the June gathering (i.e. just over 2x25bp rate cuts).
• French January final HICP confirmed flash estimates, though Y/Y CPI saw a 3 tenth upward revision. The ZEW survey is expected to be strong (expectations component seen at 20.0 vs 10.3 prior), owing to the continued rally in European equities.
• Yesterday evening, ECB’s Holzmann provided characteristically hawkish comments in an interview. In particular, he argued that an inflation rate of below 2% was “a reason to cut less, because if you automatically cut further when you see such a trend, then the expectation of lower inflation might become self-fulfilling”. Holzmann speaks again at 0900GMT this morning.
• ECB Executive Board Member Cipollone speaks on the ECB’s balance sheet at an MNI Event at 1400GMT/1500CET (sign up here).

• RES 4: 123.34 High Dec 11       
• RES 3: 122.85 High Dec 12  
• RES 2: 121.88 76.4% retracement of the Dec 11 - Jan 13 bear leg  
• RES 1: 120.98/121.00 61.8% of Dec 11 - Jan 13 bear leg / High Feb 7    
• PRICE: 119.76 @ 08:02 GMT Feb 18 
• SUP 1: 119.20 Low Jan 31           
• SUP 2: 118.65/117.16 Low Jan 24 / 13 and the bear trigger
• SUP 3: 116.59 76.4% retrace of the Jun - Dec ‘24 bull cycle (cont)
• SUP 4: 116.07 Low Jul 8 ‘24 (cont)    

A bullish cycle in BTP futures remains intact and the latest pullback appears corrective - for now. Attention is on 120.98 (pierced) and 121.88, Fibonacci retracement points. On the downside, initial key support to watch lies at 118.65, the Jan 24 low. Clearance of this price point would highlight a reversal and the end of the corrective bull cycle. First support lies at 119.20, the Jan 31 low.

• There have been some big revisions again to the HMRC RTI payrolls data. Rather than showing the downtrend picking up speed, they appear to show a more consistent downtrend in payrolls data. And the 12-month change no longer shows that there has been a net loss of jobs over the past year (of 7k), but a 49k increase (or 45k if looking at the comparable 2024 calendar year).
• The pace of decline seems to remain fairly consistent since the summer of 2022, and is now only showing very tentative signs of deteriorating at a faster pace. See the top chart below.
• Prior to today's revisions the December flash print showed the fastest pace of monthly payroll reduction since November 2020 (-47k), but the revised data only falls -14k (with an upward revision to November from -32k to -26k too and a +13k cumulative revision to the remainder of 2024.
• In recent months we have seen warning signs of large falls in April (which on the latest data is actually positive but the flash was -85k), August (originally -59k, now estimated at -25k) as well as December. See the bottom chart below.
• This does make us question the value of the flash data. This is of course still experimental data rather than an official statistic, but the data has "cried wolf" three times in the past ten releases. The ONS notes that the flash data is made up of 85% of the final data with the next release generally having 98-99% of the final data - but we think any future outliers in the data will need to be looked at with a handful of salt.