CZECHIA: Economic Sentiment Improves

Looking at the main weight changes for the UK CPI (note that these weights are provisional for 2025 and will be further revised next month with next month's weight applying for the reset of 2025) there are a few takeaways. Services and core goods increase their weight by 1.09ppt and 0.29ppt respectively with falls in the weight of energy (1.08ppt decrease) and FAT (0.30ppt decrease). Falls in the weighting of energy will be particularly welcomed by the MPC - with utilities bills due to increase later this year having less of an impact on headline inflation and making the narrative to cut Bank Rate easier. However, we also note that holiday-related volatile components have increased in weight, which may lead to more volatility in the overall headline index.

• Services' weighting has increase 50.10% from 49.01% (a 1.09ppt increase).
• Energy's weighting has dropped from 7.18% to 6.09% (a 1.08ppt decrease).
• FAT (food, alcohol and tobacco) has seen its weighting marginally fall from 15.23% to 14.93% (0.30ppt decrease).
• Non-energy industrial goods have increased from 28.59% to 28.87% (0.29ppt increase).
• In terms of other notable changes, within services we group accommodation, package holidays and air fares together as volatile holiday-related services. Combined these have seen a weight increase of 0.22ppt: Package holidays have increased by 0.38ppt from 3.36% to 3.73%, air fares has increased in weight from 0.58% to 0.63% while hotels has fallen in weight by 0.20ppt from 2.62% to 2.42% (with other accommodation services remaining broadly unchanged).
• "Clothing and footwear" has increased by 0.34ppt to 6.20%
• "Recreational and cultural services" has seen its weight increase by 0.36ppt from 3.47% to 3.82%.
• "Restaurants and cafes" has seen its weight fall by 0.53ppt and hotels by 0.20ppt.
• "Furniture, furnishing and carpets" has seen its weight reduced by 0.36ppt to 2.18%.

EU ambassadors have reached a preliminary accord on the 16th package of sanctions on Russia. The sanctions are reported to include a Russian primary aluminium import ban, 'phased-in' restrictions on certain flat-rolled products of alloy steel, certain machine tools, and certain automotive parts and accessories, and the listing of another 73 new shadow fleet vessels. The package is set to be formally adopted by EU foreign ministers at the Foreign Affairs Council on Monday 24 Feb (marking the third anniversary of Russia's full-scale invasion of Ukraine). 

• The confirmation of the agreement comes a day after the first formal US-Russia talks since Russia's full-scale invasion of Ukraine. After the talks, US Secretary of State Marco Rubio said that the EU would have to come to the negotiating table eventually, but only in the context of discussing sanctions relief for Russia.
• The EU has shown little sign of being willing to give up sanctions on Russia, and this could lead to a further schism between Washington and Brussels, with the US possibly looking to relax its sanctions regime in an effort to bring a speedy conclusion to the conflict, while the EU maintains its measures to put maximum pressure on Moscow.
• White House envoy for Russia and Ukraine Keith Kellogg has arrived in Kyiv. Amid concerns that Ukraine is being sidelined from the peace process says "We will listen. We are prepared to provide what is needed. We understand the need for security guarantees. Part of my mission is to listen."

• RES 4: 1.4948 High Mar 2003
• RES 3: 1.4814 High Apr 2003 
• RES 2: 1.4503/1.4793 High Fb 4 / 3 and key resistance
• RES 1: 1.4380 High Feb 10     
• PRICE: 1.4187 @ 08:03 GMT Feb 19
• SUP 1: 1.4107 50.0% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
• SUP 2: 1.4011 Low Dec 5 ‘24
• SUP 3: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
• SUP 4: 1.3894 Low Nov 11 ‘24

USDCAD is trading closer to recent lows. The pair has cleared key support at 1.4261, the Jan 20 low. This strengthens a bearish theme and signals scope for an extension of the current bear cycle - a correction. Scope is seen for a move towards 1.4107, a Fibonacci retracement. Initial firm resistance to watch is 1.4380, the Feb 10 high. A move above this hurdle would highlight an early bullish reversal signal.