BTP TECHS: (M5) Bull Phase Still In Play

• RES 4: 107.170 High Dec 20   
• RES 3: 107.081 61.8% retracement of the Dec 2 ‘24 - Jan 15 bear leg    
• RES 2: 107.045 High Feb 3 and a key resistance
• RES 1: 106.975 High Feb 10 / 28        
• PRICE: 106.885 @ 06:19 GMT Mar 4    
• SUP 1: 106.630 Low Feb 20 
• SUP 2: 106.755/630 Low Feb 24/20 and a key near term support
• SUP 3: 106.600 Low Jan 31 
• SUP 4: 106.515 Low Jan 30  

Schatz futures have traded in a volatile manner so far this week. A bull cycle that started on Feb 19 remains in play and the latest recovery opens 106.975, the Feb 10 high, ahead of the next key resistance at 107.045, the Feb 3 high. Clearance of this latter hurdle would strengthen a bullish condition. A reversal lower would instead expose the key short-term support at 106.630, the Feb 20 low. First support to watch lies at 106.765, Monday’s low.

• Following a 25bp cut this week, Morgan Stanley no longer looks for a pause in April and instead looks for a 25bp cut. It then looks for a final sequential cut to 2.00% in June 2025. Thereafter it looks for a slower pace of cuts (at projection meetings only) to reach a terminal 1.00% rate in June 2026.
• Previously MS had seen an April pause before sequential cuts through to the same 1.00% but reached in Q1-26.
• MS notes that "The incoming data has been weaker than expected, both on the inflation and growth front... we revised last week our forecast for EA GDP growth... We expect the ECB to do the same and mark down its growth forecasts on Thursday as well. All these data are likely to support a view within the Council that rates can be brought fast to a level most Council members think is neutral. And we believe this level is 2.0%."
• Thereafter expect the ECB to "only deliver rate cuts at projection meetings, reacting to subdued growth and weak inflation momentum. In our view, it will take the Council until the December meeting to cut rates with an explicit view that a move below neutral is warranted."

Repeats the bullet from 00:01GMT.

BRC-NielsenIQ Shop Prices fell by 0.7% Y/Y for the second consecutive month, remaining in the range of -0.8% to -0.6% since September 2024 (excluding December which was distorted by Black Friday). The Shop Price Index remains in deflation for the seventh consecutive month.

• On a sequential basis, Shop Prices rose 0.4% M/M (vs a fall of 0.4% in January), marginally below their February average (2010-2019 average of 0.52% M/M - note none of these data are seasonally adjusted).
• Food price inflation accelerated to 2.1% Y/Y, after softening two-tenths to 1.6% in January. This is the highest Y/Y print since September 2024, after recording the lowest print since November 2021 in January. On a monthly basis, food prices rose 0.4% M/M - this is significantly above the February norm (2010-2019 February average of 0.18% M/M) but followed a 0.5% print in January - which was the weakest January print since 2015.
• The Chief Executive of the BRC highlights "prices on the month saw the biggest increase in the last year...butter, cheese, eggs, bread and cereals all saw price hikes" and expects "food prices to be over 4% up by the second half of the year."
• We estimate food inflation contributed 0.11ppt to the change in January headline CPI, and despite recent divergence between the official ONS series and the BRC-NielsenIQ Shop Price series particularly in December when data was distorted by Black Friday, the current data highlights the potential risk of elevated food prices in the months ahead.
• Non-Food Prices remained in negative territory for the eleventh consecutive month, falling 2.1% Y/Y from -1.8% in January. This marks the lowest reading since October 2024 (excluding December distorted data).
• On a monthly basis, non-food prices rose 0.5% M/M (after -0.9% in January), this is below the February norm (2010-2019 February price growth average of 0.72%). However, bear in mind that this data is showing very little correlation with the ONS non-energy industrial goods reading in recent months, which has moved comfortably into positive territory in Y/Y terms.
• The press release states the rise is driven by January promotions ending.
• Survey Period: 1 to 7 February 2025.