INDIA: Modi Visit To US Confirmed For 12-13 Feb, Trade & Visas Top Issues
Following the 5 Feb announcement that PM Narendra Modi will travel to the United States next week for bilateral talks with President Donald Trump, the trip has been confirmed for 12-13 Feb by Foreign Secretary Vikram Misri. Misri said he expects that there will be "intense conversations" between India and the US on tariffs. The Straits Times reports "Trump spoke with Modi on January 27, when he discussed immigration and stressed the importance of India buying more American-made security equipment and fair bilateral trading ties. The two leaders also discussed meeting soon and "that is the promise and the commitment that is now unfolding", Misri told reporters, adding that Modi's visit will "give further direction and impetus to this very important partnership"."
- The deportation of 104 Indian nationals living illegally in the US has gained significant coverage domestically. For the Modi gov't there will be an effort to maintain legal migration routes such as student and skilled H-1B visas.
- The announcement of a review of Indian tariffs on a range of products is also seen as an effort to avoid retaliation from the president, who has on previous occasions called India the 'tariff king'.
- Misri also confirmed that on his way to the US Modi will be in France 10-12 Feb for the third AI Action Summit taking place in Paris where he will also hold bilateral talks with French President Emmanuel Macron. This will be Modi's first attendance at such a summit.
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STIR: Less Than 50bp Of BoE Cuts Priced For '25
{GB} STIR: Long end weakness, fiscal worry and the latest round of media speculation surrounding Trump’s tariff preferences promote hawkish repricing for GBP STIRs.
- BoE-dated OIS now prices ~46bp of cuts through ’25, testing the recent hawkish extreme.
- The next 25bp cut is still more than fully discounted through the May MPC.
- SONIA futures -0.5 to -15.0, with the strip steepening.
- SFIZ5 pierces its December low, with bears now eying the ’24 low (95.660), which is ~10.0 below prevailing levels.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Feb-25 | 4.541 | -15.9 |
Mar-25 | 4.511 | -18.9 |
May-25 | 4.413 | -28.7 |
Jun-25 | 4.393 | -30.7 |
Aug-25 | 4.324 | -37.6 |
Sep-25 | 4.303 | -39.7 |
Nov-25 | 4.258 | -44.2 |
Dec-25 | 4.238 | -46.2 |
OUTLOOK: Price Signal Summary - Downtrend In Gilts Accelerates
- In the FI space, the trend cycle in Bund futures remains bearish and this week’s extension reinforces this theme. The contract has breached key support at 132.00, the Nov 6 low. A clear break of this level strengthens a bearish theme. Sights are on a move towards 131.28 next, the Nov 14 low on the continuation chart. Initial resistance is at 132.57, the Jan 6 high. Key short-term resistance is at 133.90, the 20-day EMA.
- The trend condition in Gilt futures is unchanged, it remains bearish and this week’s fresh cycle lows reinforces current conditions. Today’s sell-off highlights an acceleration of the trend and maintains the price sequence of lower lows and lower highs. Sights are on the 90.00 psychological handle. Initial resistance is at 91.58, today’s intraday high. Resistance at the 20-day EMA, is at 92.88, and the average is seen as an important hurdle for bulls.
UK: Poll Shows Little Public Confidence In Gov't Ability To Boost Growth
While financial markets continue to pile pressure on the Treasury (see 'GILTS: Further Selling', 1124GMT), political pressure on the gov't is also rising as voter confidence in PM Sir Keir Starmer's ability to boost growth collapses according to recent polling. The inaugural City AM/Freshwater Strategies poll carried out 4-6 January showed 75% of respondents were 'not confident' about the gov'ts plan to achieve economic growth, while 56% of respondents expected the UK economy to worsen over the next year compared to 19% expecting an improvement.
- The poor polling comes amid reports of collapsing business confidence on the back of Chancellor of the Exchequer Rachel Reeves' 2024 budget tax hikes, as well as speculation that the UK growth outlook and declining fiscal headroom could spur more tax increases later in 2025.
- City AM: "just one in six voters believe Labour is best placed to manage and grow the economy, compared to 20 per cent who think Tory leader Kemi Badenoch could do a better job, and 24 per cent who say the same for Reform leader Nigel Farage."
- The Starmer gov't commands a sizeable majority in the House of Commons and the next election is not due until 2029, ostensibly limiting immediate threats to gov't stability. However, the short tenure of PM Liz Truss in 2022 is demonstrative of how pressure from financial markets can hasten chancellors and prime ministers (if not the party in power) towards the exit door.
Chart 1. 'How confident are you, if at all, about the UK gov'ts plan to achieve economic growth?', %
Source: City AM, Freshwater Strategy. N.b. Sample: 1,207 eligible voters in the UK, 4-6 January 2025. Margin of Error +/- 2.8%.
