It was a time for optimism on the rates markets, which eased sharply (from -6 to -10 points in Europe and the US) as the Fed presented the conclusions of its strategy meeting this evening.

Fed Chairman Jerome Powell will also hold a press conference later in the evening, a meeting that is traditionally closely followed by the markets, and all the more so at a time of uncertainty over the evolution of central bank monetary policies...

While the prospect of a 'status quo' is hardly in doubt, market participants will be trying to read between the lines and detect any clues as to the pace and timing of rate cuts.

Virtually all the US 'stats' published in January were unexpectedly robust, suggesting a 'hawkish' stance from the FED, but the 'number of the day' brings a big damper, in an area that the FED particularly scrutinizes, namely the labor market.

The ADP barometer of US private-sector employment cooled sharply in January, with only +107,000 new hires, well below economists' expectations (around 150.000 expected according to Jefferies).
The ADP report was also down sharply on the previous month's figure of 158,000 (revised from 164,000 in the initial estimate), which could foreshadow a subdued 'NFP' on Friday.
T-Bonds fell into near euphoria, with the '10-yr' down 10.3pts to 3.9520% a few hours before the FED statement, while the '2-yr' eased by a full -13pts to 4.227%.

There were also 'figures' this morning in Europe: a further fall (-1.8%) in French industrial producer prices (PPI) in December over one year, after -0.5% in November.
Insee specifies that PPI are virtually stable (+0.1% after +0.2% in November) excluding energy.

Also according to Insee (provisional estimate), consumer prices in France are set to rise by 3.1% year-on-year in January 2024, down significantly from 3.7% in December 2023.

Finally, the German economy contracted in the fourth quarter, according to a new estimate published by the Federal Statistical Office, with GDP down 0.3% in the last three months of the year compared with the previous quarter in seasonally-adjusted terms, in line with an initial estimate published on January 15.
This was enough to reassure the bond market (the ECB is expected to begin work on the monetary easing timetable): OATs and Bunds shifted 7pts in the opposite direction to the previous day.
Our OATs thus eased to 2.653%, Bunds by -7.5pts to 2.162% and across the Atlantic, Italian BTPs by -8.8pts to 3.721%.

British Gilts are also improving, but more timidly, with -5pts to 3.826%.

NB: the easing of rates is propelling gold towards $2,055, 1% away from the strong historical resistance of $2,077.

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