Daily Market Outlook - Tuesday, Feb. 17

U.S. equity futures took a hit as Wall Street investors returned from their long Presidents' Day weekend, signalling that the recent slump in technology stocks might not be over just yet. Treasury yields climbed higher, while precious metals saw declines. Futures tied to the S&P 500 dropped 0.5%, continuing their downward trend from the past two weeks, which wiped out any year-to-date gains for the index. Meanwhile, Nasdaq 100 futures slid 0.9%, extending the tech-heavy index’s three-week losing streak, leaving it roughly 2% lower for the year. European markets also braced for a rough start to the trading day. Across Asia, stocks dipped by 0.2% in light trading as several major markets, including China and Hong Kong, remained closed for Lunar New Year celebrations. Geopolitical tensions in the Middle East are once again grabbing headlines, adding to market jitters. Investors are also weighing the possibility of Federal Reserve interest rate cuts following last week’s inflation data. On top of that, shifting sentiment around artificial intelligence is stirring up uncertainty, with the so-called "AI panic trade" rippling beyond the tech sector. In other global developments, Iranian Foreign Minister Abbas Araghchi met with the head of the UN's nuclear watchdog in Geneva on Monday. This meeting comes ahead of a pivotal second round of nuclear negotiations with U.S. officials.

Domestically, the UK unemployment rate increased to 5.2% in Q4 2025, exceeding the recent BoE MPR projections and market consensus by 0.1 percentage points. Analysing the single-month figures contributing to the three-month average headline rate suggests the unemployment rate could rise further to 5.3% next month. Although the 11k drop in employment in January, based on the more reliable HMRC payroll employment series, was smaller than anticipated, it marks six consecutive months of declines. Regarding pay growth, the BoE’s preferred private sector regular pay metric eased as expected, declining by 0.2 percentage points to 3.4% year-on-year in Q4. This combination of subdued pay pressures and higher-than-expected unemployment strengthens market expectations of a potential rate cut in March. However, certain aspects of the report may not diminish the hawkish stance of some members within the divided MPC. For instance, while annual private sector pay growth slowed, shorter-term momentum, such as the 3m/3m rate, showed an uptick, which hawks may interpret as a signal that inflationary pressures persist. Additionally, quarterly flows data reveal that job-to-job movement rates, an indicator of labour market dynamism, remain relatively low. Yet, this has not translated into the usual downward pressure on broader pay growth measures. To some committee members, this could still indicate lingering inflationary pressures. While the pragmatic Governor may lean toward supporting a rate cut in March, contingent on tomorrow’s CPI data, divisions within the MPC are likely to remain.

Overnight Headlines

ZEW German Investor Morale Poised To Continue Higher
Gold Falls On Possible Position Adjustments Before US-Iran Talks
BoE To Cut Rates In March, Timing Of Further Cuts Unclear
RBA Says ‘Material’ Shift In Economic Outlook Drove Feb Rate Hike
BoJ Likely To Raise Key Rate In April, Ex-Board Member Says
Trump Says He’ll Soon Decide On Weapon Sales To Taiwan
Canada Announces New Chief Trade Negotiator To The United States
Brussels: EVs Must Be 70% Made In EU To Qualify For State Support
UK PM Starmer: Britain Needs To ‘Go Faster’ On Defence Spending
Croatia’s Plenkovic Skeptical On Hungary’s Oil Pipeline Request
Citi: Geopolitics To Support Oil Near Term; Peace Deals To Lower Prices
Dollar Holds Gains As Markets Await Fed Minutes, US GDP
BHP Profit Climbs As Copper Surge Offsets China Drag On Iron Ore
Europe’s Earnings Gain Pace, Valuations Cap Rewards
UK Quietly Shelves £110M Frictionless Post-Brexit Trade Border Project

FX Options Expiries For 10am New York Cut

(1BLN+ represents larger expiries and is more magnetic when trading within the daily ATR.)

EUR/USD: 1.1700 (976M), 1.1790-00 (700M), 1.1810-15 (439M)
1.1825-30 (933M), 1.1850 (459M), 1.1885-00 (1.91BLN), 1.1915-25 (1.2BLN)
USD/JPY: 150.90-00 (1.4BLN), 152.00 (325M), 152.25 (260M), 152.50-55 (800M)
153.00 (475M), 154.30 (357M)
USD/CHF: 0.7725-30 (795M). EUR/CHF: 0.9160 (201M)
GBP/USD: 1.3480-90 (478M), 1.3560-75 (1.1BLN), 1.3595 (321M)
1.3645 (246M)
AUD/USD: 0.6750 (500M), 0.6900 (200M), 0.7025 (449M), 0.7120 (287M)
USD/CAD: 1.3500 (973M), 1.3600 (1.02BLN), 1.3625 (861M), 1.3650 (280M)

CFTC Positions as of February 13th:

Equity fund speculators have reduced their net short position in the S&P 500 CME by 23,298 contracts, bringing it down to 414,655. Equity fund managers have also decreased their net long position in the S&P 500 CME by 6,498 contracts, resulting in a total of 921,012.
Speculators have cut their net short position in CBOT US 5-year Treasury futures by 44,216 contracts to 2,114,764. Meanwhile, they have increased their net short position in CBOT US 10-year Treasury futures by 83,613 contracts, now totaling 813,027. The net short position in CBOT US 2-year Treasury futures has been reduced by 57,915 contracts, now at 1,289,687. Speculators have raised their net short position in CBOT US UltraBond Treasury futures by 1,457 contracts to reach 270,546. The net short position in CBOT US Treasury bonds futures has been trimmed by 13,512 contracts, leaving it at 92.
Bitcoin's net long position stands at 1,017 contracts, while the Swiss franc shows a net short position of -42,259 contracts. The British pound has a net short position of -25,810 contracts, the euro has a net long position of 180,305 contracts, and the Japanese yen presents a net short position of -19,106 contracts.