German Bond Yields Tumble on ECB Rate Cut Bets

Henry Thompson

Traders' Opinions

Economic

Central Bank

Bond

Data Interpretation

Forex

Remarks of Officials

Summary:

German bond yields decline as a strong euro and deflationary concerns spur ECB rate cut speculation.

German two-year government bond yields are on track for their largest monthly decline since last April, as investors increasingly bet that the European Central Bank will respond to the deflationary pressure of a stronger euro.

The euro surged to a 4.5-year high against the dollar this week after U.S. President Donald Trump commented that the dollar's value was "great." This currency strength is amplifying concerns about its impact on the Eurozone economy.

In response, German 2-year yields, which are highly sensitive to monetary policy expectations, were trading at 2.06%. While up 0.5 basis points on the day, they are set for a 6.5-basis-point weekly drop—the biggest since October—and a 6-basis-point fall for January.

Money markets now price in a roughly 30% chance of an ECB rate cut by September, a significant jump from less than 10% just a week ago. Meanwhile, the probability of a rate hike by April 2027 has fallen from 50% to just 20%.

All Eyes on the ECB Policy Meeting

With the ECB's next monetary policy meeting approaching, investors are focused on how the central bank will navigate growing economic headwinds.

"Policy rates might be unchanged again in February, but the ECB has no shortage of issues to ponder," noted Mark Wall, chief European economist at Deutsche Bank Research. He highlighted key questions facing the bank, asking, "Is a 'Second China Shock' a more significant concern to Europe than U.S. tariffs? And is currency stability becoming a challenge to the smooth transmission of monetary policy?"

The primary worry is that the powerful combination of a strong euro and China's export activity could create a deflationary shock, forcing the ECB to abandon its current stance and pursue further interest rate cuts. Economists also point to persistent geopolitical risks, emphasizing the need for the ECB to remain agile.

Economic Data Shows Resilience, But Risks Remain

Despite market anxiety, recent economic data shows the Eurozone economy is growing at a modest but steady pace. Borrowing costs remained relatively stable after reports confirmed this trend and showed inflation in North Rhine-Westphalia, Germany's most populous state, holding at 2%.

Germany's 10-year government bond yield, the benchmark for the Eurozone, rose 1.5 basis points to 2.85%.

However, some analysts remain cautious. "We have seen some temporary good performances in Germany quickly reverse in the past few years, so the big question now is whether this will be repeated in the coming quarters," said Franziska Palmas, senior Europe economist at Capital Economics.

Bond Spreads Widen Across Major Economies

Longer-dated bond yields also saw movement. Germany’s 30-year yield was up 1.6 basis points at 3.5%, having reached 3.556% in late December, its highest level since the summer of 2011.

The risk premium on French government bonds widened. The yield gap between French 10-year bonds and their German counterparts expanded to 58 basis points after hitting a 19-month low of 55.50 basis points on Monday.

Similarly, Italy's 10-year government bond yields increased by 2 basis points to 3.47%. The spread over German Bunds stood at around 61 basis points, after tightening to 53.50 basis points in mid-January—its narrowest level since August 2008.

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King Ten

Daily News

Economic

Political

China–U.S. Trade War

Energy

A World Trade Organization (WTO) panel has ruled in favor of China, finding that key U.S. tax credits for clean energy discriminate against imported goods. The ruling targets specific measures within the Inflation Reduction Act (IRA), a landmark U.S. climate and energy law.

WTO Panel Finds US Measures Discriminatory

In its report, the WTO panel recommended that the United States must bring its policies into compliance. Specifically, it advised Washington to withdraw the domestic content bonus credits for clean energy investment and production.

The panel set a deadline of October 1, 2026, for the withdrawal, calling it a "reasonable" timeframe for the United States to adjust its measures.

Beijing's Stance on the Ruling

China’s Ministry of Commerce praised the decision, describing the panel's ruling as "objective and fair."

Beijing initiated the complaint at the WTO in March 2024. The government stated the action was necessary to protect the interests of China's electric vehicle industry and to ensure a level playing field in the global market.

The Inflation Reduction Act and Next Steps

The Inflation Reduction Act, signed into law by President Joe Biden, directs billions of dollars in tax credits toward consumers and companies. The goal is to encourage the purchase of electric vehicles and the domestic production of renewable energy as part of a broader strategy to decarbonize the U.S. power sector.

While Washington has the right to appeal the WTO's decision, the process is complicated. The WTO's highest appeals court is currently paralyzed, which means a final, binding ruling on the matter may not be possible even if an appeal is filed.

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Cryptocurrency

In the latter half of the week, Bitcoin saw a sharp drop as market sentiment turned more cautious. The selloff was driven mainly by uncertainty around the Federal Reserve and concerns that financial conditions could tighten again.

The decline accelerated because many leveraged traders were forced to close their positions in the derivatives market. As prices fell, liquidations in futures trading triggered further selling, turning an initial reaction to the news into a rapid and deeper correction.

Over the past 24 hours, market attention has shifted away from individual news events and toward overall liquidity conditions. Uncertainty around the Fed’s policy path has led investors to cut exposure to riskier assets.

In such phases, Bitcoin continues to behave more like a high-risk global asset than a safe store of value in the short term. When risk sentiment weakens, volatile assets like Bitcoin tend to be sold first as the market looks for a new balance.

As a result, conditions now appear oversold, which could allow for short-term rebounds. However, a lasting recovery will likely need a fresh trigger to rebuild investor confidence.

Bitcoin Technical Outlook

From a technical perspective, the key break came when prices fell below the 85,150 level, which had held twice earlier and was closely watched. When an important support level breaks on the third test, market psychology usually shifts. That level often stops acting as support and starts acting as resistance.

Because of this, any short-term rebound will first be judged by whether the market can move back above 85,150. As long as prices stay below this level, any rally is likely to be corrective rather than the start of a fresh uptrend.

On the daily chart, momentum indicators still leave room for a short-term bounce. The Stochastic RSI, which had been capped near the 91,000 resistance area, has now moved into oversold territory. That said, a recovery would still need two clear confirmation steps before a more durable rebound can be considered.

Reclaiming and maintaining the $85,150 level in daily closes,

Followed by a break above the $87,000-$91,000 range, which is where the short-term moving averages and intermediate resistance levels are located on the daily chart.

If the market finds a catalyst to support a stronger rebound, Bitcoin reclaiming the 90,000 zone will shift attention to the 94,700 pivot level. A break above this area would signal an exit from the trading range in place since November and would tilt the balance more clearly in favor of buyers.

Bitcoin Bears Eye Critical Support Level as Sharp Selloff Gains Steam_2

Looking at the weekly chart, the broader uptrend in Bitcoin has not fully broken. However, prices are sitting close to an important long term level, which keeps the risk of a deeper correction elevated.

That key level is 82,000, which aligns with the 0.382 Fibonacci level on the weekly chart. In February and March last year, prices briefly dipped below this area, but weekly closes stayed above 82,000. That zone acted as strong demand and was followed by a move to new highs in the months ahead.

The market may again try to form a base around this level in the coming days. If Bitcoin begins to post weekly closes below 82,000 this time, the chances of a larger correction increase and selling pressure could intensify. In that case, the 75,000 to 78,000 range may become the next area to watch. If the downtrend deepens further, the 69,300 level near the 0.5 Fibonacci mark could come into focus as a major support zone.

To summarize;

In the base case, as long as prices stay below 85,150, any rebound is likely to face selling pressure, and the 82,000 level may be tested more often. Ongoing uncertainty in global markets could make it hard for Bitcoin to hold above 80,000. If pressure continues, prices could drift toward the 70,000 area, with 78,000 and 75,000 acting as intermediate support levels.

In a more positive scenario, an improvement in global risk sentiment could help Bitcoin move back above 85,150 and then recover toward 91,000. If the rally extends toward 94,700, it could signal a broader trend reversal that lasts into the middle of the month.

Overall, the recent decline started as investors reduced risk due to uncertainty around the Fed. Forced liquidations of leveraged long positions then made the selloff faster and deeper. On the charts, this showed up as a break below the 85,000 support level, with prices searching for stability at lower levels.

Short-term rebounds are possible because the market looks oversold. However, reclaiming the 90,000 zone is key for a stronger outlook. If that fails, attention will turn to whether the 82,000 level can hold on to weekly closes. A sustained move below that area would open the door to further downside.

Source: investing

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Michael Ross

Daily News

Economic

Political

Data Interpretation

China–U.S. Trade War

Remarks of Officials

The United Kingdom is recalibrating its foreign policy, pivoting toward stronger economic ties with China in a move that signals a broader realignment in global trade. A recent visit to China by UK Prime Minister Keir Starmer—the first by a British leader in eight years—has unlocked several major business deals, even without a formal trade agreement.

UK and China Forge New Economic Path

Facing domestic economic pressures, the Starmer government has framed its engagement with China as a strategic necessity, prioritizing commercial interests to fuel growth. This approach has already yielded significant results.

Key developments from the visit include:

• AstraZeneca's Landmark Investment: The pharmaceutical giant announced a $15 billion investment in China, its largest ever in the country.

• Octopus Energy's Market Entry: The British energy firm confirmed its expansion into the Chinese market.

• Scotch Whisky Tariff Cut: China agreed to halve tariffs on Scotch whisky, providing a major boost to Scottish distillers.

• Visa-Free Travel: British travelers can now enter China without a visa for up to 30 days.

This "business-first" policy allows the UK to pursue economic stability while managing geopolitical complexities. The government maintains that it does not need to choose between its relationships with the United States and China, viewing both as critical for its future prosperity.

Shifting Currents in Global Trade

The UK's pivot comes as other major economies are also reassessing their trade relationships, often in response to actions from the United States.

EU-US Trade Deal Hits a Wall

The European Union has suspended the approval process for its trade deal with the U.S. following escalating tariff threats from President Donald Trump. The U.S. had threatened to impose tariffs on several European nations if it did not gain control over Greenland.

Bernd Lange, chairman of the European Parliament's international trade committee, stated the EU had "no alternative but to suspend work" on the agreement. The deal, intended to cap U.S. tariffs on most EU goods at 15%, is now in jeopardy.

New Partnerships Take Shape

While transatlantic ties face friction, other alliances are strengthening. After nearly two decades of talks, India and the European Union have finalized a major trade agreement, which Prime Minister Narendra Modi described as a "turning point" for bilateral relations.

Meanwhile, Canada is also adjusting its trade policy, signaling a different approach by easing tariffs on Chinese electric vehicles.

The US vs. China: An Economic Showdown

These global trade shifts are occurring against the backdrop of an intense economic rivalry between the world's two largest economies. According to the World Bank, the U.S. and China dominate the global landscape in both nominal GDP and purchasing power parity (PPP).

• Nominal GDP: The U.S. leads with a projected economy of $30,507 billion, compared to China's $19,232 billion.

• Purchasing Power Parity (PPP): China has overtaken the U.S., with its GDP valued at a forecasted $40,716 billion versus the U.S. at $30,507 billion.

While the U.S. maintains a higher per capita income, China's consistently higher growth rates in recent decades have intensified the competition for global economic leadership, encouraging nations like the UK to forge diverse and pragmatic economic partnerships.

To stay updated on all economic events of today, please check out our Economic calendar

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Daniel Carter

Economic

Enacted in July, Trump's legislation added several tax breaks for 2025 and the IRS did not adjust paycheck withholdings. As a result, many workers overpaid taxes and will be refunded when filing 2025 returns, experts say.

In 2026, average tax refunds could increase "by $1,000 or more," the White House said in a release this week. The release cited several media reports that reference early October research from Piper Sandler. That note said Trump's "retroactive tax cuts could average about $1,000 per return though it will be substantially more for some filers."

The White House release also included a graphic with January data from the Tax Foundation, a nonprofit think tank, showing estimated average refunds could be $3,800, up $748 from $3,052 for tax year 2024.

In 2026, $200 billion more will go out for tax refunds, Frank Bisignano, Social Security Administration Commissioner and IRS CEO, told CNBC's "The Exchange" on Wednesday.

The Piper Sandler research from early October estimated 2026 refunds could increase by about $91 billion from Trump's 2025 tax cuts. By comparison, the Tax Foundation's January analysis said 2026 refunds could rise by up to $100 billion, based on private-sector data.

The estimates come as Republicans continue to promote Trump's 2025 legislation — now called the "Working Families Tax Cuts" — and promises that 2026 will be the "largest tax refund season of all time."

Trump has recently floated new economic policy as many Americans struggle with the rising costs of groceries, utilities and other living expenses. Democrats have criticized Trump on affordability as Republicans fight to defend a razor-thin House majority during a midterm election year.

How much higher tax refunds could be in 2026

The Tax Foundation analysis found the average tax refund in 2026 could be $300 to $1,000 higher compared to a typical year, based on past IRS data and private sector estimates, according to Garrett Watson, director of policy analysis at the Tax Foundation.

"But there's a really important caveat here," Watson told CNBC. "This is very much an average. It does conceal a lot of variation between taxpayers."

For example, filers with a lot of tips or overtime income, or certain higher earners, are likely to see "much greater refunds" compared to lower- to middle-class W-2 workers who receive only a "slight bump" from the bigger standard deduction, he said.

For 2025, the standard deduction rose to $15,750 for single filers or $31,500 for married couples filing jointly, up from $15,000 and $30,000, respectively.

By comparison, certain workers can deduct up to $25,000 in tip income or $12,500 in overtime pay in 2025.

Meanwhile, the state and local tax deduction, or SALT, limit increased to $40,000 for 2025, up from $10,000. The SALT deduction includes state and local income taxes and property taxes. Most filers won't be eligible because you must itemize deductions to benefit.

A separate report released this week from the American Enterprise Institute projected that about 60% of filers will see an average tax cut of nearly $1,200 for 2025 returns. This figure refers to reduced taxes for 2025, not the size of filers' refunds.

The percentage of filers who benefit and the average tax cut rise with income, with middle- and high-income filers "likely to receive larger tax cuts" based on the structure of the provisions, authors Kyle Pomerleau and Huaqun Li wrote.

But how tax cuts translate into refunds ultimately "depend significantly on a taxpayer's individual characteristics," and whether they adjusted their paycheck withholdings after Trump's law went into effect, they wrote.

Source: CNBC

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Liam Peterson

Remarks of Officials

Economic

Political

Central Bank

National Economic Council Director Kevin Hassett, once considered a leading candidate for Federal Reserve chair, said Friday he is content in his current role and fully supports President Donald Trump’s decision to nominate former Fed Governor Kevin Warsh for the top job.

Speaking to CNBC, Hassett expressed no disappointment, stating he understands and backs the president's choice.

"I've got my dream job," Hassett said in a "Squawk on the Street" interview. "I think President Trump made a great choice, and I'm really thrilled and humbled by all the kind things he said about me."

A Key Player Staying at the White House

President Trump explained his decision in a Truth Social post, noting that Hassett was too valuable to move from his current position.

"He is doing such an outstanding job working with me and my team at the White House, that I just didn't want to let him go," Trump wrote. "Kevin is indescribably good so, as the expression goes, 'if you can't do better, don't try to fix it!'"

Hassett echoed this sentiment, highlighting the effectiveness of the current economic team, which includes himself, Treasury Secretary Scott Bessent, and Commerce Secretary Howard Lutnick. "We've been hitting on all cylinders, and it's a really bad time to change teams," he said. "You don't change quarterbacks when you're way ahead."

He affirmed the administration's commitment to the nominee, adding, "I really have high regard for Kevin, and we're going to put every effort that we have into getting him confirmed as soon as possible, so that we can get the Fed moving in the right direction."

The End of a Lengthy Selection Process

The nomination of Warsh concludes a selection drama that began in the summer of 2025 and followed years of President Trump's criticism of the central bank's policies under current Chair Jerome Powell.

The field of potential successors initially included 11 names. For a period, the race was widely seen as a contest between "the two Kevins"—Warsh and Hassett. At one point, prediction markets even favored BlackRock executive Rick Rieder for the position.

Ongoing Criticism of Fed Interest Rate Policy

The change in leadership aligns with the administration's long-held view that the Federal Reserve has kept interest rates too high. During his CNBC interview, Hassett reiterated this critique, calling the Fed's decision earlier this week to hold its benchmark interest rate steady a "mistake."

Hassett also addressed potential political hurdles for Warsh's nomination. Senator Thom Tills (R-S.C.) repeated a threat on Friday to hold up any Fed nominees while the Justice Department continues its investigation into the renovation of the central bank’s Washington, D.C. headquarters.

Despite this, Hassett projected confidence. "The White House is highly, highly confident that Kevin Warsh is a great nominee and that he should be confirmed as soon as possible," he stated. "Every single resource we have at our disposal is behind him."

If confirmed, Warsh is set to fill the seat of Governor Stephen Miran, whose term ends Saturday. He would then assume the role of Fed chair in May, following the expiration of Jerome Powell's term.

To stay updated on all economic events of today, please check out our Economic calendar

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James Riley

Russia-Ukraine Conflict

Remarks of Officials

The UN's nuclear watchdog held an emergency meeting on Friday to address growing fears over the safety of Ukraine's nuclear facilities, as Russian attacks continue to cripple the country's power grid.

Rafael Grossi, Director General of the International Atomic Energy Agency (IAEA), opened the board meeting by stating that the war in Ukraine "continues to pose the world's biggest threat to nuclear safety." The primary concern is that a loss of electricity supply to nuclear plants could lead to a catastrophic disaster.

UN Watchdog Convenes Emergency Meeting

The four-hour extraordinary session in Vienna was prompted by a letter from 13 countries, led by the Netherlands, expressing "growing concern about the severity and urgency of nuclear safety risks."

Ahead of the meeting, Ukrainian ambassador Yurii Vitrenko emphasized that it was "high time" for the IAEA board to confront the situation. In response, an IAEA expert mission is currently assessing 10 Ukrainian substations and power plants considered "crucial to nuclear safety," with its work expected to conclude next month.

Power Grid Attacks Threaten Nuclear Plant Stability

Since its 2022 invasion, Russia has systematically targeted Ukraine's energy infrastructure. These attacks have repeatedly jeopardized the external power needed by nuclear plants to run essential cooling and security systems, even when their reactors are shut down.

The Zaporizhzhia plant, Europe's largest nuclear facility, has been under Russian occupation since March 2022 and has been a constant source of international alarm. Its six reactors are currently shut down, but the site still requires a stable electricity connection to prevent overheating.

Earlier this month, Russia and Ukraine agreed to a localized ceasefire to permit repairs on the last remaining backup power line to the Zaporizhzhia plant, which had been disconnected by military activity in early January. Last week, the Chernobyl nuclear power plant also temporarily lost all of its off-site power, further highlighting the system's vulnerability.

Russia and Ukraine Clash at IAEA Forum

The diplomatic tensions were evident at the meeting. While Ukraine urged for more decisive action, Russian Ambassador Mikhail Ulyanov dismissed the gathering as "absolutely politically motivated," claiming there was "no real need to hold such a meeting."

Both Moscow and Kyiv have consistently accused each other of risking a nuclear catastrophe by launching attacks near the Zaporizhzhia site.

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