Powell reiterates that the Fed isn't in a hurry

Fed Chair Jerome Powell told the Senate Banking committed that the Fed does “not need to be in a hurry to adjust” rates during the start of his Congressional testimony. He also aid that cutting rates “too fast or too much could hinder progress on inflation.” Chair Powell’s remarks largely followed the same tone as the January FOMC in that the Fed would not need to rush this year in cutting rates. Powell also said he didn’t see the US labour market as a “source of significant inflationary pressure.” Chair Powell also had to push back against claims of political interference at the Fed under the administration of US President Donald Trump, saying the Fed will “stay out of politics, stay out of elections…and just try to focus on the data.”

Dubai’s tourism sector continues to hit new records as full-year 2024 figures show a total of 18.72mn visitors representing year/year growth of 9.2% on the 17.15mn recorded in 2023. This followed the 19.4% growth recorded the previous year, with strong growth being maintained even as pre-pandemic visitor numbers are long since recaptured.

UAE money supply expanded by nearly 16% y/y as of November 2024, holding the strong pace recorded over most of last year. Credit growth rose by nearly 9% as of November with private sector borrowing rising by an average of 6% y/y in Jan-Nov lest year. Corporate borrowing rose by 13% on average y/y as of November while individual borrowing was up by 13% y/y on average in the same period. Deposit growth was up nearly 15% y/y as of November 2024 and up by an average of 14% in Jan-Nov 2024.

DataVolt, a Saudi data centre operator, will invest USD 5bn to build data centres at NEOM, according to press reports. The facility will have 1.5 GW of processing power.

Today’s Economic Data and Events

• 14:30 IN CPI y/y Jan: forecast 4.5%
• 14:30 IN industrial production Dec: forecast 3.7%
• 17:30 US CPI m/m Jan: forecast 0.3%
• 17:30 US CPI y/y Jan: forecast 2.9%

Fixed Income

• US Treasuries drifted marginally lower overnight, not receiving anything new from Fed Chair Jerome Powell’s Senate testimony. Yields on the 2yr closed at 4.2833% while 10yr yields were marginally higher, up by 4bps at 4.5352%. Market pricing for the year is for about 36bps of cuts by the end of December.
• Saudi Electricity Company is pricing a USD 1.25bn 5yr sukuk at T+85 and a USD 1.25bn 10yr green sukuk at T+95.
• ADCB priced a USD 600m 5yr Fomosa FRN at SOFR+105.

FX

• The US dollar drifted lower against most peers ahead of the release of CPI data later today. EURUSD rallied by 0.5% to close at 1.0361 while USDJPY had a strong gain of 0.6% at 1.2446. USDJPY, however, moved in favour of the dollar and was higher by 0.3% at 152.49. In commodity currencies there was general strength with USDCAD moving lower by 0.2% at 1.4287 while AUDUSD rose by 0.3% to 0.6295 and NZDUSD added 0.2% to 0.5654.

Equities

• US equity markets closed mixed overnight with the Dow Jones up by 0.3% while the S&P 500 was near flat and the NASDAQ slumped by 0.4%. European markets were more broadly positive with the FTSE up 0.1% and the Euro Stoxx 50 adding 0.6%. Asian markets have opened broadly positive in early trading today.
• Local markets had a strong day of trading with the DFM up by 1.4% and the ADX gaining 0.3%. Both fared better than the Tadawul which fell by 0.4% overnight.

Commodities

• Oil markets had another positive session overnight with a gain of 1.5% in Brent markets to USD 77/b and 1.4% for WTI at USD 73.32/b. Both are selling off in early trade today, however, in response to API data which showed a 9m bbl build in US crude inventories last week, hardly offset by draws in gasoline and distillate stockpiles.
• Gold prices eased back overnight to USD 2,898/troy oz, still failing to capture the USD 3,000/troy oz level. Industrial metals were broadly weaker with declines across aluminium, copper and iron ore.