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By Michael Brown, Senior Research Strategist at Pepperstone

DIGEST – While the BoE & ECB stood pat yesterday, markets endured a choppy day, as the rotation into cyclical stocks continued amid badly received earnings from Amazon. Today, a light data docket awaits.

WHERE WE STAND – It’s been another long and choppy week, so I’ll keep things short this morning.

Neither of yesterday’s G10 policy decisions sprung especially much by way of surprise. The Bank of England’s Monetary Policy Committee held Bank Rate steady in a 5-4 vote, which was accompanied by relatively dovish guidance explicitly flagging the likelihood of further cuts, as well as a dovish updated forecast slate, which pointed to the 2% inflation target not only being achieved this spring, but CPI then staying there over the remainder of the horizon. Providing that incoming data behaves itself, a 25bp cut at the March meeting looks to be on the cards.

Meanwhile, the ECB also held all policy settings steady, maintaining the deposit rate at 2.00%, while reiterating that they will continue to take a ‘data-dependent’ and ‘meeting-by-meeting’ approach to future policy decisions. President Lagarde, meanwhile, reiterated that policy is in a ‘good place’, once again strongly implying that the easing cycle is at an end. My base case remains that the ECB’s next move will be a hike, but that shan’t come until the back end of next year, at the earliest.

As for markets, yesterday, it was very much a case of ‘more of the same’, as trade continued in a similar vein to that we’ve seen all week, where anything that’s been driven primarily by momentum and speculation in recent months continued to fall out of favour.

Consequently, the tech sector again led downside on Wall St, with the NQ falling around 2% on the day, not helped by somewhat sub-par earnings from Amazon after the bell. Those earnings, of course, dropping into a market which continues to take a more sceptical view of the entire AI theme, as the return on what is, frankly, a ridiculous amount of capital expenditure continues to be questioned. Still, that rotation into cyclical sectors which I’ve been harping on about all week continued, and I remain of the belief that that isn’t necessarily a negative, as the rally continues to broaden out.

In terms of markets elsewhere, it was another tumultuous day in the metals space, as spot gold pulled back under the $5,000/oz mark, and spot silver cratered almost 20% on the day. Though the bull case for gold is still a solid one, in my mind, the silver move does worry me greatly, especially if it were to continue, and lead to de-leveraging on a broader scale. Certainly, something to keep on the radar.

Besides metals, the day saw Treasuries firm across the curve, albeit while remaining within recent ranges, and the dollar trading a touch firmer vs. most peers as well. Honestly, though, moves in both the DM FX & FI complexes remain pretty subdued in the grand scheme of things, and provide little of interest.

LOOK AHEAD – With the January US jobs report delayed until next Wednesday, it’s somewhat ‘slim pickings’ on the data front today.

That said, we do get last month’s Canadian labour market report, as well as the preliminary read on the UMich’s February consumer sentiment survey. However, with the BoC on hold for the foreseeable, and political divisions leading to the UMich figure providing much more by way of ‘noise’ than ‘signal’, I can’t imagine either being especially market-moving.

Furthermore, it’s worth flagging the potential for gapping risk over the weekend, not only amid ongoing tensions in the Middle East, but also ahead of Japan’s lower house election. While an LDP majority is the likely result, a surprise can’t be ruled out, nor can the renewed possibility of MoF intervention on a significant bout of JPY weakness.