Crypto News: 5 things to start your day: Europe

Good morning. The Fed pushes back against March rate cut, the BOE is seen holding steady and protest against SAP's return-to-office policy. Here's what people are talking about.

Federal Reserve officials cemented the end of their aggressive campaign to push up interest rates, and sought to reset expectations for how soon and how fast they'll cut this year as inflation pressures fade. While policymakers are shifting their focus to when to start easing policy amid a favorable pullback in inflation, it's clear they're in no rush to lower rates. Chair Jerome Powell said officials would move patiently and doused speculation that rate cuts would start at the next meeting.

The Bank of England is likely on Thursday to deliver a brighter outlook for the UK economy, reducing its forecast for inflation this year and potentially opening the way to interest-rate reductions that could boost growth. Economists surveyed by Bloomberg unanimously expect the UK central bank to leave its key lending rate at a 16-year high of 5.25% when the latest decision is announced at 12 p.m. London time. Investors expect forecasts accompanying the decision to signal when monetary policy might be eased.

An internal letter criticizing SAP's back-to-office policy has attracted more than 5,000 signatures in less than two weeks, with the German software company's employees threatening to look for other jobs rather than return. Europe's largest software company outlined a new guidance in early January that will require employees globally to work in an office or on site with a customer three days a week from April. "We feel betrayed by a company that until recently encouraged us to work from home, only to ask for a radical change in direction," according to the letter, which was posted internally and seen by Bloomberg News.

Chancellor of the Exchequer Jeremy Hunt warned he has limited room for tax cuts in his upcoming budget, after Bloomberg reported the UK's fiscal watchdog presented the Treasury with constraining numbers this week. In his November fiscal statement, Hunt announced a 2 percentage-point payroll tax cut and business investment incentives. The Office for Budget Responsibility this week affirmed internal Treasury analysis warning of less scope for tax cuts this time round, according to a person familiar with the matter.

European shares are set for a muted start ahead of rate decisions from England and Sweden. EU leaders meet in Brussels for a special summit to discuss Ukraine aid. ECB Governing Council member Mario Centeno speaks in Lisbon. Expected data include euro-area CPI and unemployment. Roche, Shell and Sanofi are among a slew of companies scheduled to report earnings.

This is what's caught our eye over the past 24 hours.

Julius Baer's Rickenbacher to exit, Dreckmann to be interim CEO.
Gaza cease-fire negotiations advance as Israel-Hamas war grinds on.
Italy's finance ministry bids for Telecom Italia's sub-sea cable unit.
Adidas plans more Yeezy sales after €1 billion currency hit.
Musk gets big 'yes' vote to deepen Texas ties after pay rejected.
Boeing sees critical fix for smallest 737 Max within nine months.
China Politburo avoids setting date for key economic meeting.

In a lot of ways, the Bank of England's policy decision today will be more difficult to navigate than that of the Federal Reserve.

The Fed needed to primarily push back against bets for lower rates as soon as March and its cause was aided by recent data affirming that inflation pressures are indeed receding while growth is holding up reasonably well. While policymakers and markets are somewhat at odds over the timing, they ultimately agree that the next direction for rates is down.

The BOE is in far less of a sweet spot. The UK's nominal inflation rate at 4% remains the highest among Group-of-Seven economy, while its growth rate is among the lowest. Recent data signal households are still reluctant to spend and businesses — while marginally more optimistic — remain worried over a resurgence in inflation.

It's a combination of factors that is leading the likes of Goldman Sachs and PGIM Fixed Income to believe that Governor Andrew Bailey and his peers will be inclined to keep rates higher for a while yet. That translates into an outlook for a stronger pound relative to the dollar, to the tune of gains to $1.30 in coming months -- level last seen in July.

Yet with economists in a Bloomberg survey predicting the Britain will barely grow this year, compared with 1.5% real GDP growth expected out of the US, strategists recognize that any view for a stronger sterling — which you'd typically associate with a more robust economy — would be temporary at best. And should the BOE's priorities shift more toward shoring up growth with rate cuts, the currency's fortunes could turn very easily. As Antony Foster, head of G-10 spot trading at Nomura, put it, betting on the pound right now is "a hold-your-nose position."

Kristine Aquino is managing editor for Bloomberg Markets Today. Follow her on X at @krisaqnews.

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