Fed holds rates as Powell successor contender Waller backs cut

Good morning. Here's what happened overnight and what you need to know today.

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1.

Fed spotlight: The Federal Reserve left its benchmark rate unchanged at 3.5-3.75%, after three consecutive cuts, citing “solid” economic activity and “somewhat elevated” inflation. Governors Christopher Waller (one of the candidates to replace Jerome Powell as Fed chair) and Stephen Miran dissented in favour of a quarter-point cut. The Fed removed language about rising downside risks to employment, now saying the jobless rate has “shown some signs of stabilisation” while job gains remain low. The decision comes as Donald Trump intensifies pressure on the central bank, including a criminal investigation into Powell that he has described as retaliatory. Powell is not expected to comment on it in detail at his press conference. The US president has said he is close to announcing his pick to replace Powell, whose term ends in May, and expects the new chair will deliver swift rate cuts. It also follows a Supreme Court hearing over Trump’s attempt to remove Fed governor Lisa Cook. Meanwhile in Australia, yesterday’s surprise inflation jump has all big four banks expecting the RBA will hike interest rates next week. (Fed)(Bloomberg)(FT)(NYT)

2.

Iran warning: Donald Trump warned Iran that “time is running out” to reach a nuclear deal or face a US military strike “far worse” than last year’s attacks on Iranian nuclear facilities. Writing on social media, Trump said a “massive armada” led by the USS Abraham Lincoln was “ready, willing, and able to rapidly fulfil its mission, with speed and violence, if necessary”. Trump’s latest warning was tied explicitly to Iran’s nuclear program, a shift from his recent threats, which had focused on Tehran’s crackdown on protesters rather than its atomic activities. “Hopefully Iran will quickly ‘Come to the Table’ and negotiate a fair and equitable deal - NO NUCLEAR WEAPONS - one that is good for all parties,” Trump wrote. The Iranian mission to the UN said it is open to talks based on “mutual respect and interests” but warned that “IF PUSHED, IT WILL DEFEND ITSELF AND RESPOND LIKE NEVER BEFORE”. Oil prices climbed to their highest level since September, with Brent at USD68.19 ($97.41) and WTI at USD63.52. (Capital Brief)(Trump)(Bloomberg)(FT)(WSJ)

3.

Big four-played: NAB quietly axed one of its consumer finance teams as it finally completes the migration of Citigroup’s Australian retail assets. A spokesperson confirmed to Capital Brief that 14 roles are being eliminated within its personal banking division, including senior leadership figures, while more than a dozen other staff will be redeployed after consultation. Staff were informed on Tuesday their positions were being made redundant. Four personal banking executives will leave as part of the restructure, having held white label roles across cards, personal lending and consumer sales, reducing the leadership team from 13 to nine. The changes come as NAB wraps up the integration of Citi’s consumer business around six months later than the timeline it originally gave the market, and shifts to eliminate duplication between its existing personal everyday banking team and the Citi-linked consumer finance team. NAB acquired Citigroup’s Australian consumer banking operations in June 2022 for $1.2 billion. (Capital Brief)

4.

Big bungle: Amazon confirmed plans to cut around 16,000 corporate roles after a draft email about the layoffs was mistakenly sent to staff the night before the announcement. The move brings total layoffs since October to 30,000, or nearly 10% of its white-collar workforce, according to reports. Most affected US-based employees will be given 90 days to find another role internally. The mistakenly sent message, titled “Project Dawn”, was part of a calendar invite that was later cancelled. Senior vice president of people experience and technology Beth Galetti confirmed the layoffs in a blog post, saying they were not “the beginning of a new rhythm”, but part of ongoing efforts to reduce layers and remove bureaucracy, and that teams would continue to make changes as needed. Meanwhile, ASML also announced 1,700 job cuts (3.8% of its staff) mostly in the Netherlands and US, as it moves to strip out management roles and refocus on engineering. The decision came even as the company reported record fourth-quarter orders of EUR13.2 billion ($22.5 billion), lifted its 2026 sales forecast to EUR34-39 billion, and launched a EUR12 billion share buyback. (Capital Brief)(Amazon)(ASML)(Reuters)(Bloomberg)

5.

Deutsch raid: German federal police searched Deutsche Bank’s offices in Frankfurt and Berlin as part of a money laundering investigation, Frankfurt prosecutors told media. The probe targets unidentified employees and executives of the bank, and relates to business relationships Deutsche Bank previously maintained with foreign companies suspected of being used for money laundering, according to a statement from prosecutors. The transactions under investigation occurred between 2013 and 2018, people familiar with the matter told the Financial Times. The investigation is focused on three companies linked to Russian billionaire Roman Abramovich, Bloomberg reported, citing one source. Authorities are examining whether Deutsche Bank was too slow to submit one or more suspicious activity reports involving firms linked to Abramovich, a person familiar told the FT. The bank confirmed the searches and said in a statement it is cooperating fully with the Frankfurt public prosecutor’s office. It declined to comment on any connection to Abramovich. The searches come one day before Deutsche is due to report full-year earnings, which could include its highest net profit since 2007, based on analyst forecasts. (FT)(Bloomberg)(Reuters)

6.

Strong buckaroo: A resurgence in the Australian-US dollar exchange rate is prompting debate on whether it has returned to fair value or could be set to benefit the ASX resources sector. The AUD touched a three-year high against the greenback above USD0.70 on Wednesday, with the move attributed in the market to the Trump administration's erratic foreign policymaking and attack on the independence of the Federal Reserve. Wilson Asset Management portfolio strategist Damien Boey said an AUD in the low USD0.70s would represent fair value for the currency. This accounts for “idiosyncrasies of the Australian market” such as net capital outflows from superannuation funds seeking foreign investments and reduced structural demand from banks, he said. On Tuesday, BHP overtook CBA as Australia’s largest company by market capitalisation with a valuation of nearly $257 billion. Boey suggested that resource equities could serve as a “natural hedge” against downside risks, despite currency strength ordinarily hurting demand for Australian exports. (Capital Brief)

7.

Currency moves: Meanwhile, the yen slumped overnight and the dollar rebounded after US Treasury Secretary Scott Bessent told CNBC the US is “absolutely not” intervening in currency markets and reaffirmed that “the US always has a strong dollar policy”. His comments triggered the steepest intraday drop in the yen in more than a month, halting a three-day rally driven by speculation of joint US-Japan intervention. The Bloomberg dollar index rose 0.5%, recovering part of its earlier losses after falling to a near four-year low the previous day. That selloff was fuelled by Trump telling reporters he wasn’t concerned about the dollar’s weakness, saying, “I think it’s great.” The dollar’s rebound sent gold to a new record above USD5,300 an ounce. The S&P 500 briefly crossed 7,000 for the first time before slipping, as investors looked ahead to the widely expected Fed decision to hold rates steady following three cuts. Market focus was also on earnings from Microsoft, Meta and Tesla later this morning. (CNN)(FT)(Bloomberg)(Reuters)

8.

Pretti backlash: The Trump administration quietly placed two federal agents on leave after they shot and killed Alex Pretti in Minneapolis, as internal reviews and video evidence undermine officials’ public claims that the nurse posed a deadly threat. A Department of Homeland Security official told The New York Times the agents have been on leave since Saturday, despite earlier statements suggesting they remained on duty. It comes as Stephen Miller suggested the federal agents who killed Pretti “may not have been following” protocol, also marking a shift from earlier White House statements portraying the shooting as justified. CBP review sent to Congress did not say Pretti brandished a gun, and video analysis shows he was holding a phone when agents restrained and shot him. Separately, Ecuador lodged a formal diplomatic protest after an ICE agent attempted to enter its Minneapolis consulate without permission. Meanwhile, in Minneapolis, Democratic congresswoman Ilhan Omar was sprayed with a liquid by a man during a public town hall, shortly after she called for the abolition of ICE and the impeachment of Homeland Security Secretary Kristi Noem. Police arrested a 55-year-old man at the scene. More than 160 House Democrats have backed impeachment proceedings against Noem, as Trump has defended her. And Apple CEO Tim Cook called for “deescalation”, and Germany updated its travel advisory for the US to avoid large gatherings. (NYT)(Reuters)(Bloomberg)