U.S.-Iran Nuclear Talks Resume; Russia-Ukraine Prisoner Exchange Signals Easing Tensions

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Summary:

Iran's Foreign Minister leads delegation to Oman for Nuclear Talks with U.S.; Russia and Ukraine reach a prisoner exchange agreement......

[Quick Facts]

1. Iran's Foreign Minister leads delegation to Oman for Nuclear Talks with U.S.

2. Israeli Military says it struck Hezbollah targets in Lebanon.

3. Russia and Ukraine reach a prisoner exchange agreement.

4. Poll: Japan's ruling party is likely to win over 60% of House of Representatives seats.

5. U.S. and Russia agree to resume a high-level military dialogue.

6. Bitcoin plunges 12.6%, and the cryptocurrency market cap evaporates $2 trillion.

7. Blizzard drives up U.S. Initial Jobless Claims, and Job Openings hit their lowest level in over five years.

8. The Bank of England keeps interest rates unchanged as expected.

9. The European Central Bank keeps interest rates unchanged as expected.

10. Lagarde: The inflation outlook is more uncertain than usual.

[News Details]

Iran's Foreign Minister leads delegation to Oman for Nuclear Talks with U.S.

On February 5th, Iranian Foreign Ministry spokesperson Baghaei said via his social media account that Foreign Minister Araghchi is leading a delegation to Muscat, the capital of Oman, for nuclear talks with the United States. This diplomatic engagement aims to reach a fair, mutually acceptable, and dignified agreement on the nuclear issue.

The statement noted that Iran always considers it its duty to safeguard the rights of the Iranian nation. Meanwhile, Iran also has a responsibility not to miss any opportunity to protect national interests and maintain regional peace and stability through diplomatic means. Iran expressed gratitude to friendly neighboring countries and regional states that have played a role in advancing this process with a responsible and concerned attitude, and hopes the U.S. will also participate in a responsible, realistic, and serious manner. The U.S. and Iran plan to hold nuclear talks in Muscat on the 6th.

Israeli Military says it struck Hezbollah targets in Lebanon

The Israel Defense Forces (IDF) announced on the 5th that it had carried out strikes on multiple Hezbollah targets in Lebanon that day, focusing on destroying underground tunnel shafts used to store weapons. The IDF stated that it had detected Hezbollah activity at the above locations over the past few months, which violated the ceasefire agreement between Israel and Lebanon. So far, Hezbollah has not responded.

Russia and Ukraine reach a prisoner exchange agreement

Ukrainian negotiator and Secretary of the National Security and Defense Council, Umerov, released a communiqué on the results of the latest trilateral talks between Ukraine, the U.S., and Russia on his official social platform on the 5th. The communiqué said that from February 4th to 5th, delegations from the U.S., Ukraine, and Russia held their second trilateral talks in Abu Dhabi, UAE, aiming to promote an end to the Russia-Ukraine conflict. The discussions were constructive, focusing on creating conditions for lasting peace.

The communiqué added that the delegations reached an agreement under which Russia and Ukraine will each release 157 prisoners of war, the first such exchange in the past five months. During the two-day talks, the delegations held extensive discussions on other outstanding issues, including methods to implement a ceasefire and monitor armistice operations. The delegations agreed to report back to their respective capitals and continue trilateral negotiations in the coming weeks.

Poll: Japan's ruling party is likely to win over 60% of House of Representatives seats

A late-campaign poll by Nikkei showed that the ruling coalition of the Liberal Democratic Party (LDP) and Nippon Ishin no Kai is likely to win more than 300 of the 465 seats in the House of Representatives election to be held this Sunday. Meanwhile, the new opposition Centrist Reform Alliance, formed by the Constitutional Democratic Party and Komeito, may see its seats halved from the previous 167. However, many factors could affect voter turnout and decisions, thereby influencing the outcome. The newly established Centrist Reform Alliance has not yet gained widespread support, so its final performance remains unclear. In addition, heavy snowfall may impact voting on election day, especially along the Sea of Japan coast.

U.S. and Russia agree to resume a high-level military dialogue

On Feb 5th, the U.S. European Command said that the U.S. and Russia had reached an agreement in Abu Dhabi, the capital of the UAE, to resume high-level military dialogue. The statement noted that this military communication channel was suspended in the fall of 2021 before the escalation of the Ukraine crisis. During recent trilateral talks in Abu Dhabi, Commander of the U.S. European Command Alexander Grinkevich discussed with senior Russian and Ukrainian military officials and decided to restart the channel. The statement added that resuming military dialogue provides a way to increase transparency and reduce tensions. Grinkevich, who also serves as NATO Supreme Allied Commander Europe, will maintain communication with Russian Chief of the General Staff Valery Gerasimov.

Bitcoin plunges 12.6%, and the cryptocurrency market cap evaporates $2 trillion

Bitcoin tumbled sharply on Thursday, with losses accelerating amid volatility in precious metals and broad selling in tech stocks that weakened risk appetite. Bitcoin fell to an intraday low of $63,222.42, its lowest level since October 2024. Data from CoinGlass showed that approximately $1 billion worth of Bitcoin positions were liquidated in the past 24 hours; since early October, the global cryptocurrency market capitalization has shrunk by $2 trillion cumulatively. Bitcoin has fallen 17% so far this week and 28% year-to-date. Former President Trump's nomination of Walsh as a candidate for Federal Reserve Chair exacerbated Bitcoin's latest slide, as markets expect him to shrink the Fed's balance sheet.

Blizzard drives up U.S. Initial Jobless Claims, and Job Openings hit their lowest level in over five years

Data from the U.S. Department of Labor showed that initial jobless claims rose to 231,000 last week, up 22,000 from the previous week and exceeding expectations due to winter storms. As data volatility from the holiday season and New Year period fades, claims are likely to continue rising. Another Labor Department report, the Job Openings and Labor Turnover Survey (JOLTS), showed that job openings fell by 386,000 to 6.542 million in December, the lowest level since September 2020. Job openings declined across businesses of all sizes: the professional and business services sector accounted for two-thirds of the decline and has fallen for three consecutive months. Some economists attributed this to artificial intelligence.

The Bank of England keeps interest rates unchanged as expected

After its monetary policy meeting, the Bank of England announced it would keep the benchmark interest rate unchanged at 3.75%, in line with market expectations. At the meeting, the Monetary Policy Committee voted 5–4 to maintain the rate. Deputy Governors Ramsden and Breeden, along with committee members Swati Dhingra and Alan Taylor, voted in favor of a 25-basis-point rate cut.

The central bank's statement noted that further rate cuts are likely, but the risk of persistent inflation is currently less pronounced. Judgments about whether to further ease monetary policy will become more difficult. The bank expects inflation to be 1.8% in the first quarter of 2028 and 2% in the first quarter of 2029. Bank of England Governor Bailey pointed out that if everything goes well, there should be room for further rate cuts this year. He expects inflation to fall to around 2% in spring and emphasized the need to ensure it stays at that level.

The European Central Bank keeps interest rates unchanged as expected

After its monetary policy meeting, the European Central Bank (ECB) announced it would keep interest rates unchanged, in line with market expectations. The ECB maintained the deposit facility rate at 2%, the main refinancing rate at 2.15%, and the marginal lending rate at 2.4%.

In its post-meeting statement, the ECB reaffirmed its commitment to ensuring inflation stabilizes at the 2% target over the medium term, and it will decide the appropriate monetary policy stance on a data-dependent, meeting-by-meeting basis. The bank noted that despite a challenging global environment, the economy remains resilient. The Governing Council stands ready to adjust all tools within its mandate to ensure inflation stabilizes at the 2% medium-term target.

Meanwhile, low unemployment, robust private-sector balance sheets, gradual increases in public spending on defense and infrastructure, and the supportive effects of previous rate cuts jointly underpin economic growth. The Governing Council's rate decisions will be based on assessments of the inflation outlook, related risks, and the latest economic and financial data, with no pre-commitment to a specific rate path. However, the outlook remains uncertain, mainly due to uncertainties in global trade policies and geopolitical tensions.

Lagarde: The inflation outlook is more uncertain than usual

Following the ECB’s decision to keep rates unchanged, President Christine Lagarde said at a press conference that the "Outlook for inflation is more uncertain than usual." She noted that the bank discussed exchange rates today, stating that "Stronger Euro could bring inflation down more than now expected." Since March last year, the euro has strengthened. However, it remains within its average range, while underlying inflation is consistent with the 2% target.

Lagarde said eurozone economic growth is primarily driven by services, especially information technology and communications, while the labor market continues to support household incomes. Manufacturing remains resilient despite trade headwinds.

She added that resilience in the eurozone must be enhanced against the backdrop of geopolitics, and the external environment remains challenging, urging governments to continue pushing reforms. Due to tariffs and the euro, the trade environment faces severe challenges. The current global policy environment, marked by increasing uncertainty, could dampen demand if uncertainty rises further.

[Today's Focus]

UTC+8 17:00 ECB Governing Council member Kocher speaks

UTC+8 20:00 Bank of England Chief Economist Pill speaks

UTC+8 21:30 U.S. January nonfarm payrolls

UTC+8 23:00 U.S. preliminary February 1-year inflation expectations

UTC+8 23:00 U.S. preliminary February University of Michigan consumer confidence index

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