Tag: AUD

  • Recession Fears Weigh on Markets as Risk-Off Trade Intensifies

    Recession Fears Weigh on Markets as Risk-Off Trade Intensifies


    The risk-off sentiment that triggered the biggest US stock market selloff in months has spilled over into Asian markets, leading to broad declines across the region. The currency markets reflect this shift too, with traditional safe havens such as Japanese Yen and Swiss franc leading gains in Asia, while risk-sensitive currencies like the Australian and New Zealand Dollars face pressure.

    Unlike previous bouts of risk aversion, Dollar is not benefiting from the current flight to safety. This time, the core of the problem originates from the US economy itself, where recession worries are intensifying. Rather than flocking to the greenback, investors appear to be diversifying into other safe havens or moving to the sidelines until the dust settles.

    The uncertainty surrounding US trade policies has left businesses and consumers hesitant, potentially dragging economic growth lower. In response to the changing economic outlook, market participants are increasingly convinced that Fed will resume policy easing within the first half of the year. The only question is whether the next rate cut will arrive in May or June.

    Another driver of Dollar weakness is the extending decline in yields since mid January. Technically, there is prospect for 10-year yield to draw support from 4.000 psychological level, which is slightly below 61.8% retracement of 3.603 to 4.809 at 4.063, to form a near term bottom. However, there is little prospect for 10-year yield to rebound strongly through 55 D EMA (now at 4.412). But at least, sideway movement in 10-year yield could help lift the pressure on Dollar.

    Overall for the week so far, Yen is the best performer, followed by Euro, and then Swiss Franc. Aussie is the worst, followed by Loonie and then Kiwi. Dollar and Sterling are positioning in the middle.

    In Asia, at the time of writing, Nikkei is down -1.02%. Hong Kong HSI is down -1.02%. China Shanghai SSE is down -0.50%. Singapore Strait Times is down -2.02%. Japan 10-year JGB yield is down -0.063 at 1.509. Overnight, DOW fell -2.08%. S&P 500 fell -2.70%. NASDAQ fell -4.00%. 10-year yield fell -0.104 to 4.213.

    US stock market correction deepens as recession fears take hold

    The US stock market suffered its most significant setback in months, with the S&P 500 dropping -2.7%, its biggest one-day decline since December 18. NASDAQ also lost -4.0%, marking its worst single-day percentage loss since September 2022. Analysts widely point to mounting recession worries as the primary catalyst behind the selloff.

    Initial concerns emerged over the past month following a series of weaker economic data points, believed by some to be early reactions to an increasingly contentious tariff policy. These worries intensified after recent remarks from the White House suggested a bumpy economic outlook ahead.

    In an interview aired on Sunday, US President Donald Trump fueled apprehensions further by describing the economy as going through “a period of transition.” When pressed about an impending recession, he avoided a direct prediction but acknowledged potential “disruption.” His remarks—“Look, we’re going to have disruption, but we’re OK with that”—did little to reassure investors already on edge about growth prospects.

    Adding further weight to recession fears, historical bond market indicators have been flashing warning signs. The 10-year to 2-year US yield curve inverted in mid-2022—a classic recession signal—and only turned positive again in September 2024. Historically, a U.S. recession tends to follow within months after the yield curve normalizes (i.e., turned positive again). If this trend holds true, the US economy could be inching closer to a downturn.

    However, another view posits that tariffs are a distraction and that the real driver behind the US selloff is the recent surge in Japanese government bond yields, which have hit a 16-year high. As the carry trade unwinds—where investors borrow in low-yield currencies, often involving Japanese Yen, to fund investments in higher-yield or high-growth assets—capital is flowing out of big tech names, contributing to the NASDAQ’s outsized losses.

    Technically, NASDAQ’s strong break of 55 W EMA (now at 17864.01) suggests that it’s already in correction to the up trend from 10088.82 (2022 low). Deeper fall should be seen to 38.2% retracement of 10088.82 to 20204.58 at 16340.36. Reaction from there will decide whether it’s merely in a medium consolidations phase or in an out-right bearish trend reversal.

    As for DOW, immediate focus is now on 41844.89 support. Firm break there will complete a double top reversal pattern (45073.63, 45054.36). That should set up deeper fall to 38.2% retracement of 32327.20 to 45073.63 at 40204.49 at least, even it’s just a correction to the rise from 32327.20.

    Australia Westpac consumer sentiment jumps to 95.9, soft landing achieved

    Australian consumer sentiment saw a strong rebound in March, with Westpac Consumer Sentiment Index jumping 4.0% mom to 95.9, the highest level in three years and not far from neutral 100 mark.

    Westpac attributed the improvement to slowing inflation and February’s RBA interest rate cut which have lifted confidence across households. positive views on job security suggest that “soft landing has been achieved”. Nevertheless, “unsettling overseas news” continues to weigh on the broader economic outlook.

    Looking ahead to RBA’s upcoming meeting on March 31-April 1, Westpac expects the central bank to keep the cash rate unchanged. RBA was clear that the 25bps cut in February “did not mean further reductions could be expected at subsequent meetings.”

    Westpac added, “further slowing in inflation will give the RBA sufficient confidence to deliver more rate cuts this year with the next move coming at the May meeting”.

    Australia’s NAB business confidence slips back into negative as cost pressures persist

    Australia’s NAB Business Confidence fell from 5 to -1 in February, erasing last month’s gain and returning to below-average levels. While business conditions improved slightly from 3 to 4, the decline in confidence suggests that businesses remain cautious despite RBA’s recent rate cut and positive Q4 GDP data.

    NAB Chief Economist Alan Oster noted that the lift in sentiment seen in January was not sustained, signaling ongoing uncertainty in the business environment. Persistent cost pressures and subdued profitability appear to be key factors weighing on sentiment, keeping confidence below long-term norms.

    Within business conditions, trading conditions ticked up from 7 to 8, and profitability conditions rose slightly from -2 to -1, though still remaining in negative territory. Employment conditions, however, weakened from 5 to 4.

    Cost pressures remain a concern, with purchase cost growth accelerating from 1.1% to 1.5% in quarterly equivalent terms. On the positive side, labor cost growth eased from 1.7% to 1.5%, indicating that wage price pressures are gradually cooling. Meanwhile, final product price growth slowed from 0.8% to 0.5%, though retail price inflation held steady at 1.0%.

    EUR/AUD Daily Outlook

    Daily Pivots: (S1) 1.7149; (P) 1.7213; (R1) 1.7320; More…

    EUR/AUD’s rally resumed and brief consolidations and intraday is back on the upside. Rise from 1.6335 should now target 161.8% projection of 1.5963 to 1.6800 from 1.6355 at 1.7709 next. On the downside, below 1.7102 minor support will turn intraday bias neutral again and bring consolidations, before staging another rally.

    In the bigger picture, up trend from 1.4281 (2022 low) is resuming. Sustained trading above 1.7180 key resistance will pave the way to 61.8% projection of 1.4281 to 1.7062 from 1.5963 at 1.7682, which is also close to 61.8% retracement of 1.9799 (2020 high) to 1.4281 at 1.7691. For now, this will remain the favored case as long as 1.6355 support holds, even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Manufacturing Sales Q4 2.60% -1.20% 0.20%
    23:30 AUD Westpac Consumer Confidence Mar 4.00% 0.10%
    23:30 JPY Overall Household Spending Y/Y Jan 0.80% 3.60% 2.70%
    23:50 JPY GDP Q/Q Q4 F 0.60% 0.70% 0.70%
    23:50 JPY GDP Deflator Y/Y Q4 F 2.90% 2.80% 2.80%
    23:50 JPY Money Supply M2+CD Y/Y Feb 1.20% 1.40% 1.30%
    00:30 AUD NAB Business Confidence Feb -1 4 5
    00:30 AUD NAB Business Conditions Feb 4 3
    06:00 JPY Machine Tool Orders Y/Y Feb P 4.70%
    10:00 USD NFIB Business Optimism Index Feb 101 102.8

     



    Source link

  • Dollar Stays Soft as Forex Markets Quiet, US CPI Highlights the Week

    Dollar Stays Soft as Forex Markets Quiet, US CPI Highlights the Week


    Forex markets are trading quietly in the Asian session, remaining within Friday’s range and showing little impetus to move decisively in either direction. Dollar is staying on the back foot, with a lack of substantial buying interest to sustain a meaningful rebound. While last week’s non-farm payroll data helped calm fears of a rapid labor market slowdown, market sentiment remains cautious in the face of escalating uncertainties.

    Late last Friday, Morgan Stanley lowered its 2025 economic growth forecast for the US and highlighted mounting concerns about trade tensions. The bank noted that “earlier and broader tariffs should translate into softer growth this year.” In contrast to its previous assumption that any tariff-related drag on growth would be more pronounced in 2026. Morgan Stanley now projects Q4/Q4 2025 growth at 1.5% (down from 1.9%), and 2026 growth at 1.2% (down from 1.3%).

    Goldman Sachs also joined the wave of downward revisions, cutting its 2025 Q4/Q4 GDP growth forecast from 2.2% to 1.7%. Moreover, it raised its 12-month recession probability to 20%. While the odd is still low, it’s a noticeable shift from the previously estimated 15%.

    So far this month, Dollar is the weakest performer among the major currencies. It is trailed by Canadian Dollar and then Australian Dollar. On the other end, Euro leads the pack, followed by Swiss Franc and then British Pound, indicating broad European strength in the current environment. Both Yen and New Zealand Dollar hold the middle ground.

    Looking ahead, the upcoming US CPI release will be the major data focal point this week Meanwhile, BoC is widely expected to deliver another rate cut. UK GDP data will also be a feature.

    Technically, AUD/NZD appears to be building up downside momentum as seen in D MACD. Break of 1.1001 support will pace the way to 1.0940 cluster support zone (38.2% retracement of 1.0567 to 1.1177 at 1.0944). Such development would give Aussie some additional pressure elsewhere.

    In Asia, at the time of writing, Nikkei is up 0.47%. Hong Kong HSI is down -1.53%. China Shanghai SSE is down -0.37%. Singapore Strait Times is down -0.52.

     

    Japan’s nominal wages rises 2.8% yoy in Jan, real wages fall -1.8% yoy

    Japan’s labor cash earnings rose 2.8% yoy in January, falling short of market expectations of 3.2% yoy. Nominal wage growth remained positive for the 37th month.

    Real wages, adjusted for inflation, fell -1.8% yoy, reversing two months of slight gains. The decline was largely driven by a sharp rise in consumer inflation.

    The inflation rate used by the Ministry of Health, Labor and Welfare to calculate real wages—which includes fresh food prices but excludes rent—accelerated to 4.7% yoy, its highest level since January 2023.

    Regular pay, or base salary, rose 3.1% yoy, the largest gain since 1992. This was overshadowed by a sharp -3.7% yoy decline in special payments, which consist largely of one-off bonuses.

    China’s inflation turns negative, but seasonal factors skew the picture

    Released over the weekend, China’s consumer inflation dipped into negative territory for the first time in over a year, with February’s CPI coming in at -0.7% yoy, weaker than the expected -0.5% yoy, and a sharp reversal from January’s 0.5% yoy gain.

    Core CPI, which strips out food and energy prices, also slipped by -0.1% yoy—its first decline since January 2021—signaling weak underlying demand.

    On a month-over-month basis, consumer prices fell -0.2%, more than the expected -0.1%, reversing some of January’s 0.7% increase.

    While the decline may raise concerns about deflationary pressures, NBS attributed much of the drop to seasonal distortions tied to the timing of the Lunar New Year. Stripping out this factor, NBS estimates that CPI actually rose 0.1% yoy.

    Given these distortions, a clearer picture of China’s inflation trajectory will likely emerge in March when seasonal effects fade.

    Meanwhile, producer prices remained in contraction for the 29th consecutive month, with PPU declining -2.2% yoy, slightly better than January’s -2.3% yoy but still below expectations of -2.1% yoy.

    BoC rate cut, US inflation and consumer sentiment

    Expectations for BoC to continue easing policy have surged following weak February job data, which showed that tariff-related uncertainty is already taking a toll on employment. Markets now widely expect BoC to lower its policy rate by another 25bps this week to to 2.75%, This would serve as an insurance move against further trade disruptions. With inflation well-contained, some analysts believe the central bank would continue cutting at this pace in upcoming meetings until rates reach 2%.

    BoC’s rhetoric will be closely scrutinized to gauge how policymakers assess the risks posed by tariffs and trade disputes. If the central bank signals greater concern over the economic fallout, expectations for a sustained easing cycle will strengthen. The stance will be critical in shaping near-term movements in Canadian Dollar, which has just had a roller-coaster ride last week on tariff news.

    Looking south, US inflation data are another pivot point for global markets. Both headline and core CPI rates are expected to edge lower, from 3.0% to 2.9% and from 3.3% to 3.2%, respectively. Yet the outcome remains uncertain due to possible tariff-induced price hikes—or, conversely, weaker consumption dampening inflation. With a surprise in either direction, Fed’s near-term policy path could be thrown into disarray. March is still widely expected to be a hold, but May is increasingly up in the air.

    Adding to the US economic picture is the University of Michigan consumer sentiment survey, which carries added significance. The recent stock market selloff was closely tied to poor January consumer sentiment. Any notable deterioration in confidence could drive renewed risk aversion, compounding existing concerns about trade and growth.

    Elsewhere, other key data, including UK GDP, Japan cash earnings, and household spending, will round out a relatively less busy week for global markets.

    Here are some highlights for the week:

    • Monday: Japan average cash earnings; Germany industrial production, trade balance; Swiss SECO consumer climate; Eurozone Sentix investor confidence.
    • Tuesday: New Zealand manufacturing sales; Australia Westpac consumer sentiment, NAB business sentiment; Japan household spending, GDP final.
    • Wednesday: Japan BSI manufacturing, PPI; US CPI, BoC rate decision.
    • Thursday: Swiss PPI; Eurozone industrial production; US PPI, jobless claims.
    • Friday: New Zealand BNZ manufacturing; Germany GDP final; UK GDP, production, goods trade balance; Canada manufacturing sales, wholesale sales; US U of Michigan consumer sentiment.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 147.26; (P) 147.73; (R1) 148.51; More…

    Intraday bias in USD/JPY stays on the downside at this point. Sustained trading below 61.8% retracement of 139.57 to 158.86 at 146.32 will pave the way to 139.57 support. On the upside, 149.32 minor resistance will turn intraday bias neutral and bring consolidations again, before staging another fall.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Jan 2.80% 3.20% 4.80% 4.40%
    23:50 JPY Bank Lending Y/Y Feb 3.10% 3.10% 3% 2.90%
    23:50 JPY Current Account (JPY) Jan 1.94T 1.99T 2.73T
    05:00 JPY Leading Economic Index Jan P 108 108.1 108.4 108.3
    05:00 JPY Eco Watchers Survey: Current Feb 48.5 48.6
    07:00 EUR Germany Industrial Production M/M Jan 1.50% -2.40%
    07:00 EUR Germany Trade Balance (EUR) Jan 21.2B 20.7B
    09:30 EUR Eurozone Sentix Investor Confidence Mar -10 -12.7

     



    Source link

  • “Coalition of the Willing” Fuels Euro Strength, Boosts Defense Outlook

    “Coalition of the Willing” Fuels Euro Strength, Boosts Defense Outlook


    European markets saw a strong rally today, with notable fund inflows driving gains in DAX and Euro. Investor sentiment was boosted by expectations of increased military spending after the announcement of the UK and France-led “Coalition of the Willing” to support Ukraine. FTSE and Sterling also benefited from the renewed optimism, as traders priced in the broader economic implications of higher defense expenditures across Europe.

    Defense stocks led the charge, as recent geopolitical developments, in particular the Trump-Zelenskiy clash in the Oval Office, pointed to the beginning of a European rearmament cycle. With growing isolationism in the US under President Donald Trump, European nations appear to be shifting toward greater self-reliance in military production, reducing dependence on the US. This shift has fueled expectations of long-term defense budget expansions, providing fresh momentum for European economies.

    Meanwhile, the latest Eurozone inflation data provided a mix of signals for policymakers at ECB. Prices growth did decelerate slightly in February, an outcome that might please the doves. However, the slowdown probably isn’t enough to change please the hawks for letting guard off inflation risk.. Policymakers are still certain to continue their measured approach to rate cuts with another 25bps reduction this week. But the data will spark fresh debate over the pace and extent of easing beyond the decision.

    Overall in the currency markets, Euro is the best performer for the day so far, followed by Sterling, and then Aussie. Yen is the worst, followed by Dollar, and then Kiwi, Loonie and Kiwi are positioning in the middle.

    Technically EUR/AUD’s break of 1.6800 resistance should confirm resumption of whole rally from 1.5693. Further rise should be seen to 61.8% projection of 1.5963 to 136800 from 1.6355 at 1.6872. Decisive break there could prompt upside acceleration to 100% projection at 1.7192. Nevertheless, break of 1.6702 support will delay the bullish case and bring consolidations first.

    In Europe, at the time of writing, FTSE is up 0.77%. DAX is up 2.33%. CAC is up 1.43%. UK 10-year yield is up 0.052 at 4.537. Germany 10-year yield is up 0.091 at 2.502. Earlier in Asia, Nikkei rose 1.70%. Hong Kong HSI rose 0.28%. China Shanghai SSE fell -0.12%. Singapore Strait Times rose 0.34%. Japan 10-year JGB yield rose 0.034 to 1.410.

    Eurozone CPI falls to 2.4%, core CPI slows to 2.6%, both above expectations

    Eurozone CPI ticked down from 2.5% yoy to 2.4% yoy in February, above expectation of 2.3% yoy. Core CPI (ex-energy, food, alcohol & tobacco), fell from 2.7% yoy to 2.6% yoy, above expectation of 2.5% yoy.

    Looking at the main components of inflation, services is expected to have the highest annual rate in February (3.7%, compared with 3.9% in January), followed by food, alcohol & tobacco (2.7%, compared with 2.3% in January), non-energy industrial goods (0.6%, compared with 0.5% in January) and energy (0.2%, compared with 1.9% in January).

    Eurozone PMI manufacturing finalized at 47.6, a 24-mth high

    Eurozone manufacturing activity showed signs of stabilization in February, with PMI finalized at 47.6, a 24-month high, up from January’s 46.6. While still in contraction territory, the improvement offers some hope that the sector may be finding its footing.

    Among individual countries, Ireland led the rankings at 51.9, marking a 12-month high, while the Netherlands reached the neutral 50.0 mark for the first time in eight months. However, Spain dipped to a 13-month low at 49.7, and Italy, Austria, Germany, and France all remained below 50, despite showing some improvement.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, emphasized that while the data is encouraging, it’s “too early to call it a recovery”. New orders are still falling but at the slowest rate since May 2022, and production is inching closer to stabilization. After nearly three years of recession, there is potential for modest growth in the coming months.

    Despite ongoing risks, most businesses remain optimistic about the future, with confidence slightly above its long-term average. This resilience is notable, given the looming threat of US tariffs. Additional positive factors include hopes that Russia’s war in Ukraine could come to an end this year, alongside expectations of greater political stability in Germany following the recent elections.

    UK PMI manufacturing finalized at 46.9, job cuts accelerate

    The UK manufacturing sector continued to struggle in February, with PMI Manufacturing finalized at 46.9, down from January’s 48.3, marking a 14-month low. Weak demand and declining confidence among clients have exacerbated the downturn, leading to falling output and new orders.

    Rob Dobson, Director at S&P Global Market Intelligence, noted that UK manufacturers are facing an “increasingly difficult trading environment.” The combination of subdued demand, rising cost pressures, and uncertainty over future economic conditions is making it harder for firms to sustain growth.

    Inflation fears are also rising, particularly due to changes in the national minimum wage and employer NICs announced in the Autumn Budget.

    One of the most concerning trends is the acceleration in job losses. The pace of staff reductions in the sector is now at levels not seen since the pandemic-induced slump in mid-2020.

    Japan’s PMI manufacturing finalized at 49 in Feb, modest improvement but outlook remains weak

    Japan’s manufacturing sector showed slight improvement in February, with PMI finalized at 49.0, up from 48.7 in January. However, the sector remains in contraction territory, reflecting ongoing struggles with weak demand.

    According to Usamah Bhatti at S&P Global Market Intelligence, manufacturers cited soft global and domestic demand, with “muted conditions” in key markets such as the US, Europe, and China. Additionally, purchasing activity saw a solid and sustained decline.

    The “near-term outlook remains clouded”. Business confidence fell to its lowest level since mid-2020, driven by growing concerns over the impact of US trade policies and a slower-than-expected global economic recovery.

    China’s Caixin PMI manufacturing rises to 50.8, but employment remains a concern

    China’s Caixin PMI Manufacturing climbed to 50.8 in February, up from 50.1, exceeding expectations of 50.3.

    Wang Zhe, Senior Economist at Caixin Insight Group, noted that new export orders rebounded, corporate purchasing increased, and logistics remained smooth. However, employment continued to decline, and output prices stayed weak.

    Additionally, official PMI data released over the weekend further reinforced signs of recovery. The official PMI Manufacturing rebounded from 49.1 to 50.2, marking its highest level since November and moving back into expansionary territory. Additionally, the non-manufacturing PMI, which covers services and construction, ticked up to 50.4 from 50.2.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0350; (P) 1.0385; (R1) 1.0410; More…

    EUR/USD’s strong rebound today is mixing up the near term outlook. But still, intraday bias stays neutral and further decline is in favor as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. Below 1.0358 will target 1.0176/0210 support zone first. Firm break there will resume whole fall from 1.1213, and carry larger bearish implications. However, sustained trading above 1.0572 will pave the way to 61.8% retracement at 1.0817.

    In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Terms of Trade Index Q4 3.10% 1.50% 2.40% 2.50%
    00:00 AUD TD-MI Inflation Gauge M/M Feb -0.20% 0.10%
    00:30 JPY Manufacturing PMI Feb F 49 48.9 48.9
    01:45 CNY Caixin Manufacturing PMI Feb 50.8 50.3 50.1
    08:30 CHF Manufacturing PMI Feb 49.6 48.4 47.5
    08:50 EUR France Manufacturing PMI Feb F 45.8 45.5 45.5
    08:55 EUR Germany Manufacturing PMI Feb F 46.5 46.1 46.1
    09:00 EUR Eurozone Manufacturing PMI Feb F 47.6 47.3 47.3
    09:30 GBP Manufacturing PMI Feb F 46.9 46.4 46.4
    09:30 GBP M4 Money Supply M/M Jan 1.30% 0.20% 0.10%
    09:30 GBP Mortgage Approvals Jan 66K 66K 67K
    10:00 EUR Eurozone CPI Y/Y Feb P 2.40% 2.30% 2.50%
    10:00 EUR Eurozone CPI Core Y/Y Feb P 2.60% 2.50% 2.70%
    14:30 CAD Manufacturing PMI Feb 51.6
    14:45 USD Manufacturing PMI Feb F 51.6 51.6
    15:00 USD ISM Manufacturing PMI Feb 50.8 50.9
    15:00 USD ISM Manufacturing Prices Paid Feb 56.2 54.9
    15:00 USD ISM Manufacturing Employment Feb 50.3
    15:00 USD Construction Spending M/M Jan -0.10% 0.50%

     



    Source link

  • Bitcoin Roars Back as Trump Plans Strategic Crypto Reserve; Tariffs, Geopolitics, NFP and ECB to Move Markets

    Bitcoin Roars Back as Trump Plans Strategic Crypto Reserve; Tariffs, Geopolitics, NFP and ECB to Move Markets


    Bitcoin led the charge in an otherwise quiet Asian session, rebounding over 20% from last week’s low after a major announcement from US President Donald Trump. The cryptocurrency sector saw dramatic relief from its steep selloff last week, as Trump revealed the creation of a strategic crypto reserve, including Bitcoin, Solana, XRP, and other digital assets.

    The wording of the post also drew attention, with Trump emphasizing that BTC and ETH would be at the “heart of the reserve.” Unlike a simple stockpile, which implies holding onto existing government-owned crypto assets, a reserve suggests active purchases in regular installments.

    However, the move has not been without criticism. Crypto purists argue that Bitcoin and other decentralized assets were created to exist outside government control, and they reject the notion of a nation-state amassing a large share of the market. Some others see the announcement as politically motivated rather than a structural shift in policy, raising concerns about long-term regulatory implications.

    Technically, Bitcoin’s strong rebound ahead of 73812 cluster zone (38.2% retracement of 15452 to 109571 at 73617) suggests that price actions from 10957 are likely forming a medium term consolidation pattern only, rather than bearish trend reversal. Sustained trading above 55 D EMA (now at 95271) will solidify this bullish case, and extend range trading below 109571 for a while before eventual upside breakout.

    Meanwhile, in the currency markets, Euro is leading gains, followed by Sterling and Aussie. Dollar is the worst performer, trailed by Kiwi and Yen. Swiss Franc and Loonie are positioning in the middle.

    Looking ahead, multiple US tariffs on Canada, Mexico, and China are set to take effect on Tuesday, March 4, and speculation is mounting over retaliatory measures. China has already hinted at countermeasures, including tariffs on U.S. agricultural products and non-tariff barriers.

    On the geopolitical front, all eyes will be on the US response to a new UK-EU effort to draft a Ukraine peace plan, a move coming on the heels of President Volodymyr Zelenskiy’s high-profile clash with Trump at the Oval Office just two days ago.

    In addition, crucial US economic data, including non-farm payrolls and ISM manufacturing and services indexes, will be closely watched. Across the Atlantic, ECB is expected to cut interest rates again this week, continuing its “regular, gradual” easing.

    In Asia, at the time of writing, Nikkei is up 1.70%. Hong Kong HSI is up 1.30%. China Shanghai SSE is up 0.32%. Singapore Strait Times is up 0.47%. Japan 10-year JGB yield is up 0.029 at 1.405.

    Japan’s PMI manufacturing finalized at 49 in Feb, modest improvement but outlook remains weak

    Japan’s manufacturing sector showed slight improvement in February, with PMI finalized at 49.0, up from 48.7 in January. However, the sector remains in contraction territory, reflecting ongoing struggles with weak demand.

    According to Usamah Bhatti at S&P Global Market Intelligence, manufacturers cited soft global and domestic demand, with “muted conditions” in key markets such as the US, Europe, and China. Additionally, purchasing activity saw a solid and sustained decline.

    The “near-term outlook remains clouded”. Business confidence fell to its lowest level since mid-2020, driven by growing concerns over the impact of US trade policies and a slower-than-expected global economic recovery.

    China’s Caixin PMI manufacturing rises to 50.8, but employment remains a concern

    China’s Caixin PMI Manufacturing climbed to 50.8 in February, up from 50.1, exceeding expectations of 50.3.

    Wang Zhe, Senior Economist at Caixin Insight Group, noted that new export orders rebounded, corporate purchasing increased, and logistics remained smooth. However, employment continued to decline, and output prices stayed weak.

    Additionally, official PMI data released over the weekend further reinforced signs of recovery. The official PMI Manufacturing rebounded from 49.1 to 50.2, marking its highest level since November and moving back into expansionary territory. Additionally, the non-manufacturing PMI, which covers services and construction, ticked up to 50.4 from 50.2.

    Market sentiment hinges on US NFP, ECB cut and other data to watch

    While trade war and geopolitics might continue to dominate headlines, key economic events this week could also inject extra volatility into the markets.

    The week’s most significant market-moving event could come from the US. February non-farm payrolls report will be a crucial test for investor sentiment, particularly after recent economic data—including consumer confidence, business activity, and retail sales—showed signs of weakness. Additionally, ISM manufacturing and services data will provide further insight into business conditions. The impact of tariffs on the economy is beginning to surface in economic data, and a set of disappointing data could amplify the emerging concerns.

    It should noted that while a softer NFP print could bring forward expectations for a Fed rate cut, optimism about policy easing may be overshadowed by broader economic worries, which would drive further volatility across asset classes. The key is whether the job market can hold up against growing uncertainty, or if fears of a sharper slowdown will escalate.

    ECB is widely anticipated to proceed with its “regular, gradual” approach to policy easing at its meeting this week, with a 25bps cut to the deposit rate, bringing it down to 2.50%. The latest Economic Bulletin suggests policymakers see neutral rate in the range of 1.75%-2.25%, implying that further rate reductions beyond this week’s move will be calculated cautiously.

    Analysts largely expect two more 25bps cuts by ECB in Q2 to bring an end to the cycle. But the outcome could vary depending on economic growth and inflation developments. Markets will closely analyze ECB’s updated economic projections hints on the central bank’s view, at least the base case.

    Eurozone inflation data will also be in the spotlight. February’s flash CPI is expected to show headline inflation falling to 2.3%, following four consecutive months of increases. Core inflation, which has remained at 2.7% for five straight months, is projected to ease to 2.5%.

    Beyond the US and Eurozone, Australia will also be in focus. Although RBA initiated its easing cycle in February, policymakers have remained cautious about further cuts. RBA meeting minutes will provide more details on the board’s thinking regarding the next steps. Additionally, Australia’s Q4 GDP and January retail sales data will offer insight into whether more imminent easing is necessary.

    Other key data releases include Canada’s employment report and China’s Caixin PMIs.

    Here are some highlights for the week

    • Monday: Japan PMI manufacturing final; China Caixin PMI manufacturing; Swiss PMI manufacturing; Eurozone CPI flash, PMI manufacturing final; UK PMI manufacturing final; Canada PMI manufacturing; US ISM manufacturing, construction spending.
    • Tuesday: New Zealand building permits; Japan unemployment rate, capital spending, monetary base, consumer confidence; Australia RBA minutes, retail sales; Eurozone unemployment rate.
    • Wednesday: Australia GDP; China Caxin PMI services; Eurozone PMI services final, PPI; UK PMI services final; US ADP employment, ISM services, factory orders, Fed’s Beige Book report.
    • Thursday: Australia building permits, goods trade balance; Swiss unemployment rate; UK PMI construction; Eurozone retail sales, ECB rate decision, US jobless claims, trade balance; Canada Ivey PMI.
    • Friday: China trade balance; Germany factory orders; Swiss foreign currency reserves; Eurozone GDP revision; Canada employment; US non-farm payrolls.

    EUR/AUD Daily Outlook

    Daily Pivots: (S1) 1.6660; (P) 1.6717; (R1) 1.6768; More…

    Intraday bias in EUR/AUD stays on the upside for the moment. As noted before, consolidation from 1.6800 should have already completed with three waves down to 1.6355. Firm break of 1.6800 resume the rise from 1.5963 to 61.8% projection of 1.5963 to 136800 from 1.6355 at 1.6872, and then 100% projection at 1.7192, which is close to 1.7180 high. On the downside, below 1.6657 minor support will delay the bullish case and turn intraday bias neutral again first.

    In the bigger picture, with 1.5996 key support (2024 low) intact, larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

    D

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Terms of Trade Index Q4 3.10% 1.50% 2.40% 2.50%
    00:00 AUD TD-MI Inflation Gauge M/M Feb -0.20% 0.10%
    00:30 JPY Manufacturing PMI Feb F 49 48.9 48.9
    01:45 CNY Caixin Manufacturing PMI Feb 50.8 50.3 50.1
    08:30 CHF Manufacturing PMI Feb 48.4 47.5
    08:50 EUR France Manufacturing PMI Feb F 45.5 45.5
    08:55 EUR Germany Manufacturing PMI Feb F 46.1 46.1
    09:00 EUR Eurozone Manufacturing PMI Feb F 47.3 47.3
    09:30 GBP Manufacturing PMI Feb F 46.4 46.4
    09:30 GBP Mortgage Approvals Jan 66K 67K
    09:30 GBP M4 Money Supply M/M Jan 0.20% 0.10%
    10:00 EUR Eurozone CPI Y/Y Feb P 2.30% 2.50%
    10:00 EUR Eurozone CPI Core Y/Y Feb P 2.50% 2.70%
    14:30 CAD Manufacturing PMI Feb 51.6
    14:45 USD Manufacturing PMI Feb F 51.6 51.6
    15:00 USD ISM Manufacturing PMI Feb 50.8 50.9
    15:00 USD ISM Manufacturing Prices Paid Feb 56.2 54.9
    15:00 USD ISM Manufacturing Employment Feb 50.3
    15:00 USD Construction Spending M/M Jan -0.10% 0.50%

     



    Source link

  • Safe-Haven Demand Fuels Dollar Rally Amid Trade, Geopolitical Turmoil

    Safe-Haven Demand Fuels Dollar Rally Amid Trade, Geopolitical Turmoil


    Market sentiment took a decisive turn for the worse last week, with risk aversion dominating across asset classes. The combination of deteriorating domestic economic conditions in the US and heightened global uncertainties has fueled concerns that risk appetite could weaken further. Equities faced renewed selling pressure, yields dropped sharply.

    Domestically, US economic data painted a troubling picture. Consumer confidence deteriorated sharply, while weak personal spending data and a rise in jobless claims suggested that the labor market could be facing new headwinds. With the economy looking increasingly fragile, concerns are mounting that the economy may struggle to maintain momentum, reinforcing speculation about Fed rate cuts.

    Externally, the risk of a full-blown trade war continues to escalate. US President Donald Trump doubled down on his aggressive tariff agenda, reaffirming the March 4 deadline for 25% tariffs on Canada and Mexico and indicating that the EU would be next in line with reciprocal tariffs.

    Geopolitical tensions also worsened, particularly after a dramatic Oval Office showdown between Trump, Vice President JD Vance, and Ukrainian President Volodymyr Zelenskiy. The meeting, initially expected to pave the way for a mineral deal between the US and Ukraine—potentially a step toward resolving the Russian invasion—ended in failure. With US-Ukraine relations strained and no clear resolution in sight, uncertainty in the region remains elevated.

    On the bright side, markets have scaled up expectations for a Fed rate cut in the first half of the year. However, it’s unclear whether additional monetary easing will truly bolster risk sentiment or simply underscore the extent of the economic challenges ahead. A rate cut could offer short-term relief for risk assets, but it might also underscore fears of an impending downturn in domestic activity.

    In the forex market, Dollar emerged as the clear winner for the week, benefiting from risk aversion rather than rate expectations. Sterling and Swiss Franc followed as the next strongest currencies, with the UK seemingly avoiding US tariff threats and the Franc gaining from both risk aversion and Euro weakness. At the other end of the spectrum, commodity currencies struggled, with New Zealand Dollar leading the declines, followed by Australian and Canadian Dollars. Meanwhile, Euro ended in a mixed manner, with the initial post-German election boost fading as tariff threats weighed. Yen also struggled to extend its rally, leaving it stuck in the middle of the performance ladder.

    Investors Pin Hopes on Fed Easing as Stocks Sell Off, But Is Relief Temporary?

    US equity markets ended February on a weak note, with NASDAQ suffering a sharp -3.5% weekly decline despite a late recovery. S&P 500 also lost nearly -1%, while DOW managed to close about 1% higher, benefiting from recovery after leading the selloff earlier in the month. However, the broader market sentiment remained fragile.

    For the entire month, NASDAQ dropped -4%, marking its worst monthly performance since April 2024. S&P 500 fell -1.5%, while the DOW ended down -1.6%. Several factors weighed on market sentiment, including intensifying trade war risks, particularly as the scheduled 25% tariffs on Canada and Mexico approach on March 4. The more consequential reciprocal tariffs, set to take effect on April 2, also remain a source of significant uncertainty.

    US economic data further exacerbated concerns, with sharp decline in consumer confidence, jump in jobless claims, and contraction in personal spending, all pointing to risk of extended weakness in household demand. These indicators have fueled doubts about the strength of US consumption, which remains a critical driver of economic growth.

    With these headwinds and decline in PCE core inflation as released on Friday, expectations for another Fed rate cut in the first half of the year continued to rise. Fed fund futures now price in a 94% probability of a 25bps cut to 4.00%-4.25% in June, up significantly from 63% just a week ago. This growing optimism about resumed Fed easing has provided some support to market sentiment. But it remains unclear whether it will be enough to reverse the pre-dominating risk-off mood or merely slow the pace of decline.

    Technically, NASDAQ is tentatively drawing support from 38.2% retracement of 15708.53 to 20204.58 at 18487.09. Strong rebound from current level, followed by firm break of 55 D EMA (now at 19440.85) will suggest that the corrective pattern from 20204.58 has completed. That will also keep the medium term up trend intact for another rally through 20204.58 at a later stage.

    However, sustained break of 18487.09 will raise the chance that a larger scale correction has already started. In the bearish case, NASDAQ should be correcting whole uptrend from 10088.82 (2022 low). Further break of 55 W EMA (now at 17866.91) will confirm this bearish case and pave the way to 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

    Risk Aversion Drags Yields Down, But Lifts Dollar Higher

    Risk aversion was also evident in the US bond markets, with 10-year Treasury yield tumbling sharply to its lowest level since December. The sharp drop highlights growing concerns over economic uncertainty and trade tensions.

    Technically, current development suggests that rise from 3.603 (2024 low) has completed at 4.809 already, well ahead of 4.997 (2023 high). Current fall is seen as another downleg in the sideway corrective pattern from 4.997. Deeper decline is expected to 61.8% retracement of 3.603 to 4.809 at 4.063 next. Risk will stay on the downside as long as 55 D EMA (now at 4.452) holds, in case of recovery.

    Dollar Index clear reacted more to risk aversion than falling yields and Fed cut expectations. The’s strong bounce towards the end of the week and the break of 55 D EMA (now at 107.31) suggests that fall from 110.17 has completed at 106.12. That came after defending 38.2% retracement of 100.15 to 110.17 at 106.34. Further rise should be seen to 108.52 resistance. Firm break there will target a retest on 110.17 high.

    In the bigger picture, Dollar Index is holding comfortably above 55 W EMA (now at 105.37), and thus rise from 100.15 and 99.57 should still be intact. Break of 110.17 will pave the way back to 114.77 (2022 high) at a later stage.

    NZD/USD and AUD/USD Sink, Eye 2025 Lows for Support

    Kiwi and Aussie were the worst-performing currencies last week, each losing around -2.4% against the greenback. With risk sentiment deteriorating downside pressure on these two currencies could persistent. The key focus now is whether risk aversion would intensify and push NZD/USD and AUD/USD through this year’s lows to resume the long term down trend. There these key support levels could offer a breather to them.

    Technically, NZD/USD’s steep decline last week suggests that corrective rebound from 0.5515 should have completed at 0.5571 already. Retest of 0.5515 should be seen next. Strong support from there could bring rebound to extend the corrective pattern with another rising leg. But outlook will stay bearish as long as 38.2% retracement of 0.6378 to 0.5515 at 0.5848 holds. Firm break of 0.5515 will resume the long term down trend to 61.8% projection of 0.7463 to 0.5511 from 0.6378 at 0.5172.

    Similarly, AUD/USD’s corrective rebound from 0.6087 should have completed at 0.6407. Retest of 0.6087 low should be seen next. Strong rebound from there would extend the corrective pattern with another rising leg. But outlook will stay bearish as long as 38.2% retracement of 0.6941 to 0.6087 at 0.6413 holds. Firm break of 0.6087 will resume the long term down trend to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806.

    Bitcoin and Gold Tumble on Risk-Off Sentiment

    Bitcoin and Gold struggled under renewed risk aversion last week, extending their losses in line with broader market weakness. While Gold retains a comparatively better outlook, both assets remain vulnerable to ongoing volatility.

    Bitcoin suffered a sharp fall, decisively breaking 89127 support, confirming medium-term topping at 109571. The current slide is seen as a correction of the entire uptrend from the 15452 (2022 low). Deeper decline toward 55 W EMA (now at 74129) is expected.

    Strong support could emerge from the 73812 cluster zone (38.2% retracement of 15452 to 109571 at 73617) to bring rebound, at least first attempt. However, downside risks remain as long as 55 D EMA (now at 95288) caps any recovery.

    Decisive break of 73617/73812 zone could extended the decline to 50k mark, which is close to 49008 support and 61.8% retracement at 51405.

    By contrast, Gold’s outlook is less overtly bearish. 2956.09 is seen as a short term top only, for now. Subsequent pullback is viewed primarily as a correction of the rise from 2584.24. Strong support might be seen from 55 D EMA (now at 2792.05) to bring rebound, and set the base for uptrend resumption at a later stage.

    However, considering that Gold was just rejected by 3000 psychological level sustained trading below 55 D EMA would argue that larger scale correction in underway. In the bearish case, Gold could be starting a medium term decline back to 55 W EMA (now at 2522.33).

    EUR/USD Weekly Outlook

    EUR/USD reversed after edging higher to 1.0527 last week, and the development suggests that consolidation from from 1.0176 has already completed. Initial bias stays on the downside this week for retesting 1.0176/0210 support zone first. Firm break there will resume whole fall from 1.1213, and carry larger bearish implications. On the upside, above 1.0419 minor resistance will turn intraday bias neutral. But outlook will stay bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds.

    In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    In the long term picture, down trend from 1.6039 remains in force with EUR/USD staying well inside falling channel, and upside of rebound capped by 55 M EMA (now at 1.0929). Consolidation from 0.9534 could extend further and another rising leg might be seem. But as long as 1.1274 resistance holds, eventual downside breakout would be mildly in favor.



    Source link

  • Markets Reel Under Trade War Fears, Dollar Gains Traction, Gold Falls

    Markets Reel Under Trade War Fears, Dollar Gains Traction, Gold Falls


    Global stock markets are under heavy selling pressure as risk-off sentiment dominates the final trading day of February. The selloff intensified across major indices, with Japan’s Nikkei plunging -3% and Hong Kong’s Hang Seng Index down -2.8%, following the steep declines in US equities overnight. Investors are increasingly wary of escalating trade tensions, which could further weigh on the fragile global recovery.

    Market sentiment took a sharp hit after confirmation that the 25% US tariffs on Mexico and Canada will take effect on March 4. The more consequential reciprocal tariffs, set for April 2, have also drawn attention, particularly with US President Donald Trump threatening to extend a 25% tariff on European Union imports.

    NASDAQ was the hardest hit among US indices, tumbling -2.78%, with semiconductor giant Nvidia leading the declines with an -8.5% drop. Despite reporting strong quarterly earnings, the company is facing increased concerns that it won’t be immune to the broader trade war, particularly if Taiwan’s chip industry comes under new US tariff measures. Given Nvidia’s dominant role in the AI sector, any disruption in its supply chain could ripple through the entire tech sector.

    In the currency markets, Dollar is now firmly leading the weekly performance rankings after its sharp rally overnight. Swiss Franc follows as the second-strongest, while Sterling also benefits from the broader selloff in Euro. Meanwhile, commodity-linked currencies are bearing the brunt of risk aversion, with New Zealand Dollar plunging the most, followed by Australian and Canadian Dollars. While Euro and Yen are positioned in the middle of the performance spectrum, the single currency is looking rather vulnerable.

    Technically, Gold’s extended decline is another confirmation of the Dollar’s underlying strength. The break of 2876.93 support confirms short-term topping at 2956.09, just below the key psychological 3000 level, with bearish divergence in 4H MACD.

    Deeper correction should be seen to 38.2% retracement of 2584.24 to 2956.09 at 2814.04. Rebound from there indicate that it’s just a near term correction, and keep the larger up trend intact. However, sustained break of 2814.04 will suggest that a larger scale correction is already unfolding.

    In Asia, at the time of writing, Nikkei is down -2.97%. Hong Kong HSI is down -2.58%. China Shanghai SSE is down -1.11%. Singapore Strait Times is down -0.72%. Japan 10-year JGB yield is down -0.023 at 1.373. Overnight, DOW fell -0.45%. S&P 500 fell -1.59%. NASDAQ fell -2.78%. 10-year yield rose 0.036 to 4.285.

    BoJ’s Uchida: Yield rise reflects market’s views on economic and global developments

    Speaking in parliament today, BoJ Deputy Governor Shinichi Uchida said recent rise in JGB yields “reflects the market’s view on the economic and price outlook, as well as overseas developments.”

    “There’s no change to our stance on short-term policy rates and government bond operations,” he emphasized, adding that the bond holdings “continue to exert a strong monetary easing effect” on the economy.

    When asked whether the prospect of further rate hikes and tapering would continue to drive yields higher, Uchida responded that it is ultimately “up to markets to decide.”

    Japan’s Tokyo CPI slows to 2.2% yoy in Feb, industrial production down -1.1% mom in Jan

    Tokyo’s core CPI (ex-food) slowed to 2.2% yoy in February, down from 2.5% yoy and below market expectations of 2.3% yoy. This marks the first decline in four months, largely due to the reintroduction of energy subsidies. Meanwhile, core-core CPI (ex-food and energy) held steady at 1.9% yoy. Headline CPI slowed from 3.4% yoy to 2.9% yoy.

    In the industrial sector, production contracted by -1.1% mom in January, a sharper decline than the expected -0.9%. Manufacturers surveyed by Japan’s Ministry of Economy, Trade, and Industry anticipate a strong 5.0% mom rebound in February, followed by a -2.0% mom drop in March.

    On the consumer front, retail sales grew 3.9% yoy in January, slightly missing the 4.0% yoy forecast, but still pointing to resilient domestic demand.

    Fed’s Hammack signals cautious approach, stresses policy patience

    Cleveland Fed President Beth Hammack said Fed has the “luxury of being patient” given the strength of the labor market and the uneven progress in reducing inflation.

    In a speech overnight, she noted that while inflation has moderated, it remains above the 2% target, and policymakers are not yet confident that price pressures will fully subside. As a result, she expects the federal funds rate to stay steady “for some time”.

    Hammack acknowledged that the current policy stance has helped ease inflation, but she warned that risks remain. While Fed anticipates a gradual return to 2% inflation over the medium term, she stressed that this is “far from a certainty.”

    She suggested Fed will need to take a “patient approach” in monitoring how inflation and the labor market adjust before making any policy changes.

    Fed’s Harker says one inflation report shouldn’t sway policy in either direction

    Philadelphia Fed President Patrick Harker noted in a speech overnight that recent inflation data continues to show an uneven path toward the 2% target. He acknowledged that January’s consumer price data came in hotter than expected, marking the fastest increase in 18 months.

    However, he stressed that policymakers should “not be moved to act, in either direction” based on a single month’s data.

    Harker reaffirmed his stance that the Fed’s current policy rate remains sufficiently restrictive to keep inflation in check without undermining overall economic stability.

    Despite inflation’s persistence, Harker remains optimistic about the economic outlook. He stated, “I am of a position that we let monetary policy continue to work.”

    Looking ahead

    Germany will release CPI flash, import prices, retail sales and unemployment in European session. Swiss will release KOF economic barometer.

    Later in the day, Canada will publish GDP. Focus is also on US PCE inflation, goods trade balance and Chicago PMI.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6207; (P) 0.6261; (R1) 0.6291; More…

    AUD/USD’s fall from 0.6407 accelerated lower today and intraday bias stays on the downside for retesting 0.6087 low. Decisive break there will resume larger decline from 0.6941. On the upside, above 0.6284 minor resistance will turn intraday bias neutral first. But outlook will remain bearish as long as 38.2% retracement of 0.6941 to 0.6087 at 0.6413 holds, in case of recovery.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6505) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Tokyo CPI Y/Y Feb 2.90% 3.40%
    23:30 JPY Tokyo CPI Core Y/Y Feb 2.20% 2.30% 2.50%
    23:30 JPY Tokyo CPI Core-Core Y/Y Feb 1.90% 1.90%
    23:50 JPY Industrial Production M/M Jan P -1.10% -0.90% -0.20%
    23:50 JPY Retail Trade Y/Y Jan 3.90% 4.00% 3.70% 3.50%
    00:30 AUD Private Sector Credit M/M Jan 0.50% 0.60% 0.60%
    05:00 JPY Housing Starts Y/Y Jan -2.60% -2.50%
    07:00 EUR Germany Import Price Index M/M Jan 0.70% 0.40%
    07:00 EUR Germany Retail Sales M/M Jan 0.10% -1.60%
    07:45 EUR France Consumer Spending M/M Jan -0.80% 0.70%
    07:45 EUR France GDP Q/Q Q4 -0.10% -0.10%
    08:00 CHF KOF Economic Barometer Feb 102.1 101.6
    08:55 EUR Germany Unemployment Change Jan 15K 11K
    08:55 EUR Germany Unemployment Rate Jan 6.20% 6.20%
    13:00 EUR Germany CPI M/M Feb P 0.40% -0.20%
    13:00 EUR Germany CPI Y/Y Feb P 2.30% 2.30%
    13:30 CAD GDP M/M Dec 0.30% -0.20%
    13:30 USD Personal Income M/M Jan 0.30% 0.40%
    13:30 USD Personal Spending Jan 0.20% 0.70%
    13:30 USD PCE Price Index M/M Jan 0.30% 0.30%
    13:30 USD PCE Price Index Y/Y Jan 2.50% 2.60%
    13:30 USD Core PCE Price Index M/M Jan 0.30% 0.20%
    13:30 USD Core PCE Price Index Y/Y Jan 2.60% 2.80%
    13:30 USD Goods Trade Balance (USD) Jan P -114.9B -122.0B
    13:30 USD Wholesale Inventories Jan P 0.10% -0.50%
    14:45 USD Chicago PMI Feb 40.3 39.5

     



    Source link

  • Dollar Attempts Another Comeback, Aussie Lags

    Dollar Attempts Another Comeback, Aussie Lags


    Dollar traded broadly higher in Asian session, trying to stage a comeback after a failed rally attempt overnight. Renewed focus on tariffs appears to be driving some of the greenback’s momentum. Meanwhile, broader market sentiment is just steady following Nvidia’s strong earnings report, with lingering concerns over competition from China’s DeepSeek AI continue to weigh.

    Tariffs are back in headlines after US Commerce Secretary Howard Lutnick revealed that the “big transaction” involving reciprocal tariffs is set for April 2. The date was pushed from April 1, as US President Donald Trump—citing superstition—chose to avoid making major policy moves on that day.

    Lutnick also noted that Canada and Mexico could avoid the planned 25% tariffs if they can demonstrate sufficient progress on border security and fentanyl control. However, he added that Trump would ultimately decide whether to pause again or proceed with the tariffs.

    Despite Nvidia reporting an impressive 78% year-over-year sales increase and a 93% jump in data center revenue, its struggle to rebound with momentum. The company has yet to fully recover from its 17% drop on January 27—its worst single-day decline since 2020—amid growing concerns about China’s emerging AI competitor, DeepSeek.

    Elsewhere, Aussie is struggling despite comments from a top RBA official suggesting that rate cuts are not on auto-pilot and that further easing would require more disinflation evidence. This cautious stance should have provided some support for the Aussie, but broader risk-off sentiment is keeping the currency under pressure.

    For now, Aussie is sitting at the bottom of today’s performance chart. Kiwi is also underperforming, while Swiss Franc is the third worst performer of the day so far. At the top of the performance table, Dollar leads, followed by Yen and Loonie. Euro and British Pound are positioning in the middle.

    Technically, AUD/JPY’s fall from 102.39 resumed this week and further fall should now be seen to 100% projection of 102.39 to 95.50 from 98.75 at 91.86. As this decline is seen as the second leg of the corrective pattern from 90.10, strong support should be seen around there to bring reversal. But risk will continue to stays on the downside as long as 55 D EMA (now at 96.74) holds, in case of recovery.

    In Asia, at the time of writing, Nikkei is up 0.14%. Hong Kong HSI is down -0.76%. China Shanghai SSE is down -0.49%. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is up 0.036 at 1.402. Overnight, DOW fell -0.43%. S&P 500 rose 0.01%. NASDAQ rose 0.26%. 10-year yield fell -0.049 to 4.249.

    RBA’s Hauser: Global uncertainty justifies rate cut, but more easing depends on disnflation evidence

    RBA Deputy Governor Andrew Hauser told the parliament today that mounting global uncertainty had a chilling effect on economic activity, which played a role in the board’s decision to cut the cash rate by 25 bps this month.

    He noted that businesses are becoming increasingly cautious, delaying investment projects and expansion plans as they wait for clearer economic signals, “just to see how things pan out.”

    This hesitation, he suggested, made a slight easing of monetary policy a “sensible” response to support economic stability.

    However, Hauser emphasized that further rate cuts are not guaranteed and will depend on incoming inflation data. Policymakers remain optimistic about further disinflation but need to see clear evidence before committing to additional policy easing.

    NZ ANZ business confidence rises to 58.4, on the path to recovery

    New Zealand’s ANZ Business Confidence rose from 54.4 to 58.4 in February. However, the Own Activity Outlook, slipped slightly from 45.8 to 45.1, highlighting that while sentiment is improving, actual activity remains uncertain.

    Pricing and cost indicators painted a mixed picture. Inflation expectations for the next year eased from 2.67% to 2.53% and cost expectations fell from 73.6 to 71.3. But wage expectations remained elevated at 79.2 despite fall from 83.1, and pricing intentions ticked up from 45.7 to 46.2.

    ANZ noted that the economy is on the “path to recovery,” supported by lower interest rates and stronger-than-expected commodity export prices. However, the bank cautioned that the next phase of growth remains “a point of debate.”

    The pace of expansion will depend on how households perceive current interest rates, the extent to which global uncertainty influences business investment, and whether firms push forward despite challenges. Additionally, potential labor shortages could emerge as a key constraint on further growth.

    BoE’s Dhingra: Orderly trade fragmentation unlikely to require monetary policy response

    BoE MPC member Swati Dhingra suggested that the inflationary impact of rising global tariffs could be tempered by weaker economic growth.

    She added that if the global economy undergoes a “fragmentation in an orderly way,” monetary policy might not need to react immediately as prices readjust to new geopolitical shifts.

    However, she cautioned that in an “extreme scenario” where multiple major economies erect significant trade barriers similar to those proposed by the US, “severe strain on a few sources of supply” could lead to sharp price spikes, reminiscent of those seen following Russia’s 2022 invasion of Ukraine.

    Despite the risks, Dhingra downplayed the likelihood of a severe disruption, noting that “the world economy seems to be moving closer to an orderly fragmentation.”

    Looking ahead

    Swiss GDP, Eurozone M3 monthly supply will be released in European session. ECB will publish meeting accounts.

    Later in the day, US will release GDP revision, durable goods orders and pending home sales.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8920; (P) 0.8943; (R1) 0.8969; More…

    USD/CHF recovered notably but stays below 0.9053 resistance and intraday bias remains neutral. The corrective pattern from 0.9200 could still extend lower. But strong support should be seen from 38.2% retracement of 0.8374 to 0.9200 at 0.8884 to complete it, and bring larger rise resumption. On the upside, above 0.9053 will bring retest of 0.9200 resistance. However, sustained break of 0.8884 will indicate bearish reversal, and target 61.8% retracement at 0.8690 instead.

    In the bigger picture, decisive break of 0.9223 resistance will argue that whole down trend from 1.0342 (2017 high) has completed with three waves down to 0.8332 (2023 low). Outlook will be turned bullish for 1.0146 resistance next. Nevertheless, rejection by 0.9223 will retain medium term bearishness for another decline through 0.8332 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:00 NZD ANZ Business Confidence Feb 58.4 54.4
    00:30 AUD Private Capital Expenditure Q4 -0.20% 0.60% 1.10% 1.60%
    08:00 CHF GDP Q/Q Q4 0.20% 0.40%
    09:00 EUR Eurozone M3 Money Supply Y/Y Jan 3.80% 3.50%
    10:00 EUR Eurozone Economic Sentiment Feb 96 95.2
    10:00 EUR Eurozone Industrial Confidence Feb -12 -12.9
    10:00 EUR Eurozone Services Sentiment Feb 6.8 6.6
    10:00 EUR Eurozone Consumer Confidence Feb F -13.6 -13.6
    12:30 EUR ECB Meeting Accounts
    13:30 CAD Current Account (CAD) Q4 -3.2B -3.2B
    13:30 USD Initial Jobless Claims (Feb 21) 220K 219K
    13:30 USD GDP Annualized Q4 P 2.30% 2.30%
    13:30 USD GDP Price Index Q4 P 2.20% 2.20%
    13:30 USD Durable Goods Orders Jan 2.00% -2.20%
    13:30 USD Durable Goods Orders ex Transport Jan 0.40% 0.30%
    15:00 USD Pending Home Sales M/M Jan -1.30% -5.50%
    15:30 USD Natural Gas Storage -276B -196B

     



    Source link

  • Dollar Gathers Momentum, Gold Cools Off, Market Jitters Ahead?

    Dollar Gathers Momentum, Gold Cools Off, Market Jitters Ahead?


    Dollar appears to be gathering steam for a stronger, sustainable near-term rebound, although the precise catalyst remains unclear. One contributing factor an undercurrent of risk aversion, which is reflected in the broad selloff in the Australian and New Zealand Dollars. Yet, the overall market picture is mixed, as US stock futures inch higher and Treasury yields hold steady, hardly signaling a deep risk-off move or robust safe-haven flows.

    Another explanation points to traders positioning ahead of Nvidia’s earnings release, due after the bell. With the AI-driven rally serving as a key theme for tech stocks, any surprise in the results could influence wider market sentiment, thereby affecting the currency markets. Additionally, speculation is building around the upcoming March 4 tariff deadline, when US levies on Canada and Mexico—postponed for a month to address border and fentanyl issues—are set to take effect.

    At present, the greenback tops the leaderboard for the day, followed by Sterling and Loonie. Aussie and Kiwi lag, with Swiss Franc also underperforming. Euro and Yen are holding middle ground.

    Technically, considering bearish divergence condition in 4H MACD, a short term top could already be in place in Gold at 2956.09, ahead of 3000 psychological level. Firm break of 2876.93 support should confirm this case, and bring deeper correction to 38.2% retracement of 2584.24 to 2956.09 at 2814.04. If realized, that would be a confirmation for Dollar’s rebound.

    In Europe, at the time of writing, FTSE is up 0.65%. DAX is up 1.69%. CAC is up 1.32%. UK 10-year yield is down -0.0316 at 4.483. Germany 10-year yield is down -0.032 at 2.429. Earlier in Asia, Nikkei fell -0.25%. Hong Kong HSI rose 3.27%. China Shanghai SSE rose 1.02%. Singapore Strait Times fell -0.20%. Japan 10-year JGB yield fell -0.0098 to 1.367.

    German Gfk consumer sentiment drops to -24.7, no sign of recovery yet

    Germany’s GfK Consumer Sentiment Index for March declined further from -22.6 to -24.7, missing expectations of -21.1.

    February data showed income expectations plunging -4.3 points to -5.4, marking a 13-month low, while the economic outlook for the next 12 months improved slightly by 2.8 points to 1.2.

    According to Rolf Bürkl, consumer expert at NIM, the data highlights that “no signs of a recovery” are visible in German consumer sentiment. He noted that headline index has been stuck at a low level since mid-2024, with “great deal of uncertainty among consumers and a lack of planning security”.

    Australia’s monthly CPI holds at 2.5%, core measures edge higher

    Australia’s monthly CPI was unchanged at 2.5% yoy in January, falling short of expectations for a slight uptick to 2.6%.

    However, underlying inflation pressures showed signs of persistence, with CPI excluding volatile items and holiday travel rising from 2.7% yoy to 2.9% yoy. Trimmed mean CPI edged up from 2.7% yoy to 2.8% yoy.

    These figures suggest that while headline inflation appears stable, core price pressures are still lingering, reinforcing RBA’s cautious stance on further easing.

    The largest contributors to annual inflation included food and non-alcoholic beverages (+3.3% yoy), housing (+2.1% yoy), and alcohol and tobacco (+6.4% yoy).This was partly offset by a notable decline in electricity prices, which fell -11.5% yoy.

    AUD/USD Mid-Day Report

    Daily Pivots: (S1) 0.6325; (P) 0.6341; (R1) 0.6360; More…

    AUD/USD’s break of 0.6327 support should confirm short term topping at 0.6407, on bearish divergence condition in 4H MACD. Corrective rebound should have completed just ahead of 38.2% retracement of 0.6941 to 0.6087 at 0.6413. Intraday bias is back on the downside for retesting 0.6087 low. For now, risk will stay on the downside as long as 0.6407 holds, in case of recovery.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6505) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD Monthly CPI Y/Y Jan 2.50% 2.60% 2.50%
    00:30 AUD Construction Work Done Q4 0.50% 0.80% 1.60% 2.00%
    07:00 EUR Germany GfK Consumer Sentiment Mar -24.7 -21.1 -22.4 -22.6
    09:00 CHF UBS Economic Expectations Feb 3.4 17.7
    15:00 USD New Home Sales Jan 677K 698K
    15:30 USD Crude Oil Inventories 2.5M 4.6M

     



    Source link

  • Greenback Drops Ahead of Consumer Data, Risk Sentiment in Focus

    Greenback Drops Ahead of Consumer Data, Risk Sentiment in Focus


    Dollar weakened notably against European majors and Yen as markets transitioned into US session, despite subdued overall trading activity. The decline was largely driven by extended fall in US 10-year Treasury yield, which hit its lowest level since mid-December.

    Beyond geopolitical and trade war concerns, market focus has turned toward whether slowing US consumption and softer economic data could force Fed to resume rate cuts sooner than expected, even as inflation remains elevated. Fed funds futures now price in a near 65% chance of a 25bps rate cut in June, a notable increase from 45% just a week ago.

    The next catalyst for Dollar’s direction will be consumer confidence report, set for release shortly. However, Dollar’s next moves may not be straightforward, as risk aversion—if it intensifies—could provide some support due to safe-haven demand. US stocks, particularly the tech-heavy NASDAQ, could be vulnerable on the upcoming Nvidia earnings report later in the week.

    For now, commodity currencies are under the most pressure, with Kiwi leading the declines. On the other hand, Swiss Franc is the strongest performer, followed closely by Sterling and Euro. Dollar and Yen are positioned in the middle.

    Looking ahead to the Asian session, Australia’s monthly CPI reading will draw attention. Consensus suggests inflation might edge up from 2.5% to 2.6% in January, supporting RBA’s cautious stance even after it initiated its easing cycle earlier this month. Still, a downside surprise would provide RBA with added confidence to proceed with additional rate cuts if economic conditions worsen.

    Technically, EUR/AUD’s rebound is gaining some momentum today. Firm break of 1.6631 resistance will argue that the corrective pattern from 1.6800 has completed, and larger rise from 01.5963 is finally ready to resume through 1.6800.

    In Europe, at the time of writing, FTSE is up 0.47%. DAX is up 0.43%. CAC is up 0.04%. UK 10-year yield is down -0.0475 at 4.525. Germany 10-year yield is down -0.0012 at 2.479. Earlier in Asia, Nikkei fell -1.39%. Hong Kong HSI fell -1.32%. China Shanghai SSE fell -0.80%. Singapore Strait Times fell -0.30%. Japan 10-year JGB yield fell -0.0511 to 1.376.

    ECB’s Nagel expects more rate cuts Amid encouraging price trends

    German ECB Governing Council member Joachim Nagel indicated that incoming data suggests the central bank is on track to achieve its inflation target this year, opening the door for further rate cuts.

    Speaking today, Nagel stated, “This would allow us on the Governing Council to lower the key interest rates further,” reinforcing expectations that ECB will continue its gradual easing cycle.

    However, Nagel also cautioned against premature optimism, highlighting “persistently elevated core inflation and the undiminished strength of services inflation.”

    Bitcoin breaches 90K, double top breakdown could trigger deep correction

    Bitcoin’s selloff intensified today, plunging below the 90k mark and hitting its lowest level since November. The immediate catalyst appears to be last week’s massive hack of USD 1.5B worth of Ether from cryptoexchange Bybit—an incident researchers have labeled the biggest crypto heist on record.

    Although Bybit has announced that it fully restored the stolen Ether, market sentiment remains firmly negative, as traders grow wary of systemic risks and question the exchange’s ability to prevent future breaches.

    Technically, Bitcoin now hovers at a critical juncture. The key 89,127 support level is under heavy pressure, and decisive break there would complete a double top pattern (108368, 108571). Such a development would strongly indicate that a larger-scale correction is underway.

    In the bearish scenario, Bitcoin could be entering a correction of the entire rally from 15,452 (2022 low). The correction could target 73,812 cluster support (38.2% retracement of 15,452 to 109,571 at 73,617) before completion.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2594; (P) 1.2643; (R1) 1.2673; More…

    Intraday bias in GBP/USD stays neutral at this point. Further rise will remain in favor as long as 1.2522 resistance turned support holds. Above 1.2689 will resume the rally from 1.2099 to 1.2810 resistance next. However, firm break below 1.2522 will argue that the rebound might have completed, and bring deeper fall to 1.2331 support.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Corporate Service Price Index Y/Y Jan 3.10% 2.90% 2.90% 3.00%
    07:00 EUR Germany GDP Q/Q Q4 F -0.20% -0.20% -0.20%
    14:00 USD S&P/CS Composite-20 HPI Y/Y Dec 4.30% 4.30%
    14:00 USD Housing Price Index M/M Dec 0.20% 0.30%
    15:00 USD Consumer Confidence Feb 103.3 104.1

     



    Source link

  • Dollar Rises Slightly After Trump Reaffirms March 4 Tariff Plans for Mexico and Canada

    Dollar Rises Slightly After Trump Reaffirms March 4 Tariff Plans for Mexico and Canada


    Dollar gained slightly overnight, buoyed by mild risk aversion and ongoing tariff threats from President Donald Trump. However, the lack of follow-through momentum in the greenback suggests traders remain hesitant to commit to large directional bets amid persistent policy uncertainty.

    US stock market weakness has been most pronounced in the NASDAQ, which fell by more than -1%. Some of this pullback appears related to profit taking ahead of Nvidia’s quarterly results, due on Wednesday. There are concerned about lower demand for AI technology if China’s low-cost DeepSeek gains traction, posing competition to the industry’s current frontrunners.

    Adding to the cautious tone, Trump doubled down on his plan to impose 25% tariffs on Mexico and Canada, stating the levies are “on time, on schedule” for March 4, following a one-month delay. However, markets have been reluctant to react too strongly, given Trump’s history of sudden policy reversals, which adds to the uncertainty surrounding trade relations.

    In currency markets, Euro is currently the strongest performer for the week, followed by Swiss Franc and then Dollar. Meanwhile, Loonie is the worst so far, trailed by Yen and Kiwi. Aussie and Sterling are trading in the middle of the pack. Looking ahead, US consumer confidence data could provide the next directional cue for the market.

    USD/CAD stands out as a pair to watch, especially under the looming tariff threat. Technically, the fall from 1.4791 (considered a correction to the rally from 1.3418) is in favor to continue as long as 1.4378 resistance holds. Break below 1.4150 would open the way to 1.3946 cluster support ( 61.8% retracement of 1.3418 to 1.4791 at 1.3942).

    However, firm break above 1.4378 would suggest the pullback has ended, paving the way for a stronger rebound to retest 1.4791 high.

    In Asia, at the time of writing, Nikkei is down -1.34%. Hong Kong HSI is down -0.62%. China Shanghai SSE is down -0.14%. Singapore Strait Times is down -0.11%. Overnight, DOW rose 0.08%. S&P 500 fell -0.50%. NASDAQ fell -1.21%. 10-year yield fell -0.027 to 4.393.

    Fed’s Goolsbee: Rate cuts on hold until policy uncertainty clears

    Chicago Fed President Austan Goolsbee emphasized the need for caution before resuming rate cuts, citing uncertainty over the economic impact of the Trump administration’s policies.

    Speaking in a TV interview overnight, Goolsbee stated that Fed remains in “wait-and-see” mode as it assesses the effects of new tariffs, immigration policies, tax cuts, government spending reductions, and federal workforce changes.

    Goolsbee made it clear that if the administration’s policies push inflation higher, Fed is obligated by law to respond accordingly. However, he stressed that the overall policy package remains unclear, making it difficult for Fed to determine its next steps.

    “There’s a lot of uncertainty, a lot of kind of dust in the air, and before the Fed can go back to cutting the rates, I feel and have expressed that we got to get a little dust out of the air,” he said.

    BoE’s Dhingra reaffirms dovish stance, signals concern over weak consumption

    BoE MPC member Swati Dhingra, one of the most dovish voices on the committee, reinforced her call for faster rate cuts. She argued that policy remains overly restrictive despite ongoing disinflation.

    Dhingra, who voted for a 50bps rate cut earlier this month, pushed back against the common interpretation that gradual easing cycle means 25bps cuts per quarter, stating that “that’s not actually what the committee has said. That’s not my definition, clearly.” She emphasized that even under the assumption of quarterly 25bps cuts, monetary policy would still be “in restrictive territory all of this year”.

    Her primary concern remains the persistent weakness in consumer spending, stating that “consumption remains pretty weak, so we’re not seeing that resurgence of inflationary pressures.” She also noted that the slow recovery in demand justifies a more accommodative stance, as “we basically aren’t recovering fully.”

    Despite concerns about potential inflationary pressures in certain items, Dhingra maintained that the disinflation process remains intact. She believes the key takeaway is that monetary policy is still restrictive, and reducing the level of restraint would not necessarily derail inflation’s downward trend.

    Her remarks highlight a clear divide within the MPC, where some members advocate patience, while doves like Dhingra and Catherine Mann argue that rate cuts should come sooner and in larger increments.

    Looking ahead

    Germany GDP final will be released in European session. Later in the day, US consumer confidence will be the main focus, and house price index will be published too.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6331; (P) 0.6362; (R1) 0.6379; More…

    AUD/USD is staying in tight range above 0.6327 support and intraday bias stays neutral. On the downside, firm break of 0.6327 will suggest that the corrective rebound from 0.6087 has completed ahead of 38.2% retracement of 0.6941 to 0.6087 at 0.6413. Intraday bias will be turned back to the downside for retesting 0.6087 low. Nevertheless, sustained break of 0.6413 will pave the way back to 61.8% retracement at 0.6615, even still as a correction.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6505) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Corporate Service Price Index Y/Y Jan 3.10% 2.90% 2.90% 3.00%
    07:00 EUR Germany GDP Q/Q Q4 F -0.20% -0.20%
    14:00 USD S&P/CS Composite-20 HPI Y/Y Dec 4.30% 4.30%
    14:00 USD Housing Price Index M/M Dec 0.20% 0.30%
    15:00 USD Consumer Confidence Feb 103.3 104.1

     



    Source link

  • Euro Fades After Brief German Election Boost

    Euro Fades After Brief German Election Boost


    Euro’s brief post-election rally faded quickly, as investors welcomed CDU/CSU’s victory but remained cautious due to lingering uncertainties around coalition formation and fiscal policy. While a relatively centrist government comprising CDU and the Social Democrats would provide stability, challenges surrounding the “debt brake” reform and defense spending continue to cloud the outlook.

    A coalition with the Greens and Social Democrats would likely be the most market-friendly outcome. However, even with these three parties combined, they fall short of the two-thirds parliamentary majority needed to reform the “debt brake”, which limits Germany’s structural budget deficit to 0.35% of GDP. Meanwhile, far-right AfD remains excluded from coalition talks, as Friedrich Merz has ruled out working with them.

    This situation presents a fiscal dilemma for Germany, particularly given geopolitical uncertainties. The government faces pressure to increase both defense spending and broader fiscal stimulus, but policy divisions persist. The Left Party favors loosening the debt brake, but only for social and economic spending, not for increased defense expenditure. These divisions could complicate budget negotiations and delay much-needed investment decisions.

    Bundesbank weighed in on the debate today, backing an increase in the government’s deficit cap, citing the need for higher public investment while Germany’s debt ratio remains low. In its monthly report, the Bundesbank argued that adapting the debt brake’s borrowing limit to current economic conditions is justified, but also stressed the importance of reviewing fiscal priorities and ensuring efficient use of financial resources.

    In the currency markets, trading remains subdued, with major pairs and crosses confined within Friday’s ranges. Canadian, Australian, and New Zealand dollars are the strongest performers, while Yen is the weakest, followed by Swiss Franc and British Pound. Euro and Dollar are mixed in the middle.

    Technically, a major focus is whether the risk market selloff last week would extend today, and its impact in the forex markets. As for AUD/USD, firm break of 0.6327 support will suggest that corrective rebound from 0.6087 has completed ahead of 38.2% retracement of 0.6941 to 0.6087 at 0.6413. Deeper decline would then be seen back to retest 0.6087, with prospects of resuming the whole fall from 0.6941.

    In Europe, at the time of writing, FTSE is down -0.01%/ DAX is up 0.85%. CAC is down -0.22%. UK 10-year yield is up 0.0207 at 4.597. Germany 10-year yield is up 0.020 at 2.493. Earlier in Asia, Japan was on holiday. Hong Kong HSI fell -0.58%. China Shanghai SSE fell -0.18%. Singapore Strait Times fell -0.06%.

    Eurozone CPI finalized at 2.5% in Jan, core CPI holds at 2.7%

    Eurozone headline inflation was finalized at 2.5% yoy in January, ticking up from 2.4% yoy in December. Core CPI, which excludes energy, food, alcohol, and tobacco, remained unchanged at 2.7% yoy.

    The largest contributor to Eurozone inflation was the services sector, which added 1.77 percentage points (pp) to the overall rate. Food, alcohol, and tobacco contributed 0.45 pp, while energy added 0.18 pp, and non-energy industrial goods accounted for 0.12 pp.

    At the EU level, CPI was finalized at 2.8% yoy. The lowest inflation rates were seen in Denmark (1.4%), Ireland, Italy, and Finland (all 1.7%), indicating softer price pressures in some core economies. On the other hand, Hungary (5.7%), Romania (5.3%), and Croatia (5.0%) recorded the highest inflation levels, underlining regional imbalances in price stability.

    Compared to December, inflation fell in eight EU member states, remained unchanged in four, and rose in fifteen.

    German Ifo unchanged at 85.2, businesses waiting to see how things develop

    Germany’s Ifo Business Climate Index was unchanged at 85.2 in February, falling short of expectations for a rise to 85.8. The data reflects that businesses are still “skeptical” about the outlook, “waiting to see how things develop”, according to the Ifo Institute.

    Current Assessment Index dropped from 86.0 to 85.0, missing the forecasted 86.5. However, Expectations Index showed slight improvement, rising from 84.3 to 85.4, exceeding the consensus of 85.2.

    Sector-wise, the manufacturing index improved from -24.8 to -22.1, and trade sentiment rebounded from -29.5 to -26.2. The construction sector also saw a marginal improvement, rising from -28.1 to -27.6. However, services weakened, falling from -2.2 to -4.3.

    New Zealand retail sales rises 0.9% qoq in Q4, ex-auto sales jumps 1.4% qoq

    New Zealand’s Q4 retail sales volume rose 0.9% qoq to NZD 25B, surpassing expectations of 0.6% qoq. Excluding autos, sales jumped 1.4% qoq, well above the 0.3% qoq forecast.

    Sales volume growth was broad-based, with 10 of 15 industries posting gains. The largest increases came from electrical and electronic goods (+5.1%), department stores (+4.2%), and accommodation (+7.6%). Meanwhile, food and beverage services rose 2.3%, but pharmaceutical and other retailing declined -3.4%.

    Retail sales value climbed 1.4% qoq to NZD 30B, with 11 of 15 sectors reporting gains. Price effects were evident, particularly in accommodation (+11%), food and beverage services (+3.3%), and department stores (+2.9%).

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0436; (P) 1.0474; (R1) 1.0499; More…

    EUR/USD’s rally attempt today quickly lost momentum and intraday bias stays neutral. Outlook is unchanged that price actions from 1.0176 are forming a corrective pattern only. Strong resistance is expected from 38.2% retracement of 1.1213 to 1.0176 at 1.0572 to limit upside. On the downside, break of 1.0400 support will turn bias back to the downside for 1.0176/0210 support zone. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

    In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Retail Sales Q/Q Q4 0.90% 0.60% -0.10% 0.00%
    21:45 NZD Retail Sales ex Autos Q/Q Q4 1.40% 0.30% -0.80% -0.60%
    09:00 EUR Germany IFO Business Climate Feb 85.2 85.8 85.1 85.2
    09:00 EUR Germany IFO Current Assessment Feb 85 86.5 86.1 86
    09:00 EUR Germany IFO Expectations Feb 85.4 85.2 84.2 84.3
    10:00 EUR Eurozone CPI Y/Y Jan F 2.50% 2.50% 2.50%
    10:00 EUR Eurozone CPI Core Y/Y Jan F 2.70% 2.70% 2.70%

     



    Source link

  • Risk Aversion Returns as US Tariff Fears Resurface, Dollar Recovers Late

    Risk Aversion Returns as US Tariff Fears Resurface, Dollar Recovers Late


    Geopolitical developments dominated global headlines last week, particularly surrounding peace negotiations over Russia’s invasion of Ukraine and evolving US-Ukraine relations. While US President Donald Trump’s tariffs took a backseat, concerns over their impact on consumer spending and economic growth resurfaced by the end of the week, triggering renewed risk aversion.

    Markets lacked clear direction for most of the week, with major assets struggling to gain momentum in either direction. However, risk sentiment soured late in the week as fresh worries emerged over the potential inflationary effects of tariffs, particularly on US consumers. This shift in tone could set the market narrative for the near term.

    Against this backdrop, Dollar initially struggled but recovered some ground by the week’s close, finishing as the third worst performer overall. The late-week risk-off mood helped Dollar stabilize, with Dollar Index showing potential for a rebound off key Fibonacci support if risk aversion deepens further.

    Euro finished as the second weakest currency, partly weighed down by disappointing PMI data. Hopes for a political boost from German election over the weekend could be short-lived, as renewed US tariff threats may quickly drag Euro lower again. The worst performer was Canadian Dollar, which faced additional pressure from concerns over trade and slowing economy.

    In contrast, Yen emerged as the strongest currency, benefiting from increasing speculation of an earlier-than-expected BoJ rate hike. Divergence in yields also provided support, as Japan’s JGB yields rose while US Treasury yields declined.

    Sterling and the Swiss Franc were the second and third strongest, respectively, as both benefited from uncertainty surrounding Euro. Australian and New Zealand Dollars ended mixed, weighed down by the late-week risk aversion. However, Kiwi ended up with a slight upper hand over Aussie.

    Stocks Slide as Consumer Confidence Plunges, Dollar Index Holds Key Support

    US stocks ended the week notably lower as earlier resilience turned into steep selloff on Friday. S&P 500, which had set a new record high, ended the week with -1.7% loss, while DOW and NASDAQ both fell -2.5%. DOW’s -700-point drop on Friday marked its worst trading day of the year, catching many investors off guard and raising concerns over broader market sentiment.

    At the heart of the selloff was the unexpected deterioration in consumer sentiment. The University of Michigan Consumer Sentiment Index for February was finalized at 64.7, significantly below January’s 71.7 and the preliminary reading of 67.8. This was the lowest level since November 2023, signaling growing unease among US households about economic conditions.

    Adding to market anxiety, inflation expectations surged. Households now expect inflation over the next year to rise to 4.3%, the highest since November 2023, up from 3.3% last month. Over the next five years, inflation expectations climbed to 3.5%, the highest level since 1995, compared to 3.2% in January.

    Some analysts attribute the drop in sentiment to uncertainty over US President Donald Trump’s policies, particularly the potential for inflationary effects from new tariffs. The University of Michigan noted that the deterioration in sentiment was led by the -19% drop in buying conditions for durable goods, as consumers fear tariff-driven price hikes. Additionally, expectations for personal finances and the short-run economic outlook fell by nearly -10%.

    However, there are differing views on the inflationary impact of tariffs. Some analysts argue that Trump’s tariff threats are more of a strategic negotiation tool aimed at broader geopolitical objectives, such as pressuring Canada and Mexico on fentanyl issues. If these concerns fade, inflation expectations could retreat, allowing consumer confidence to rebound.

    Technically, DOW’s steep decline and strong break of 55 D EMA (now at 43848.97) is clearly a near term bearish sign. However, current fall from 45054.36 are seen as the third leg of the corrective pattern from 45073.63 only. Hence, while deeper fall could be seen to medium term rising channel support (now at around 42530) or below, strong support should emerge around 41884.89 to complete the pattern and bring up trend resumption.

    However, decisive break of 41844.89 will complete a double top reversal pattern (45073.63, 45054.36). DOW would then be at least in correction to the up trend form 32327.20. That would open up deeper correction to 38.2% retracement of 32327.20 to 45054.36 at 40204.49, or even further to 38499.27 support. But then, this is far from being the base scenario at this point.

    For now, Dollar Index is still sitting above 38.2% retracement of 100.15 to 110.17 at 106.34. Near term risk aversion could help Dollar Index defend this support level, with prospect of a bounce from there. Firm break of 55 D EMA (now at 107.40) should bring stronger rally back towards 110.17 high. However, Decisive break below the 106.34 support would deepen the decline to 61.8% retracement at 103.98, even still as a correction.

    Yen Ends Week Strong as BoJ Might Hike Rates Again Sooner

    Yen ended last week as the best-performing currency, thanks to robust inflation data and hawkish remarks from BoJ officials. The rally briefly paused midweek after BoJ Governor Kazuo Ueda signaled readiness to intervene in the bond market, causing Japan’s 10-year JGB yield to retreat from its 15-year high. However, this setback proved temporary, as Yen quickly regained strength amid rising risk aversion and falling US Treasury yields.

    According to the latest Reuters poll, 65% of economists (38 out of 58) expect BoJ to raise rates from 0.50% to 0.75% in July or September. Among the 39 analysts who gave a specific month, 59% (23 respondents) chose July, while 15% (six analysts) expected a June hike. The remaining 10 analysts were evenly split between April and September.

    However, stronger-than-anticipated inflation could give BoJ further cause to pull the timetable forward. Last week’s data already showed core CPI surging more than expected to 3.2% in January, marking the fastest pace in 19 months. If consumer price pressures remain elevated, markets speculate that policymakers might prefer to act sooner rather than wait for the second half.

    The April 30 – May 1 policy meeting could stand out as an appropriate window for BoJ to act. By then, BoJ will have access to Shunto wage negotiation results and an updated economic outlook, providing the necessary justification for an earlier rate hike.

    USD/JPY’s extended decline last week suggests that rebound from 139.57 has already completed with three waves up to 158.86. Fall from 158.86 is now seen as the third leg of the pattern from 161.94.

    Deeper fall is expected as long as 150.92 support turned resistance holds, to 61.8% retracement of 139.57 to 158.86 at 146.32. Firm break there will pave the way back to 139.57. Meanwhile, break of 150.92 will delay the bearish case and bring some consolidations first.

    Any extended USD/JPY weakness should limit Dollar’s rebound. However, this alone shouldn’t be enough to push DXY below key fibonacci support at 106.34 mentioned above.

    AUD/NZD Reverses after RBA and RBNZ Rate Cuts

    Both RBA and RBNZ delivered rate cuts last week, with RBA lowering its cash rate by 25bps to 4.10% and RBNZ cutting by 50bps to 3.75%, in line with expectations.

    RBA maintained a cautious tone, with Governor Michele Bullock emphasizing “patience” before considering another cut. The accompanying statement warned against easing “too much too soon,” highlighting concerns that disinflation progress could stall and inflation could settle above the midpoint of the target range if policy is loosened aggressively.

    Australian economic data also reinforced RBA’s cautious stance, with strong job growth and elevated wage pressures supporting a measured pace of policy easing.

    Meanwhile, RBNZ delivered a more defined path for easing, with Governor Adrian Orr clearly ruling out further 50bps cuts barring an economic shock. Instead, the central bank has outlined two additional 25bps cuts in the first half of the year.

    In the currency markets, AUD/NZD saw a sharp decline, falling back toward its 55 D EMA (now at 1.1063). The key driver of this move is likely the perception that RBNZ is nearing the end of its rate-cutting cycle, while RBA has only just begun easing, leaving room for further reductions if economic conditions weaken.

    With the OCR at 3.75% already close to the neutral band, there is limited downside for RBNZ, while RBA at 4.10% has more room to cut rates. This policy divergence, particularly if Australia’s economy slows further due to trade tensions between US and China, could keep downward pressure on AUD/NZD in the near term.

    Technically, sustained trading below 55 D EMA should confirm rejection by 1.1177 resistance. Fall from 1.1173 would be seen as the third leg of the corrective pattern from 1.1177. Further break of near term channel support (now at 1.1029) would pave the way back to 1.0940 support next.

    EUR/USD Weekly Outlook

    Range trading continued in EUR/USD last week and outlook is unchanged. Initial bias remains neutral this week first. Price actions from 1.0176 are seen as a corrective pattern only. IN case of further rise, upside should be limited by 38.2% retracement of 1.1213 to 1.0176 at 1.0572. On the downside, break of 1.0400 support will turn bias back to the downside for 1.0176/0210 support zone. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

    In the bigger picture, focus stays on on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, strong rebound from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    In the long term picture, down trend from 1.6039 remains in force with EUR/USD staying well inside falling channel, and upside of rebound capped by 55 M EMA (now at 1.0929). Consolidation from 0.9534 could extend further and another rising leg might be seem. But as long as 1.1274 resistance holds, eventual downside breakout would be mildly in favor.



    Source link

  • Kiwi Wobbles After RBNZ Cut, Markets Eye UK CPI and FOMC Minutes

    Kiwi Wobbles After RBNZ Cut, Markets Eye UK CPI and FOMC Minutes


    New Zealand Dollar initially weakened following RBNZ’s 50bps rate cut today, but quickly regained ground as Governor Adrian Orr indicated that the pace of easing will slow in the coming months. Orr suggested that the central bank is likely to implement just more 25bps cuts, in April and May, provided that economic conditions unfold as expected. However, the Kiwi’s upside remains limited, as RBNZ revised its terminal rate forecast downward to 3.1% by year-end, slightly below November’s projection of 3.2%.

    Technically, we’d maintain the view that AUD/NZD’s choppy rise from 1.0940 is a corrective move. So upside should be limited by 1.1177 resistance to bring near term reversal. Break of 1.1071 support will argue that the pattern from 1.1177 has started the third leg, and should decline towards 1.0940 support next.

    Outside of NZD-driven moves, the broader forex market remains subdued, with a lack of major catalysts. Dollar is the weakest performer of the day so far, as the momentum from this week’s recovery has faded. Traders are now looking ahead to FOMC minutes, though they are unlikely to provide new insights, instead reaffirming that Fed remains cautious and in no hurry to cut rates again.

    British Pound is also under pressure, ranking as the second weakest currency, as investors await the release of UK CPI data. A hot inflation print could diminish expectations for a consecutive BoE rate cut in March, potentially offering some relief to the currency. Swiss franc rounds out the three weakest performers, showing broad softness.

    On the stronger side, New Zealand Dollar leads the market. Yen follows, benefiting from continued speculation over future BoJ policy hikes, while the Australian Dollar also holds firm. Euro and Canadian Dollar are positioning in the middle.

    In Asia, at the time of writing, Nikkei is down -0.38%. Hong Kong HSI is down -0.28%. China Shanghai SSE is up 0.54%. Singapore Strait Times is up 0.11%. Japan 10-year JGB yield is up 0.002 at 1.439. Overnight, DOW rose 0.02%. S&P 500 rose 0.24%. NASDAQ rose 0.07%. 10-year yield rose 0.072 to 4.544.

    RBNZ cuts by 50bps, signals further easing through 2025

    RBNZ cut the Official Cash Rate (OCR) by 50bps to 3.75%, as widely expected, while maintaining a clear easing bias.

    The central bank stated that “if economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” According to the latest projections, the OCR is expected to decline to 3.1% by year-end and remain at that level until early 2028.

    RBNZ acknowledged that economic activity remains subdued, though it expects growth to recover in 2025, driven by lower interest rates encouraging spending. However, elevated global economic uncertainty is likely to weigh on business investment. The bank also noted that inflation is expected to be volatile in the near term, influenced by a weaker exchange rate and higher petrol prices.

    Regarding global risks, the RBNZ flagged concerns and warned that higher global tariffs could slow growth in key trading partners, dampening demand for New Zealand exports and weakening domestic economic momentum over the medium term.

    However, the impact on inflation is “ambiguous”, depending on factors such as trade diversion, supply-chain adjustments, and financial market reactions.

    Australian wages growth slow 0.7% qoq, pressures easing

    Australia’s wage price index rose 0.7% qoq in Q4, marking a slowdown from 0.9% qoq and missing expectations of 0.8% qoq. This matches the lowest quarterly growth since March 2022, reinforcing signs that wage pressures are easing, albeit still elevated.

    On an annual basis, wages increased 3.2% yoy, making it the slowest pace since Q3 2022. Private sector wage growth came in at 3.3% yoy, the weakest since Q2 2022. Public sector wages rose 2.8% yoy, falling below 3% for the first time since Q2 2023.

    BoJ’s Takata: Gradual policy shifts should continue beyond January hike

    BoJ Board Member Hajime Takata emphasized the need for the central bank to continue to “implement gear shifts gradually, even after the additional rate hike decided in January 2025”, to mitigate the risk of rising prices and financial market overheating.

    Takata noted in a speech today that as “positive corporate behavior” persists, BoJ should consider a “further gear shift” in policy.

    He highlighted three key risks that could drive prices above BoJ’s baseline scenario: a stronger wage-price cycle, inflationary pressures from domestic factors, and market volatility, especially in the exchange rates, stemming from a recovery in the US economy.

    Nevertheless, due to uncertainties surrounding the US economy and the challenge of identifying the neutral interest rate, Takata advocated for a “vigilant approach”.

    Japan’s trade deficit widens as imports surge, exports to China drop

    Japan’s trade deficit expanded sharply in January, reaching JPY -2.759T, the largest shortfall in two years, as imports surged 16.7% yoy, far exceeding the expected 9.3% yoy gain.

    Meanwhile, exports rose 7.2% yoy, falling slightly short of the 7.7% yoy forecast, with strong shipments to the U.S. (+18.1% yoy) offset by a -6.2% yoy decline in exports to China.

    On a seasonally adjusted basis, exports declined -2.0% mom to JPY 9.253T, while imports climbed 4.7% mom to JPY 10.109T, leading to a JPY -857B trade deficit.

    Looking ahead

    UK CPI is the main focus in European session. EUrozone will release current account. Later in the day, main focus is on FOMC minutes while US will also publish building permits and housing starts.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6335; (P) 0.6352; (R1) 0.6368; More…

    Intraday bias in AUD/USD stays neutral for consolidations below 0.6373 temporary top. Rebound from 0.6087 is seen as a correction to the fall from 0.6941. In case of another rise, upside should be limited by 38.2% retracement of 0.6941 to 0.6087 at 0.6413. On the downside, break of 0.6234 support will suggest that the rebound has completed as a correction, and turn bias back to the downside for retesting 0.6087 low. Nevertheless, sustained break of 0.6413, will pave the way back to 61.8% retracement at 0.6615.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6504) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD PPI Input Q/Q Q4 -0.90% 1.40% 1.90%
    21:45 NZD PPI Output Q/Q Q4 -0.10% 1.10% 1.50%
    23:50 JPY Machinery Orders M/M Dec -1.20% 0.30% 3.40%
    23:50 JPY Trade Balance (JPY) Jan -0.86T -0.24T -0.03T -0.22T
    00:30 AUD Wage Price Index Q/Q Q4 0.70% 0.80% 0.80% 0.90%
    01:00 NZD RBNZ Rate Decision 3.75% 3.75% 4.25%
    07:00 GBP CPI M/M Jan -0.30% 0.30%
    07:00 GBP CPI Y/Y Jan 2.80% 2.50%
    07:00 GBP Core CPI Y/Y Jan 3.70% 3.20%
    07:00 GBP RPI M/M Jan -0.10% 0.30%
    07:00 GBP RPI Y/Y Jan 3.70% 3.50%
    07:00 GBP PPI Input M/M Jan 0.70% 0.10%
    07:00 GBP PPI Input Y/Y Jan -0.50% -1.50%
    07:00 GBP PPI Output M/M Jan 0.20% 0.10%
    07:00 GBP PPI Output Y/Y Jan 0.10% 0.10%
    07:00 GBP PPI Core Output M/M Jan 0%
    07:00 GBP PPI Core Output Y/Y Jan 1.50%
    09:00 EUR Eurozone Current Account (EUR) Dec 30.2B 27.0B
    13:30 USD Building Permits Jan 1.45M 1.48M
    13:30 USD Housing Starts Jan 1.39M 1.50M
    19:00 USD FOMC Minutes

     



    Source link

  • RBA’s Cautious Easing Leaves AUD Supported, USD/JPY Ready for a Bounce?

    RBA’s Cautious Easing Leaves AUD Supported, USD/JPY Ready for a Bounce?


    Australian Dollar initially dipped after RBA’s widely expected rate cut, but the move was short-lived as the currency quickly stabilized. RBA’s cautious tone on further easing provided underlying support for the Aussie. The central bank made it clear that while policy easing has begun, it is not committing to a rapid or continuous rate-cut cycle.

    The updated economic projections justify RBA’s cautious stance. Trimmed mean CPI is expected to stay at 2.7% throughout the forecast horizon, remaining above the midpoint of the RBA’s 2-3% inflation target. Meanwhile, the unemployment rate forecast was lowered to 4.2% and is expected to hold steady, indicating a persistently tighter-than-expected labor market.

    RBA’s own cash rate assumptions suggest a drop to 3.60% by the end of 2025, implying just two more cuts before a prolonged pause. This guidance is against expectations for an aggressive easing cycle and could help limit AUD downside in the near term.

    In the broader currency market, Dollar leads as the strongest performer of the day so far, recovering some of last week’s losses. Loonie follows as second, while Aussie holds third place. In contrast, Kiwi is the weakest, followed by Yen and Euro. Swiss Franc and Sterling are hovering in the middle of the pack.

    Market focus now shifts to key upcoming economic data releases, including UK GDP, German ZEW economic sentiment, and Canadian CPI.

    Technically, a main focus for today is whether USD/JPY could stage an extended rebound after drawing support from 38.2% retracement of 139.57 to 158.86 at 151.4 for the second time. Firm break of 55 4H EMA (now at 152.08) will be the first signal of bottoming. Firm break of 154.79 resistance will revive near term bullishness for resuming the rally from 139.57 at a later stage.

    In Asia, at the time of writing, Nikkei is up 0.68%. Hong Kong HSI is up 1.94%. China Shanghai SSE is up 0.29%. Singapore Strait Times is up 0.25%. Japan 10-year JGB yield is up 0.0158 at 1.408.

    RBA cuts rates, but warns against easing too much too soon

    RBA lowered its cash rate target by 25bps to 4.10%, as widely anticipated, but signaled a cautious approach to further easing.

    In its statement, the central bank emphasized that monetary policy will remain restrictive even after today’s reduction, warning that if rates are “eased too much too soon”, disinflation progress could stall and inflation could settle above the midpoint of the target range.

    RBA acknowledged that some upside risks to inflation “appear to have eased”, and disinflation may be unfolding “a little more quickly than earlier expected”. However, it maintained that “risks on both sides” remain.

    While today’s cut reflects the central bank’s confidence in recent progress, policymakers remain “cautious about the outlook”, reinforcing the idea that future easing will be data-dependent rather than pre-committed.

    In the new economic projections:

    • Headline CPI is now projected to rise to 3.7% by the end of 2025, before gradually easing to 2.8% by the end of 2026 (raised from 2.5%), and settling at 2.7% by mid-2027.
    • Trimmed mean CPI is expected to remain at 2.7% throughout 2025, 2026, and mid-2027.
    • Unemployment rate forecast was lowered to 4.2% across the projection horizon
    • Year-average GDP growth was revised down by 0.1% to 2.1% for 2025, while 2026 remains unchanged at 2.3%, with growth expected to hold steady at 2.3% into 2026/2027.
    • Cash rate assumptions suggest an average rate of 3.6% in 2025, followed by 3.5% in 2026.

    Fed’s Waller downplays tariff impact, warns against policy paralysis

    Fed Governor Christopher Waller downplayed concerns that tariffs would have a significant, lasting impact on inflation, stating that their effect is likely to be “modest” and “non-persistent.” As a result, he favors “looking through” these effects when setting policy.

    In a speech overnight, he emphasized that while economic uncertainty remains, Fed cannot afford to fall into a “recipe for policy paralysis” by waiting for absolute clarity regarding the administration’s policies.

    However, he conceded that tariffs could have a larger impact than expected, depending on their size and implementation. At the same time, he pointed out that other policies under discussion could have positive supply-side effects, helping to ease inflationary pressures.

    Waller defended Fed’s decision to hold rates steady in January, arguing that the current economic data “are not supporting a reduction in the policy rate at this time.”

    He left the door open for future rate cuts, stating that “if 2025 plays out like 2024, rate cuts would be appropriate at some point this year.”

    Looking ahead

    UK employment data is the main focus in European session, along with German ZEW economic sentiment. Later in the data, attention will be on Canada CPI. US will release Empire state manufacturing index and NAHB housing index.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6345; (P) 0.6359; (R1) 0.6372; More…

    Intraday bias in AUD/USD is turned neutral as rebound from 0.6087 lost moment, as seen in 4H MACD, after hitting 0.6373. On the downside, break of 0.6234 support will suggest that the rebound has completed as a correction, and turn bias back to the downside for retesting 0.6087 low. Nevertheless, sustained break of 38.2% retracement of 0.6941 to 0.6087 at 0.6413, will pave the way back to 61.8% retracement at 0.6615.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6504) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    03:30 AUD RBA Rate Decision 4.10% 4.10% 4.35%
    07:00 GBP Claimant Count Change Jan 10.0K 0.7K
    07:00 GBP ILO Unemployment Rate (3M) Dec 4.50% 4.40%
    07:00 GBP Average Earnings Including Bonus 3M/Y Dec 5.90% 5.60%
    07:00 GBP Average Earnings Excluding Bonus 3M/Y Dec 5.90% 5.60%
    10:00 EUR Germany ZEW Economic Sentiment Feb 20.2 10.3
    10:00 EUR Germany ZEW Current Situation Feb -89 -90.4
    10:00 EUR Eurozone ZEW Economic Sentiment Feb 25.4 18
    13:30 USD Empire State Manufacturing Index Feb -1 -12.6
    13:30 CAD CPI M/M Jan 0.10% -0.40%
    13:30 CAD CPI Y/Y Jan 1.80%
    13:30 CAD CPI Media Y/Y Jan 2.40% 2.40%
    13:30 CAD CPI Trimmed Y/Y Jan 2.60% 2.50%
    13:30 CAD CPI Common Y/Y Jan 2.00% 2.00%
    15:00 USD NAHB Housing Index Feb 47 47

     



    Source link

  • Yen Rallies as Strong GDP Fuels BoJ Rate Hike Speculation

    Yen Rallies as Strong GDP Fuels BoJ Rate Hike Speculation


    Yen gained strength across the board after Japan’s Q4 GDP growth exceeded expectations, with both private consumption and capital investment rebounding. This development supports BoJ’s decision to hike in January and has fueled speculation that another rate increase could arrive sooner than expected.

    It’s now seen by some economists that the timing of the next BoJ move will largely hinge on the outcome of the Shunto wage negotiations, with markets eyeing a hike as early as May if wage growth matches 2024 levels.

    Beyond Japan, Aussie and Kiwi have maintained their footing, benefitting from a mildly positive risk-on sentiment, even as both the RBA and RBNZ are expected to cut interest rates this week. Meanwhile, Dollar continues to struggle, extending its losses from last week. Euro and Swiss Franc are also on the softer side, while Loonie and Sterling trade mixed.

    AUD/NZD would be a pair to watch this week with some bearish risks. Technically, choppy recovery from 1.0940 is likely just a corrective move. Hence, in case of another upside, upside should be limited by 1.1177 resistance. On the downside, firm break of the near term rising channel support (now at 1.1023) will argue that the recovery has already complete at 1.1141. Deeper decline should be seen back towards 1.0940 support as the third leg of the pattern from 1.1177.

    In Asia, at the time of writing, Nikkei is down -0.01%. Hong Kong HSI is down -0.45%. China Shanghai SSE is down -0.44%. Singapore Strait Times is up 0.49%. Japan 10-year JGB yield is up 0.0114 at 1.368.

    Japan’s Q4 GDP beats forecasts with 0.7% qoq growth

    Japan’s economy expanded by 0.7% qoq in Q4 2024, surpassing market expectations of 0.3% qoq and improving from the previous quarter’s 0.4% qoq rise. On an annualized basis, GDP grew 2.8%, significantly above 1.0% forecast and accelerating from Q3’s 1.7% pace.

    Private consumption, which accounts for over half of Japan’s economic output, edged up by 0.1% qoq, defying expectations of a -0.3% qoq contraction. However, it slowed sharply from the 0.7% qoq increase recorded in Q3, reflecting a cautious spending environment.

    Capital spending improved by 0.5% qoq, reversing the -0.1% qoq decline in Q3, but fell short of the anticipated 1.0% qoq rise.

    Price pressures continued climbing, with the GDP deflator inching up from 2.4% yoy to 2.8% yoy.

    Despite the strong Q4 performance, full-year 2024 GDP growth slowed sharply to 0.1%, a steep decline from the 1.5% expansion in 2023.

    NZ BNZ services rises to 50.4, stabilization rather than elevation

    New Zealand BusinessNZ Performance of Services Index climbed from 48.1 to 50.4 in January, marking a return to expansion after four consecutive months of contraction. While this signals some improvement, the index remains below its long-term average of 53.1.

    A closer look at the components reveals a mixed picture. Activity/sales saw a notable rebound, rising from 46.5 to 54.0, while new orders/business ticked up slightly from 49.4 to 50.0. Stocks/inventories also edged into expansion territory at 50.1, up from 48.9. However, employment continued to struggle, slipping from 47.4 to 47.1. Supplier deliveries showed minimal improvement, moving from 47.7 to 47.8.

    Despite the headline figure turning positive, sentiment remains weak. The proportion of negative comments rose to 61.9% in January, up from 57.5% in December and 53.6% in November. Respondents cited economic uncertainty and broader downturn concerns as key issues.

    BNZ’s Senior Economist Doug Steel noted that the PSI reflects “stabilization rather than elevation,” highlighting that while the upward move is a positive sign, the sector is far from robust growth.

    RBA, RBNZ rate cuts, FOMC minutes, and more

    The upcoming week is set to be highly eventful for global markets, with two major central bank meetings and a packed economic calendar. RBA and RBNZ are both expected to lower interest rates. Additionally, investors will scrutinize Fed’s January FOMC minutes to gauge the timing and conditions for policy shifts. Meanwhile, key economic indicators from the UK, Eurozone, Canada, and Japan will provide further insights into their economic trends.

    RBA is widely expected to cut interest rates by 25 bps to 4.10%, marking its first rate reduction in this cycle. The decision follows the latest Q4 trimmed mean CPI, which revealed stronger-than-expected disinflation. Market participants will closely analyze the accompanying Statement on Monetary Policy for clues on the outlook. Some analysts anticipate a steady quarterly pace of 25 bps cuts, which could bring the cash rate to a neutral level of 3.35% by the end of the year.

    RBNZ is expected to move more aggressively, with a 50 bps cut to 3.75%, as it seeks to transition its policy stance toward a neutral level of 2.50%-3.50%. However, with the rate approaching this estimated range, the central bank may soon opt for smaller rate cuts moving forward. Investors will carefully assess the updated Monetary Policy Statement to determine whether RBNZ signals a slowdown in its pace of easing and to gauge expectations for the terminal rate of this cycle.

    Fed’s January FOMC meeting minutes will provide additional insights into policymakers’ discussions on the policy outlook. It is well understood that Fed is in no rush to resume policy easing, given persistent inflation and other risks. However, investors will be looking for answers to key questions: What conditions would trigger a resumption of rate cuts? When does the Fed expect this to happen? Is a rate hike completely off the table?

    BoE’s rate path has been relatively uncertain in recent weeks. The stronger-than-expected Q4 UK GDP data has significantly reduced the likelihood of a back-to-back rate cut in March. However, this week’s UK employment, wage growth, CPI, retail sales, and PMI reports will be critical in shaping market expectations. If these indicators show resilience in the economy and inflation remains sticky, markets will likely fully revert to pricing in a gradual, one-cut-per-quarter approach.

    For Euro and DAX, German ZEW Economic Sentiment and Eurozone PMIs will be particularly important. If these data points confirm that Germany’s sluggish economy is finally starting to turnaround, it would provide a significant boost to investor sentiment and strengthen the case for continued DAX and Euro gains. Apart from central bank decisions, inflation data from Canada and Japan will also be closely watched.

    Here are some highlights for the week:

    • Monday: New Zealand BNZ services; Japan GDP; Eurozone trade balance.
    • Tuesday: RBA rate decision; UK employment; German ZEW economic sentiment; Canada CPI; US Empire state manufacturing, NAHB housing index.
    • Wednesday: New Zealand PPI; Japan trade balance, machine orders; Australia wage price index; RBNZ rate decision; UK CPI, PPI; Eurozone current account; US building permits and housing starts, FOMC minutes.
    • Thursday: Australia employment; Swiss trade balance; Germany PPI; Canada IPPI and RMPI; US jobless claims, Philly Fed survey.
    • Friday: New Zealand trade balance; Australia PMIs; Japan CP, PMIs; UK Gfk consumer confidence, retail sales; PMIs; Eurozone PMIs; Canada retail sales; US PMIs, existing home sales.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 151.83; (P) 152.49; (R1) 152.96; More…

    Intraday bias in USD/JPY stays neutral first. Strong support from 38.2% retracement of 139.57 to 158.86 at 151.49 would maintain near term bullishness. On the upside, break of 154.79 will revive the case that correction from 158.86 has completed at 150.29. Further rise should be seen to retest 158.86 high. However, break of 150.92 and sustained trading below 151.49 will raise the chance of trend reversal, and target 148.64 support instead.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PSI Jan 50.4 47.9 48.1
    23:50 JPY GDP Q/Q Q4 P 0.70% 0.30% 0.30% 0.40%
    23:50 JPY GDP Deflator Y/Y Q4 P 2.80% 2.80% 2.40%
    04:30 JPY Tertiary Industry Index M/M Dec 0.10% 0.20% -0.30%
    04:30 JPY Industrial Production M/M Dec -0.20% 0.30% 0.30%
    10:00 EUR Eurozone Trade Balance (EUR) Dec 15.0B 12.9B
    13:15 CAD Housing Starts Jan 250K 231K

     



    Source link

  • Dollar at Crossroads: Rebound Possible, But Bearish Risks Intensify

    Dollar at Crossroads: Rebound Possible, But Bearish Risks Intensify


    Dollar closed the week broadly lower, with the only exception being its slight gains against the even weaker Yen. Risk-on sentiment dominated global markets, fueling strong rallies in equities across the US, Europe, and Hong Kong, which in turn kept the greenback under pressure.

    The greenback had previously enjoyed a tariff-driven boost earlier in the month, but that narrative has largely unwound following the delay in implementing reciprocal tariffs. This shift has more than offset growing expectations that Fed will maintain a prolonged pause in rate cuts.

    Dollar Index is now at a critical technical juncture. A bounce from current levels is possible. However, if risk-on sentiment persists and intensifies, deeper pullback could materialize, with risk of leading to bearish trend reversal.

    While Dollar’s outlook appears increasingly vulnerable, other major currencies are struggling to establish clear directions. Most non-dollar pairs and crosses ended the week within their prior ranges, reflecting a lack of conviction among traders.

    Euro emerged as the strongest performer. Sterling followed behind, and then Aussie. On the weaker side, Yen underperformed the most, Dollar and Loonie followed in the lower tier. Swiss franc and Kiwi ended in middle positions.

    S&P 500 Nears Record as Markets Welcome Reciprocal Tariff Delay

    Investor sentiment in the US was broadly positive with major stocks indexes closing the week higher. S&P 500 even surged to just below its record high. Fed’s pause in its policy easing cycle is likely to continue for an extended period, but the market seems unfazed. Instead, focuses were on robust economic fundamentals and easing immediate tariff risks.

    A key driver of the upbeat mood is US President Donald Trump’s plan for reciprocal tariffs, which, for the moment, lacks immediate enforcement. The administration has pledged to investigate and develop country-specific tariffs by April 1 under the guidance of Commerce Secretary. That would potentially provide ample time for negotiations and compromises with major trading partners. As a result, immediate trade disruptions appear unlikely, prompting relief in equity markets.

    Meanwhile, Fed Chair Jerome Powell reiterated in his semiannual testimony to Congress that the central bank is in “no hurry” to cut interest rates again. Market participants have largely adjusted their expectations for the next Fed rate cut, now anticipating it more likely in the second half of the year rather than the first.

    Powell’s message also aligns with the data: January’s CPI and core CPI both accelerated, and PPI also exceeded expectations, indicating that price pressures may still be lingering. These figures support the Fed’s decision to maintain a restrictive rate stance until inflation shows more convincing signs of moderating. Meanwhile, disappointing January retail sales figures indicates slower pace of consumer spending, and Fed is unlikely needed to revert to tightening to curb inflation.

    Technically, S&P 500 should be ready to resume its long term up trend. Further rise is expected as long as 6003.00 support holds. Next near term target is 61.8% projection of 5119.26 to 6099.97 from 5773.31 at 6379.38.

    A larger question looms over whether S&P 500 can decisively break through long-term rising channel resistance (now around 6436). If it manages to do so, it could trigger medium-term acceleration 138.2% projection of 2191.86 to 4818.62 from 3491.58 at 7121.76.

    DAX Surges to New Highs as Hopes for Ukraine Ceasefire Lift Sentiment

    European markets staged an even stronger robust rally last week, with investors embracing a wave of optimism fueled by delayed US tariffs and renewed hopes of stability on the geopolitical front, with expectations for steady, gradual rate cuts from ECB in the background.

    The pan-European STOXX 600 index chalked up its eighth consecutive week of gains—its longest winning streak since Q1 2024—and hit a fresh intra-week record.

    One critical boost to confidence is the possibility that negotiations to end the war in Ukraine might soon begin. US President Donald Trump confirmed that he has held discussions with Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin, signaling that negotiations to end the war will begin immediately. Such a resolution could not only stem the loss of life but also reignite investment in the region, delivering a strong catalyst for further economic expansion across Europe.

    A cessation of hostilities in Ukraine would likely pave the way for significant investment programs, particularly in infrastructure and reconstruction. This influx of capital could be a tailwind for the manufacturing and industrial sectors throughout the EU, driving demand for goods and services.

    In Germany, DAX extended its record run with strong momentum. Near term outlook will stay bullish as long as 21759.97 support holds. Next target is 161.8% projection of 14630.21 to 18892.92 from 17024.82 at 23921.87.

    In the larger picture, DAX is clearly in an acceleration phase and could be targeting 161.8% projection of 8255.65 to 16290.19 from 11862.84 at 24862.73 before topping.

    Hong Kong Stocks Surge as China AI Optimism Builds

    Asian markets closed out the week with mixed performance, reflecting divergent regional drivers. Hong Kong’s HSI stole the show, and soared to a four-month high, underpinned by shifting investor sentiment toward a less aggressive US tariff policy and excitement around China’s tech sector.

    The Hong Kong market’s volatility was evident in the HSI’s deep profit-taking pullback on Thursday, followed by a strong 4% rebound on Friday—an indication of how quickly sentiment can swing once trade uncertainties eased with delay of Trump’s reciprocal tariffs.

    Another critical factor fueling the advance is the surge of optimism surrounding Chinese technology companies, particularly after the emergence of AI-related developments with DeepSeek.

    Unlike the brief recoveries seen last year, many analysts view the current run-up in Hong Kong’s equities as more than a short-lived, stimulus-driven bounce. They see a paradigm shift, with investors recognizing new opportunities in Chinese tech with prospect of long-term sector expansion.

    The result could be a stronger, more resilient rally that may endure longer than earlier bursts of optimism…. provided global trade tensions remain manageable.

    Technically, last week’s extended rise in HSI should confirm that correction from 23241.74 has completed at 18671.49 already. Near term outlook will stay bullish as long as 21070.05 resistance turned support holds. Firm break of 23241.74 will confirm resumption of whole medium term rise from 14794.16. Next target is 100% projection 16964.28 to 23241.74 from 18671.49 at 24948.95, which is close to 25k psychological level.

    In the bigger picture, the strong support from 55 W EMA is clearly a medium term bullish signal. It’s still way too early to confirm that whole long term down trend from 33484.08 (2018 high) has reversed. But even as a corrective move, rise from 14597.31 could extend to 61.8% retracement of 33484.08 to 14597.31 at 26269.33 before topping.

    Dollar at a Crossroads as Risk Sentiment Keeps Pressure On

    Dollar Index finds itself at a pivotal juncture following last week’s significant decline. A short-term bounce remains possible if the index can defend 38.2% retracement of 100.15 to 110.17 at 106.34. If strong support emerges at this point, it would reinforce the idea that recent price action is merely a consolidation pattern. That would keep the rally from 100.15 intact, setting the stage for an eventual break of 110.17 high.

    However, the growing appetite for risk across global markets could add additional weight on the greenback. Decisive break below the 106.34 support would deepen the correction to 55 W EMA (now at 105.23). Sustained break of 55 W EMA will argue that whole rise from 99.57 (2023 low) has already completed and a more significant trend reversal is underway.

    Compounding Dollar’s woes, U.S. Treasury yields have not offered the usual support. 10-year yield reversed quickly after briefly climbing to 4.660%. Even in a more optimistic scenario,10-year yield appears to be extending consolidation between the 4.809 high and 38.2% retracement of 3.603 to 4.809 from 4.348, leaving Dollar without a strong tailwind from the rates market.

    AUD/USD Weekly Report

    AUD/USD’s break of 0.6329 resistance last week indicates that rebound from 0.6087 is at least correcting the whole fall from 0.6941. Initial bias is now on the upside for 38.2% retracement of 0.6941 to 0.6087 at 0.6413. On the downside, however, break of 0.6234 support will suggest that the rebound has completed and bring retest of 0.6087 low.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6516) holds.

    In the long term picture, prior rejection by 55 M EMA (now at 0.6846) is taken as a bearish signal. But for now, fall from 0.8006 is still seen as the second leg of the corrective pattern from 0.5506 long term bottom (2020 low). Hence, in case of deeper fall, strong support should emerge above 0.5506 to contain downside to bring reversal. However, this view is subject to adjustment if current decline accelerates further.



    Source link

  • Gold Nears 3000 as Muted Reaction to Metal Tariffs Fades, Fed Powell in Focus

    Gold Nears 3000 as Muted Reaction to Metal Tariffs Fades, Fed Powell in Focus


    Dollar is trading is a mildly firmer tone while Gold inches closer to the key 3000 psychological level after US President Donald Trump officially raised tariffs on aluminum and steel imports. However, the broader market reaction has been relatively subdued. Major US equity indexes managed to post modest gains overnight, and 10-year Treasury yield also recovered. Investor sensitivity to trade war escalations has somewhat diminished. The next test will be whether Trump’s upcoming reciprocal tariff announcement will trigger a similar lackluster response.

    In his proclamation on Monday, Trump lifted tariff rate on aluminum to 25% from the previous 10% and eliminating previous country-specific exemptions, including quota agreements and product-specific exclusions for both metals. The measures are set to take effect on March 4.

    Although Trump insisted there would be “no exceptions,” he later softened the tone and indicated the possibility of an exemption for Australia, citing that nation’s trade deficit with the US. As a result, uncertainty remains over how many countries or products may ultimately be exempt from the higher tariffs.

    Markets are now awaiting further details on Trump’s reciprocal tariff plan, expected to be unveiled between Tuesday and Wednesday. The plan could impose new duties on a range of imports to match tariffs levied by trading partners, with the EU particularly at risk due to its 10% tariff on American cars—much higher than the US’s 2.5% tariff on imported vehicles.

    In addition to trade policy developments, the focus is also on Fed Chair Jerome Powell’s Congressional testimony later today, followed by release of key US CPI data tomorrow. Powell’s remarks could provide further insight into the Fed’s rate outlook, particularly whether policymakers are shifting toward an even longer pause in monetary easing given recent strength in the labor market and lingering inflation risks.

    On the currency front, Dollar is currently the strongest major currency so far this week, followed by Aussie and then Swiss franc. Kiwi is the worst performer, trailed by Sterling and then Yen. Euro and Loonie are trading in the middle.

    Technically, immediate focus in on Gold’s reaction from 3000 psychological level, as well as 38.2% projection of 1810.26 to 2789.92 from 2584.24 at 2958.47. Strong resistance could be seen from there to limit upside on first attempt. Break of 2852.31 support would indicate that pullback is underway back to 2789.92 resistance turned support and possibly below. However, sustained break of 3000 would pave the way to next target at 61.8% projection at 3189.66 before topping.

    In Asia, Japan is on holiday. Hong Kong HSI is down -0.72%. China Shanghai SSE is down -0.16%. Singapore Strait Times is down -0.41%. Overnight, DOW rose 0.38% S&P 500 rose 0.67%. NASDAQ rose 0.98%. 10-year yield rose 0.006 to 4.493.

    Australia’s Westpac consumer sentiment ticks up, RBA to start cutting this month

    Australia’s Westpac Consumer Sentiment Index rose slightly by 0.1% mom to 92.2 in February. While consumer mood improved significantly in the second half of 2024, the past three months have shown stagnation.

    Westpac noted that financial pressures on households persist and a more uncertain global economic climate has also played a role in dampening optimism.

    RBA is likely to begin policy easing at its next meeting on February 17–18. Westpac highlighted that recent economic data on core inflation, wage growth, and household consumption indicate that inflation is “returning to target faster” than previously expected.

    These factors provide RBA with the confidence to initiate a 25bps rate cut this month, marking the first step in what is expected to be a “moderate” easing cycle through 2025.

    Australian NAB business confidence rebounds to 4, but conditions remain weak

    Australia’s NAB Business Confidence index made a strong recovery in January, rising from -2 to 4 and returning to positive territory. However, despite this uptick in sentiment, underlying business conditions deteriorated.

    Business Conditions index dropped from 6 to 3, marking a notable slowdown. Within this, trading conditions slipped from 10 to 6, while profitability conditions turned negative, falling from 4 to -2. On a more positive note, employment conditions edged up slightly from 4 to 5.

    Cost pressures remained a key concern for businesses. Purchase cost growth eased to 1.1% on a quarterly equivalent basis, down from 1.4%. Labor cost growth picked up slightly to 1.8%. Meanwhile, final product price growth held steady at 0.8%, while retail price inflation inched up to 0.9%. Businesses are struggling to fully pass on rising costs to consumers.

    NAB Chief Economist Alan Oster noted that while confidence improved, it is uncertain whether this momentum will be sustained. Elevated cost pressures, particularly on wages and input costs, continue to weigh on overall business conditions.

    BoE’s Mann: Larger rate cut needed to send clear market signal

    BoE MPC member Catherine Mann explained her unexpected vote for a 50bps rate cut last week. Speaking to the Financial Times, she emphasized that “Demand conditions are quite a bit weaker than has been the case”, prompting a reassessment of her stance on inflation risks.

    She now sees inflationary pressures easing faster, with pricing trends aligning closely to 2% target in the year ahead. This marks a notable shift from her previously hawkish position, which had consistently supported maintaining restrictive monetary policy.

    A key reason for her preference for a larger cut was the need to deliver a stronger signal to financial markets. She argued that a half-point move would help “cut through the noise” and provide clearer guidance on the need for looser financial conditions in the UK.

    “To the extent that we can communicate what we think are the appropriate financial conditions for the UK economy, a larger move is a superior communication device,” she noted.

    Mann’s stance aligns her with Swati Dhingra, the most dovish member of the MPC, who also advocated for a 50bps cut to 4.25% at last week’s meeting. The final decision was a more measured 25bps reduction to 4.50%.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6245; (P) 0.6267; (R1) 0.6299; More…

    AUD/USD is bounded in sideway trading in tight range and intraday bias remains neutral. With 0.6329 resistance intact, outlook will stay bearish. On the downside, break of 0.6239 minor support will turn bias back to the downside for retesting 0.6087 low. However, firm break of 0.6329 will bring stronger rebound to 38.2% retracement of 0.6941 to 0.6087 at 0.6413, even just as a corrective move.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6516) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 AUD Westpac Consumer Confidence Feb 0.10% -0.70%
    00:30 AUD NAB Business Confidence Jan 4 -2
    00:30 AUD NAB Business Conditions Jan 3 6
    11:00 USD NFIB Business Optimism Jan 104.6 105.1
    13:30 CAD Building Permits M/M Dec 2.30% -5.90%

     



    Source link