Tag: Australia

  • 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

     



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  • Australian Dollar rises as Chinese developers buy land at premium

    Australian Dollar rises as Chinese developers buy land at premium


    • The Australian Dollar advanced as the Chinese government announced its annual policy statement for 2025 on Sunday.
    • The AUD struggled as Trump instructed the Committee on Foreign Investment to limit Chinese investments in the US.
    • The US Dollar struggles following the downbeat US economic data released last week.

    The Australian Dollar (AUD) retraces its recent losses from the previous session on Monday following the Chinese government’s release of its annual policy statement for 2025 on Sunday. The statement details strategies to advance rural reforms and promote comprehensive rural revitalization. Optimism around China’s stimulus plans could strengthen the AUD, given China’s role as a key trading partner for Australia.

    China’s state-supported developers are aggressively increasing land purchases at premium prices, driven by the government’s relaxation of home price restrictions aimed at revitalizing the troubled property market. In 2025 so far, 37% of land sales have closed at prices 20% or more above the asking price — a sharp rise from 14% in 2024 and just 4.6% in 2023, according to the China Index Academy.

    The AUD/USD pair faced challenges as President Donald Trump signed a memorandum on Friday instructing the Committee on Foreign Investment in the United States (US) to limit Chinese investments in strategic sectors. Reuters cited a White House official saying that the national security memorandum seeks to encourage foreign investment while safeguarding US national security interests from potential threats posed by foreign adversaries like China.

    The Reserve Bank of Australia (RBA) lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% last week—the first rate cut in four years. Reserve Bank of Australia (RBA) Governor Michele Bullock acknowledged the impact of high interest rates but cautioned that it was too soon to declare victory over inflation. She also emphasized the labor market’s strength and clarified that future rate cuts are not guaranteed, despite market expectations.

    Australian Dollar strengthens as the US Dollar falters amid disappointing economic data

    • The US Dollar Index (DXY), which measures the USD against six major currencies, depreciates below 106.50 at the time of writing. The DXY faced challenges following the downbeat US economic data including Jobless Claims S&P Global Purchasing Managers’ Index (PMI) released last week.
    • The US Composite PMI fell to 50.4 in February, down from 52.7 in the previous month. In contrast, the Manufacturing PMI rose to 51.6 in February from 51.2 in January, surpassing the forecast of 51.5. Meanwhile, the Services PMI declined to 49.7 in February from 52.9 in January, falling short of the expected 53.0.
    • US Initial Jobless Claims for the week ending February 14 rose to 219,000, exceeding the expected 215,000. Meanwhile, Continuing Jobless Claims increased to 1.869 million, slightly below the forecast of 1.87 million.
    • Federal Reserve Board Governor Adriana Kugler stated on Thursday that US inflation still has “some way to go” before reaching the central bank’s 2% target, noting that the path remains uncertain, according to Reuters.
    • St. Louis Fed President Alberto Musalem cautioned about potential stagflation risks and rising inflation expectations. Meanwhile, Atlanta Fed President Raphael Bostic kept the possibility of two rate cuts this year open, contingent on economic developments.
    • President Trump indicated that a new trade deal with China is possible and expects Chinese President Xi Jinping to visit. He also mentioned discussions with China regarding TikTok and noted that his administration is considering a 25% tariff on lumber and forest products.
    • The latest Federal Open Market Committee (FOMC) Meeting Minutes reaffirmed the decision to keep interest rates unchanged in January. Policymakers emphasized the need for more time to assess economic activity, labor market trends, and inflation before considering any rate adjustments. The committee also agreed that clear signs of declining inflation are necessary before implementing rate cuts.
    • President Trump has confirmed that a 25% tariff on pharmaceutical and semiconductor imports will take effect in April. Additionally, he reaffirmed that auto tariffs will remain at 25%, further escalating global trade tensions.
    • Australia’s Judo Bank Manufacturing PMI rose to 50.6 in February, up from 50.2 in January. The Services PMI improved to 51.4 from 51.2, while the Composite PMI edged up to 51.2 from 51.1.
    • The Australian Bureau of Statistics (ABS) reported on Thursday that Australia’s seasonally adjusted Unemployment Rate rose to 4.1% in January from 4.0% in December, aligning with market expectations. Additionally, Employment Change came in at 44K for January, down from a revised 60K in December (previously 56.3K), but still exceeding the consensus forecast of 20K.
    • Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser stated while speaking to Bloomberg News last week that the central bank’s policy “is still restrictive.” Hauser noted that the latest jobs data showed little cause for concern.

    Australian Dollar could test 0.6350 support near nine-day EMA

    AUD/USD trades near 0.6370 on Monday, moving within an ascending channel that reflects bullish market sentiment. The 14-day Relative Strength Index (RSI) stays above 50, supporting the positive outlook.

    On the upside, the AUD/USD pair could challenge the key psychological resistance at 0.6400, with the next hurdle at the ascending channel’s upper boundary around 0.6430.

    The AUD/USD pair could find immediate support at the nine-day Exponential Moving Average (EMA) of 0.6347, followed by the 14-day EMA at 0.6330. A stronger support zone aligns with the channel’s lower boundary near 0.6320.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.42% -0.28% -0.07% -0.14% -0.13% -0.07% -0.15%
    EUR 0.42%   0.06% 0.17% 0.10% 0.29% 0.17% 0.10%
    GBP 0.28% -0.06%   0.17% 0.04% 0.23% 0.12% 0.04%
    JPY 0.07% -0.17% -0.17%   -0.06% 0.04% 0.10% 0.02%
    CAD 0.14% -0.10% -0.04% 0.06%   -0.04% 0.08% 0.00%
    AUD 0.13% -0.29% -0.23% -0.04% 0.04%   -0.11% -0.18%
    NZD 0.07% -0.17% -0.12% -0.10% -0.08% 0.11%   -0.07%
    CHF 0.15% -0.10% -0.04% -0.02% -0.00% 0.18% 0.07%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    Australian Dollar FAQs

    One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

    The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

    China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

    Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

    The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

     



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  • 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.



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  • Euro Briefly Dips on Soft PMI, CAD Shrugs Off Robust Retail Sales

    Euro Briefly Dips on Soft PMI, CAD Shrugs Off Robust Retail Sales


    Trading is rather subdued in the forex markets today, with most major pairs and crosses stuck within yesterday’s range. Loonie failed to react to significantly stronger-than-expected retail sales data. Euro dipped earlier following weak PMI reports, but selling pressure quickly fizzled out. Yen saw some volatility during the Asian session, initially weakening alongside Japanese bond yields after BoJ Governor Kazuo Ueda’s comments, but selling was short-lived.

    For the week so far, Yen remains the strongest performer, although it could now pause for consolidation after its recent rally. Sterling pound ranks second, followed by Aussie. On the weaker side, Euro has slipped to the bottom, just below Loonie and Dollar. However, the gap between the three remains tight, leaving room for shifts before the weekly close. Meanwhile, Swiss Franc and Kiwi are positioning in the middle.

    In Europe, at the time of writing, FTSE is up 0.02%. DAX is up 0.29%. CAC is up 0.52%. UK 10-year yield is up 0.0044 at 4.619. Germany 10-year yield is down -0.0478 at 2.492.Earlier in Asia, Nikkei rose 0.26%. Hong Kong HSI rose 3.99%. China Shanghai SSE rose 0.85%. Singapore Strait Times rose 0.06%. Japan 10-year JGB yield fell -0.0229 to 1.428.

    Canada’s retail sales surge in 2.5% mom Dec, but Jan set for pullback

    Canada’s retail sales jumped 2.5% mom to CAD 69.6B in December, far surpassing market expectations of 1.6% mom. Sales increased across all nine subsectors, with the strongest contributions from food and beverage retailers and motor vehicle and parts dealers.

    In volume terms, retail sales also rose 2.5% mom, indicating that the increase was not solely due to price effects.

    For Q4, retail sales climbed 2.4% qoq, marking the second consecutive quarterly gain. Adjusted for inflation, sales volumes rose 1.8% qoq.

    However, momentum may have slowed at the start of 2025. Advance estimate for January suggests retail sales declined by -0.4% mom.

    Eurozone PMI manufacturing rises to 47.3, but services falls to 50.7

    Eurozone Manufacturing PMI improved from 46.6 to 47.3 in February, a nine-month high. However, Services PMI declined to 50.7 from 51.3, dragging Composite PMI flat at 50.2, indicating near stagnant overall growth.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted that services sector price pressures remain elevated, creating complications for the ECB ahead of its next meeting. Persistent wage growth and rising input costs in manufacturing, driven by energy prices, add to inflationary risks.

    Regionally, France’s services sector led the slowdown, with business activity deteriorating at an accelerated pace since September. In contrast, Germany maintained modest growth, supported by expectations of greater political stability ahead of its federal elections.

    UK PMI composite dips to 50.5, stagflation dilemma for BoE

    UK’s PMI Manufacturing dropped from 48.3 to 46.4 in February, a 14-month low. PMI Services edged up slightly to 51.1 from 50.8, while Composite PMI dipped to 50.5 from 50.6, indicating minimal overall growth.

    Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that business activity remained “largely stalled” for the fourth straight month, with job losses accelerating amid declining sales and rising costs. He cautioned that the combination of stagnant growth and mounting price pressures is creating a “stagflationary environment,” presenting a “growing dilemma” for BoE.

    A primary driver of inflationary pressure is the increase in firms raising prices to offset rising staff costs tied to the National Insurance hike and minimum wage increase announced in the autumn Budget. However, these same fiscal measures have also exacerbated job cuts, with employment falling at its fastest pace since the global financial crisis, excluding the pandemic period.

    UK retail sales rebound sharply by 1.7% mom in Jan

    UK retail sales volumes surged 1.7% mom in January, far exceeding market expectations of 0.3% m/m, marking a strong recovery from December’s -0.6% mom decline.

    This sharp rebound pushed monthly sales index levels to their highest since August 2024.

    However, the broader trend remains mixed. Over the three months to January 2025, sales volumes declined by -0.6% compared to the previous three months. On a year-over-year basis, sales volumes rose 1.4%, showing some improvement in spending patterns compared to early 2024.

    Despite the monthly rebound, UK retail sales volumes remain -1.3% below pre-pandemic levels from February 2020.

    BoJ’s Ueda pledges action against sharp JGB yield rise, Yen tumbles

    Yen pulled back sharply from its recent rally, along with steep fall in 10-year JGB yield from its 15-year high. The move came after BoJ Governor Kazuo Ueda reminded markets of the central bank’s commitment to curbing excessive yield volatility.

    In parliamentary comments, Ueda stated, “We expect long-term interest rates to fluctuate to some extent.”

    However, he cautioned that “when markets make abnormal moves and lead to a sharp rise in yields, we are ready to respond nimbly to stabilize markets.”

    The pledge to increase bond purchases, if necessary, knocked the 10-year JGB yield off its 15-year high

    Ueda declined to specify when BoJ might conduct emergency bond market operations, stating only that the central bank would closely monitor the market for signs of destabilization.

    Japan’s core CPI jumps to 3.2% in Jan, above expectations

    Japan’s inflation accelerated in January, with core CPI (ex-food) rising from 3.0% yoy to 3.2% yoy, surpassing expectations of 3.1% yoy and marking the fastest pace in 19 months, driven by higher rice and energy costs.

    This was also the third consecutive month of acceleration, with core CPI rebounding sharply from 2.3% yoy in October. Inflation has now remained at or above BoJ’s 2% target since April 2022.

    Core-core CPI (ex-food and energy) climbed to 2.5% yoy, up from 2.4% yoy, signaling broader price pressures beyond energy and food. Food prices, excluding perishables, surged 5.1% yoy, up from 4.4% yoy, driven by a 70.9% yoy spike in rice prices, the largest increase since data collection began in 1971. This sharp rise was attributed to supply shortages and higher production and transportation costs.

    Energy prices also saw a notable increase of 10.8% yoy, up from 10.1% yoy in December, as gasoline costs rose following government subsidy reductions. Meanwhile, services inflation slowed slightly to 1.4% yoy from 1.6% yoy.

    Headline CPI surged from 3.6% yoy to 4.0% yoy, a two-year high.

    Japan’s PMI improves, but business confidence hits lowest since 2021

    Japan’s PMI data for February showed slight improvements, with PMI Manufacturing rising from 48.7 to 48.9. Meanwhile, PMI Services edged up from 53.0 to 53.1. Composite PMI increased from 51.1 to 51.6, the highest in five months.

    According to Usamah Bhatti, Economist at S&P Global Market Intelligence, the “modest improvement” was driven by sustained growth in services, with firms crediting business expansion plans and improved sales.

    However, optimism about future business activity weakened, with confidence dropping to its lowest level since January 2021. Companies cited labor shortages, persistent inflation, and weak domestic economic conditions as major concerns.

    Employment growth slowed to its weakest pace in over a year, reflecting businesses’ caution about hiring amid economic uncertainty. Additionally, input price inflation remained elevated, similar to January’s historically high levels.

    RBA’s Bullock: More rate cuts possible, but patience needed

    At a parliamentary committee hearing today, RBA Governor Michele Bullock explained that this week’s 25bps rate cut was based on better-than-expected inflation data, weaker private demand, and wage growth aligning with forecasts.

    Also, she acknowledged that the board is mindful of timing, stating, “What’s also playing on the board’s mind is that the board also doesn’t want to be late, and arguably we were late raising interest rates on the way up.”

    While further easing remains on the table, Bullock emphasized the need for caution. “We are not pre-committed. We’re going to be data-driven on this and I think people just have to be patient,” she added.

    Deputy Governor Andrew Hauser echoed this sentiment, reinforcing the RBA’s wait-and-see approach. He remarked, “If we’re wrong and inflation moves more quickly downwards, you could celebrate that fact and policy will need to respond, but we’d rather wait and see than assume that’s what’s going to happen.”

    Australia’s PMI composite hits 6-month high, but business confidence dips

    Australia’s PMI data for February showed continued expansion in private sector activity, with Manufacturing PMI rising to from 50.2 to 50.6, its highest level in 27 months. Meanwhile, Services PMI edged up from 51.2 to 51.4, and Composite PMI ticked up from 51.1 to 51.2, both reaching six-month highs.

    According to Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, the latest figures indicate a “modest” but steady improvement in economic conditions, while growth was broad-based.

    However, business sentiment weakened to its lowest level since October 2024. This caution also affected pricing strategies, with businesses reluctant to fully pass on cost increases, leading to a slowdown in selling price inflation.

    RBNZ’s Conway: 50bps cut the clear choice, signs of economic turnaround emerging

    RBNZ Chief Economist Paul Conway revealed in a Reuters interview that the central bank considered both 25bps and 75bps rate cuts ahead of this week’s policy decision. But the bank ultimately concluded that a 50bps reduction “was the way to go” given the state of the economy and inflation.

    Conway pointed to recent data in manufacturing and services, indicating that some businesses may already be “starting to feel a bit of a turnaround.” However, he acknowledged that companies remain cautious.

    Regarding the labor market, Conway noted that employment trends typically lag economic activity. He added that”businesses need to have confidence that growth is returning and that growth will be sustained into the future before they start to think about employing someone.”

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0446; (P) 1.0475; (R1) 1.0532; More…

    Outlook in EUR/USD remains unchanged despite today’s mild dip. Consolidation from 1.0176 is still extending and intraday bias remains neutral. Stronger rebound might be seen but outlook will remain bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. On the downside, break of 1.0176 will resume whole fall from 1.1213. 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 Trade Balance (NZD) Jan -486M 225M 219M 94M
    22:00 AUD Manufacturing PMI Feb P 50.6 50.2
    22:00 AUD Services PMI Feb P 51.4 51.2
    23:50 JPY CPI Y/Y Jan 4.00% 3.60%
    23:50 JPY CPI Core Y/Y Jan 3.20% 3.10% 3.00%
    23:50 JPY CPI Core-Core Y/Y Jan 2.50% 2.40%
    00:01 GBP GfK Consumer Confidence Feb -20 -22 -22
    00:30 JPY Manufacturing PMI Feb P 48.9 49 48.7
    00:30 JPY Services PMI Feb P 53.1 53
    07:00 GBP Retail Sales M/M Jan 1.70% 0.30% -0.30% -0.60%
    07:00 GBP Public Sector Net Borrowing (GBP) Jan -15.4B -20.5B 17.8B 18.1B
    08:15 EUR France Manufacturing PMI Feb P 45.5 45.3 45
    08:15 EUR France Services PMI Feb P 44.5 49 48.2
    08:30 EUR Germany Manufacturing PMI Feb P 46.1 45.6 45
    08:30 EUR Germany Services PMI Feb P 52.2 52.6 52.5
    09:00 EUR Eurozone Manufacturing PMI Feb P 47.3 47.1 46.6
    09:00 EUR Eurozone Services PMI Feb P 50.7 51.5 51.3
    09:30 GBP Manufacturing PMI Feb P 46.4 48.5 48.3
    09:30 GBP Services PMI Feb P 51.1 51 50.8
    13:30 CAD Retail Sales M/M Dec 2.50% 1.60% 0% 0.20%
    13:30 CAD Retail Sales ex Autos M/M Dec 2.70% 0.40% -0.70%
    14:45 USD Manufacturing PMI Feb P 51.3 51.2
    14:45 USD Services PMI Feb P 53 52.9
    15:00 USD Existing Home Sales M/M Jan 4.17M 4.24M
    15:00 USD Michigan Consumer Sentiment Index Jan F 67.8 67.8

     



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  • Sterling Unmoved by CPI Surprise, Gold to Try 3000 Again ahead of FOMC Minutes

    Sterling Unmoved by CPI Surprise, Gold to Try 3000 Again ahead of FOMC Minutes


    The forex markets remain rather indecisive today. Traders are paring back expectations for BoE rate cuts after UK inflation surged to a 10-month high. A March rate cut is now off the table, and markets are no longer fully pricing in two BoE cuts this year. However, this shift has provided only minimal support for the British pound, as broader market sentiment remains cautious.

    Meanwhile, Dollar is mildly firmer but lacks strong upside momentum. Traders are now focused on FOMC minutes, which are expected to reaffirm that Fed is in no rush to cut rates. Current Fed funds futures show a 55% probability that rates will remain at 4.25-4.50% through the first half of 2025, a view that is unlikely to change much without further clarity on President Donald Trump’s fiscal and trade policies.

    In the commodities market, Gold surged to a record high, approaching the critical 3000 psychological level for another attempt. This marks a key inflection point—a decisive break above 3,000 could pave the way to 61.8% projection of 1810.26 to 2789.92 from 2584.24 at 3189.66.

    However, failure to sustain gains above 3000 could lead to deeper pullback. Firm break 2876.93 support should set up correction back towards 2789.92 resistance turned support instead.

    In Europe, at the time of writing, FTSE is down -0.61%. DAX is down -1.16%. CAC is down -0.84%. UK 10-year yield is up 0.0696 at 4.629. Germany 10-year yield is up 0.058 at 2.558. Earlier in Asia, Nikkei fell -0.27%. Hong Kong HSI fell -0.14%. China Shanghai SSE rose 0.81%. Singapore Strait Times rose 0.22%. Japan 10-year JGB yield rose 0.0038 to 1.440.

    ECB’s Schnabel: Rate Cut Pause May Be Approaching

    ECB Executive Board member Isabel Schnabel suggested in an FT interview that the central bank is approaching a point where it “may have to pause or halt” rate cuts.

    While she refrained from making a firm prediction for upcoming policy meetings, she acknowledged that the ECB needs to “start that discussion”.

    Schnabel highlighted that the degree of monetary restriction “has come down significantly”, to the extent that policymakers can “no longer say with confidence” that ECB’s stance remains restrictive.

    She defended the ECB’s gradual and cautious approach, arguing that domestic inflation remains high, wage growth is still elevated, and energy price shocks continue to impact inflation expectations.

    ECB’s Panetta: Eurozone economic weakness more persistent than expected

    Italian ECB Governing Council member Fabio Panetta acknowledged that economic weakness in the Eurozone is proving “more persistent than we expected”, as the long-anticipated consumption-driven recovery has yet to materialize.

    After two consecutive quarters of stagnation, he noted that “tensions in the manufacturing sector, employment is giving signs of weakening”

    Panetta also highlighted the downside risks to inflation stemming from weak growth. However, he also noted that upside inflation risks remain, primarily from energy costs.

    UK CPI surges to 3.0%, highest since March 2024

    UK headline CPI accelerated to 3.0% yoy in January, up from 2.5% yoy and exceeding market expectations of 2.8% yoy. This marks the highest inflation level since March 2024, reinforcing concerns that price pressures remain persistent.

    Core inflation also surged, with CPI excluding energy, food, alcohol, and tobacco rising to 3.7% yoy, up from 3.2% yoy in December.

    Meanwhile, CPI goods inflation edged higher from 0.7% yoy to 1.0% yoy, while CPI services inflation climbed from 4.4% yoy to 5.0% yoy.

    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.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2587; (P) 1.2609; (R1) 1.2637; More…

    GBP/USD dips mildly today but stays in established tight range. Intraday bias remains neutral, and focus stays on 38.2% retracement of 1.3433 to 1.2099 at 1.2609. Rejection by this level will keep near term outlook bearish. Break of 1.2331 support will suggest that the rebound from 1.2099 has completed as a correction, and bring retest of 1.2099 low. However, firm break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

    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
    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 -0.10% -0.30% 0.30%
    07:00 GBP CPI Y/Y Jan 3.00% 2.80% 2.50%
    07:00 GBP Core CPI Y/Y Jan 3.70% 3.70% 3.20%
    07:00 GBP RPI M/M Jan -0.10% -0.10% 0.30%
    07:00 GBP RPI Y/Y Jan 3.60% 3.70% 3.50%
    07:00 GBP PPI Input M/M Jan 0.80% 0.70% 0.10% 0.20%
    07:00 GBP PPI Input Y/Y Jan -0.10% -0.50% -1.50% -1.30%
    07:00 GBP PPI Output M/M Jan 0.50% 0.20% 0.10% -0.20%
    07:00 GBP PPI Output Y/Y Jan 0.30% 0.10% 0.10% -0.10%
    07:00 GBP PPI Core Output M/M Jan 0.30% 0%
    07:00 GBP PPI Core Output Y/Y Jan 1.50% 1.50% 1.60%
    09:00 EUR Eurozone Current Account (EUR) Dec 38.4B 30.2B 27.0B 25.1B
    13:30 USD Building Permits Jan 1.48M 1.45M 1.48M
    13:30 USD Housing Starts Jan 1.37M 1.39M 1.50M
    19:00 USD FOMC Minutes

     



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  • 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

     



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  • Muted Forex Action as Traders Overlook Data, Await RBNZ Cut

    Muted Forex Action as Traders Overlook Data, Await RBNZ Cut


    Forex markets remained subdued today, with muted reactions to key economic data. Dollar held broadly higher as traders focused on the US-Russia peace talks, where both sides agreed to continue discussions on ending Russia’s invasion of Ukraine. However, meaningful progress is unlikely without direct involvement from Ukraine and European nations, keeping market uncertainty elevated.

    Canadian Dollar traded mixed following slightly stronger-than-expected core inflation data. Despite this, with headline CPI below 2% and CPI common just above 2%, BoC is still expected to gradually lower rates toward neutral levels.

    British Pound showed little reaction to strong UK labor market data, including strong wage growth. BoE Governor Andrew Bailey commented that the figures did not alter the central bank’s outlook, keeping rate expectations steady. Similarly, Euro ignored a notable improvement in German economic sentiment, which suggests the economy may finally be stabilizing.

    Australian Dollar remains supported following RBA’s cautious rate cut, with the central bank signaling that the easing cycle will proceed gradually and may not be as deep as previously expected.

    Looking ahead, RBNZ rate decision is the primary focus in the upcoming Asian session, where markets anticipate a 50bps rate cut, bringing the OCR down to 3.75%, moving closer to neutral levels. A key point of interest will be whether RBNZ signals a slowdown in the pace of easing, and traders will analyze economic projections for insights into the terminal rate.

    Technically, NZD/USD’s rebound from 0.5515 is seen as a correction to the fall from 0.6378. While another rise cannot be ruled out, upside should be limited by 38.2% retracement of 0.6378 to 0.5515 at 0.5848. Break of 0.5622 minors support will argue that the corrective bounce has completed, and bring retest of 0.5515 low.

    In Europe, at the time of writing, FTSE is up 0.16%. DAX is up 0.24%. CAC is up 0.31%. UK 10-year yield is up 0.032 at 4.570. Germany 10-year yield is up 0.012 at 2.504. Earlier in Asia, Nikkei rose 0.25%. Hong Kong HSI rose 1.59%. China Shanghai SSE fell -0.93%. Singapore Strait Times rose 0.53%. Japan 10-year JGB yield rose 0.0435 to 1.436.

    Canada’s CPI rises to 1.9% in Jan, core inflation ticks up

    Canada’s headline CPI increased from 1.8% yoy to 1.9% yoy in January, in line with expectations. The rise was driven by higher energy costs, particularly gasoline and natural gas, while GST/HST tax break introduced in December helped offset broader price pressures.

    Food prices fell -0.6% yoy, marking the first annual decline since May 2017, led by a record -5.1% yoy drop in restaurant food prices.

    On a monthly basis, CPI rose 0.1% mom, rebounding from December’s -0.4% mom decline.

    Core inflation strengthened, with CPI median rising to 2.7% yoy from 2.6% yoy, CPI trimmed increasing to 2.7% yoy from 2.5% yoy, and CPI common edging up to 2.2% yoy from 2.0% yoy.

    German ZEW jumps to 26 in Feb, optimism ahead of elections

    German ZEW Economic Sentiment Index surged from 10.3 to 26.0 in February, surpassing expectations of 20.2 and reflecting growing optimism about Germany’s economic outlook. Current Situation Index also showed a slight improvement, rising from -90.4 to -88.5, beating forecasts of -89.0.

    Eurozone ZEW Economic Sentiment rose from 18.0 to 24.2, falling short of the anticipated 25.4, while the Current Situation Index climbed by 8.5 points to -45.3.

    According to ZEW President Achim Wambach, the sharp rise in expectations is likely driven by hopes for a “new German government capable of action” ahead of the federal election, alongside expectations for a rebound in private consumption over the next six months.

    UK wages growth accelerates in Dec, payrolled employment rose 21k in Jan

    The latest UK labor market data presents a mixed picture, with payrolled employment rising by 21k (0.1% mom) in January, but the Claimant Count increasing by 22 to 1.75 million. Meanwhile, median monthly pay reached £2,467, reflecting a 5.7% yoy increase, reinforcing concerns about wage-driven inflation pressures.

    Looking at the broader employment trend, data for the three months to December showed that the employment rate edged up by 0.1 percentage point to 74.9%, while the unemployment rate also ticked higher by 0.1 percentage point to 4.4%.

    Wage pressures remain elevated, with average earnings including bonuses accelerating from 5.5% yoy to 6.0% yoy, and earnings excluding bonuses rising from 5.6% yoy to 5.9% yoy.

    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.

    USD/CAD Mid-Day Outlook

    Daily Pivots: (S1) 1.4165; (P) 1.4179; (R1) 1.4199; More…

    USD/CAD is staying in tight range above 1.4150 temporary low and intraday bias remains neutral. Deeper decline will remain in favor as long as 1.4378 resistance holds. Fall from 1.4791 is correcting whole rise from 1.3418. Break of 1.4150 will target 1.3946 cluster support (61.8% retracement of 1.3418 to 1.4791 at 1.3942).

    In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

    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 22K 10.0K 0.7K -15.1K
    07:00 GBP ILO Unemployment Rate (3M) Dec 4.40% 4.50% 4.40%
    07:00 GBP Average Earnings Including Bonus 3M/Y Dec 6.00% 5.90% 5.60% 5.50%
    07:00 GBP Average Earnings Excluding Bonus 3M/Y Dec 5.90% 5.90% 5.60%
    10:00 EUR Germany ZEW Economic Sentiment Feb 26 20.2 10.3
    10:00 EUR Germany ZEW Current Situation Feb -88.5 -89 -90.4
    10:00 EUR Eurozone ZEW Economic Sentiment Feb 24.2 25.4 18
    13:30 USD Empire State Manufacturing Index Feb 5.7 -1 -12.6
    13:30 CAD CPI M/M Jan 0.10% 0.10% -0.40%
    13:30 CAD CPI Y/Y Jan 1.90% 1.90% 1.80%
    13:30 CAD CPI Media Y/Y Jan 2.70% 2.40% 2.40% 2.60%
    13:30 CAD CPI Trimmed Y/Y Jan 2.70% 2.60% 2.50%
    13:30 CAD CPI Common Y/Y Jan 2.20% 2.00% 2.00%
    15:00 USD NAHB Housing Index Feb 47 47

     



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  • 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

     



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  • 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

     



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  • Australian Dollar remains firm as the US Dollar weakens due to lower US yields

    Australian Dollar remains firm as the US Dollar weakens due to lower US yields


    • The Australian Dollar appreciates as Trump postpones the implementation of reciprocal tariffs.
    • The AUD may face headwinds as the RBA maintains its rate-cut stance following a fresh inflation outlook.
    • The US Dollar weakens amid declining US yields, despite persistent concerns over a global trade war.

    The Australian Dollar (AUD) strengthens for the second consecutive day on Friday, driven by US President Donald Trump’s decision to postpone the implementation of reciprocal tariffs. Additionally, the AUD/USD pair appreciates as the US Dollar (USD) weakens amid falling US yields across the curve, despite ongoing concerns about a global trade war. Investors now await the release of US Retail Sales data later in the day.

    The AUD may face headwinds as expectations of a Reserve Bank of Australia (RBA) rate cut remain intact following fresh inflation outlook data. Consumer inflation expectations climbed to 4.6% in February from 4.0% in January, reaching their highest level since April 2024. This comes ahead of the RBA’s first monetary policy meeting of the year next week, with market odds indicating a 95% probability of a rate cut to 4.10%, as recent data suggests underlying inflation is cooling faster than anticipated.

    The upside of the AUD/USD pair could be limited as strong US inflation data reinforces expectations of prolonged Federal Reserve (Fed) rate holds. Fed Chair Jerome Powell recently reiterated that the central bank is in no rush to cut rates further, citing a resilient economy and persistently high inflation.

    Australian Dollar appreciates as US Dollar loses ground despite a hawkish Fed

    • The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, extends its losses for the fourth successive session. The DXY trades around 107.00 with 2-year and 10-year yields on US Treasury bonds standing at 4.31% and 4.53%, respectively, at the time of writing.
    • Core PPI inflation in the United States (US) rose to 3.6% YoY in January, exceeding the expected 3.3% but slightly below the revised 3.7% (previously reported as 3.5%). This has reinforced expectations that the Federal Reserve (Fed) will delay rate cuts until the second half of the year.
    • US Consumer Price Index (CPI) rose 3.0% year-over-year in January, exceeding expectations of 2.9%. The core CPI, which excludes food and energy, increased to 3.3% from 3.2%, surpassing the forecast of 3.1%. On a monthly basis, headline inflation jumped to 0.5% in January from 0.4% in December, while core CPI rose to 0.4% from 0.2% over the same period.
    • In his semi-annual report to Congress, Fed’s Powell said the Fed officials “do not need to be in a hurry” to cut interest rates due to strength in the job market and solid economic growth. He added that US President Donald Trump’s tariff policies could put more upward pressure on prices, making it harder for the central bank to lower rates.
    • A Reuters poll of economists now suggests the Federal Reserve will delay cutting interest rates until next quarter amid rising inflation concerns. Many who had previously expected a March rate cut have revised their forecasts. The majority of economists surveyed between February 4-10 anticipate at least one rate cut by June, though opinions on the exact timing remain divided.
    • Federal Reserve Bank of Cleveland President Beth Hammack stated on Tuesday that keeping interest rates steady for an extended period will likely be appropriate. Hammack emphasized that a patient approach will allow the Fed to assess economic conditions and noted that the central bank is well-positioned to respond to any shifts in the economy, according to Reuters.

    Technical Analysis: Australian Dollar rises above 0.6300 toward eight-week highs

    The AUD/USD pair hovers near 0.6320 on Friday, rising above the nine- and 14-day Exponential Moving Averages (EMAs) on the daily chart. This suggests that short-term price momentum is strengthening. Additionally, the 14-day Relative Strength Index (RSI) maintains its position above the 50 mark, reinforcing a bullish bias.

    On the upside, the AUD/USD pair may test the eight-week high of 0.6330, which was last reached on January 24. A break above this level could support the pair to approach a psychological level of 0.6400.

    The AUD/USD pair could fall toward primary support at the nine-day EMA of 0.6290 level, followed by the 14-day EMA of 0.6279. A decisive break below these levels could weaken the short-term price momentum, potentially pushing the pair toward the psychological level of 0.6200.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Euro.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   0.02% -0.04% -0.09% -0.01% -0.03% -0.11% -0.00%
    EUR -0.02%   -0.06% -0.11% -0.03% -0.06% -0.14% -0.03%
    GBP 0.04% 0.06%   -0.06% 0.03% 0.00% -0.07% 0.04%
    JPY 0.09% 0.11% 0.06%   0.07% 0.04% -0.04% 0.08%
    CAD 0.00% 0.03% -0.03% -0.07%   -0.04% -0.10% 0.00%
    AUD 0.03% 0.06% -0.00% -0.04% 0.04%   -0.08% 0.03%
    NZD 0.11% 0.14% 0.07% 0.04% 0.10% 0.08%   0.11%
    CHF 0.00% 0.03% -0.04% -0.08% -0.01% -0.03% -0.11%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    RBA FAQs

    The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

    While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

    Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

    Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

    Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

     



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  • Cautious Trading Prevails as Markets Await Retaliations to US Tariffs

    Cautious Trading Prevails as Markets Await Retaliations to US Tariffs


    Trading is relatively subdued today across global markets as investors assess the fallout from the US steel and aluminum tariffs announced by President Donald Trump. Major European equity indexes are treading water, while US futures are slightly in the red. Treasury yields are recovering, though it remains too early to confirm a reversal of the recent downtrend. Meanwhile, Gold is having a notable pullback after an initial rejection at the key 3000 psychological level, suggesting profit-taking among traders.

    European Commission President Ursula von der Leyen responded to the US move, stating that the EU will not let the “unjustified tariffs” go unanswered and pledged “firm and proportionate countermeasures” to protect European interests. However, no specific retaliatory measures have been outlined yet. Canada’s Prime Minister Justin Trudeau also criticized the tariffs as “unacceptable,” reinforcing that “Canadians will stand up strongly and firmly if we need to.” Markets remain cautious, awaiting concrete details on countermeasures from key US trade partners.

    At a global level, IMF Managing Director Kristalina Georgieva addressed the uncertainty surrounding the tariff situation at the World Government Summit in Dubai, stating that it remains an “evolving story” and that it is “too early to say” what the full economic impact might be. This reinforces the broader market sentiment that investors are hesitant to make directional bets until more clarity emerges on trade retaliation and its economic implications.

    In the forex market, Dollar has turned mixed, losing some momentum against Euro and Sterling while firming up slightly against Yen and Swiss Franc. Market focus is now shifting to Fed Chair Jerome Powell’s Congressional testimony, with investors looking for signals on how long Fed’s current policy pause might last. Powell is also expected to be questioned on the impact of tariffs. Though it is unlikely he will provide any clear forward guidance on both fronts.

    GBP/CHF could see increased volatility this week as the UK prepares to release Q4 GDP data and Switzerland reports January CPI figures. The cross has been struggling in range trading since last September. Today’s bounce suggests that rise from 1.1086 is ready to resume through 1.1336 towards 1.1393. Strong resistance could be seen there to limit upside to start another falling leg. Meanwhile, break of 1.1243 should bring deeper fall through 1.1189 towards 1.1086.

    In Europe, at the time of writing, FTSE is flat. DAX is up 0.27%. CAC is up 0.16%. UK 10-year yield is up 0.0317 at 4.493. Germany 10-year yield is up 0.051 at 2.416. Earlier in Asia, Japan was on holiday. Hong Kong HSI fell -1.06%. China Shanghai SSE fell -0.12%. Singapore Strait Times fell -0.37%.

    US NFIB small business optimism drops as uncertainty rises, hiring challenges persist

    NFIB Small Business Optimism Index declined to 102.8 in January, missing market expectations of 104.6 and falling from December’s reading of 105.1.

    The decline reflects growing concerns among small business owners, as seven out of the 10 components of the index deteriorated, while only one improved. Additionally, the Uncertainty Index surged 14 points to 100, marking the third-highest reading in its history after two months of easing uncertainty.

    NFIB Chief Economist Bill Dunkelberg highlighted while there is still “optimism regarding future business conditions,” uncertainty is climbing. One major concern remains the persistent “hiring challenges,” as businesses struggle to find qualified workers to fill vacancies. Capital investment plans are also being reconsidered.

    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.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0282; (P) 1.0310; (R1) 1.0334; More…

    EUR/USD recovers mildly today but stays in the middle of the near term established range above 1.0176. Intraday bias remains neutral for the moment. Outlook will remain bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. On the downside, break of 1.0176 will resume whole fall from 1.1213. 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
    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 102.8 104.6 105.1
    13:30 CAD Building Permits M/M Dec 11.00% 2.30% -5.90%

     



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  • 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%

     



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  • Australia Building Consents Rise 0.7% In December

    Australia Building Consents Rise 0.7% In December


    The total number of building permits issued in Australia was up a seasonally adjusted 0.7 percent on month in December, the Australian Bureau of Statistics said on Monday – coming in at 15,174.

    That was in line with expectations following the 3.4 percent decline in November.

    Permits for private sector houses fell 3.0 percent on month to 8,715, while consents for private sector dwellings excluding houses surged 15.2 percent to 6,209.

    On a yearly basis, permits for private sector houses was down 1.8 percent, permits for private sector dwellings excluding houses rallied 42.7 percent and overall permits were up 12.2 percent.

    The value of total residential building fell 0.9 percent on month to A$8.33 billion, while the value of non-residential building rose 9.7 percent to A$6.62 billion.

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  • Sterling Tumbles on BoE’s Dovish Rate Cut

    Sterling Tumbles on BoE’s Dovish Rate Cut


    The British Pound weakened significantly after BoE delivered a 25bps rate cut. The policy decision was more dovish than anticipated, primarily due to the unexpected shift in the MPC voting split. Catherine Mann, previously one of the most hawkish members of the committee, reversed course and joined Swati Dhingra in voting for a more aggressive 50bps cut.

    Adding to the bearish sentiment on Sterling, BoE’s updated economic projections painted a complicated macroeconomic outlook. The central bank sharply downgraded its 2025 GDP growth forecast. At the same time, inflation forecasts were revised higher. Facing the increased uncertainty, BoE emphasized its commitment to a “gradual and careful” approach to policy easing.

    Overall with today’s announcement, risk is clearly tilted toward a more dovish policy stance. The base case remains as one 25bps cut per quarter throughout 2025,. But today’s decision raises the probability of a faster easing cycle, in particular if growth conditions worsen further.

    Technically, EUR/GBP’s strong break of 0.8353 minor resistance argue that the pullback from 0.8472 might have completed at 0.8290 already. This also revives that case that rebound from 0.8221 is not totally completed. Further rise is now in favor back to 0.8472 resistance next.

    Overall in the currency markets, Yen is currently the strongest one, followed by Canadian, and then Dollar. Sterling is the worst, followed by Kiwi, and then Swiss Franc. Euro and Aussie are positioning in the middle. The picture is rather mixed with the exception of clear strength in Yen and weakness in Sterling. Other parts of the markets might need tomorrow’s US NFP data to provide more clarity.

    In Europe at the time of writing, FTSE is up 1.53%. DAX is up 0.82%. CAC is up 0.97%, UK 10-year yield is down -0.0249 at 4.416. Germany 10-year yield is up 0.004 at 2.369. Earlier in Asia, Nikkei rose 0.61%. Hong Kong HSI rose 1.43%. China Shanghai SSE rose 1.27%. Singapore Strait Times rose 0.39%. Japan 10-year JGB yield fell -0.0166 to 1.267.

    US initial jobless claims rises to 219k vs exp 214k

    US initial jobless claims rose 11k to 219k in the week ending February 1, above expectation of 214k. Four-week moving average of initial claims rose 4k to 217k.

    Continuing claims rose 36k to 1886k in the week ending January 25. Four-week moving average of continuing claims rose 2k to 1872k.

    BoE cuts rates to 4.50% in surprisingly dovish vote

    BoE lowered its policy rate by 25 basis points to 4.50%, as widely expected, but the tone of the decision was unexpectedly dovish.

    The Monetary Policy Committee vote split at 7-2, with Swati Dhingra advocating for a more aggressive 50bps cut—as expected—but hawkish member Catherine Mann surprisingly joining her, marking a significant shift in her stance.

    BoE emphasized a “gradual and careful” approach to easing, a slight adjustment from December’s messaging, which only referenced “gradual” reductions. This shift highlights policymakers’ growing concerns over inflation persistence and economic fragility. Governor Andrew Bailey reaffirmed that rate adjustments would be assessed on a “meeting-by-meeting” basis, with no pre-determined path for cuts.

    In its updated economic projections, BoE raised its inflation outlook, now expecting headline CPI to peak at 3.7% in Q3 2025, up from a prior forecast of 2.8%. The revision reflects higher energy costs and expected increases in regulated utility and transport prices. Inflation is not anticipated to return to the 2% target until Q4 2027, six months later than previously projected.

    Growth forecasts were also downgraded sharply for 2025, with expected GDP expansion halved to 0.75%, citing weak business sentiment, sluggish consumer activity, and poor productivity growth. However, projections for 2026 and 2027 were revised slightly upward to 1.5% from 1.25%, suggesting policymakers see a slow but eventual economic recovery.

    ECB’s Cipollone open to March cut, flags risks of full US-China trade war

    ECB Executive Board member Piero Cipollone indicating that while “there is still room for adjusting rates downwards”, the March decision remains uncertain. He stated that ECB must be “extremely careful” in its assessment, and he will enter the meeting “with an open mind”.

    Discussing the concept of the neutral rate in a Reuters interview, Cipollone downplayed its practical significance in policy setting. He pointed out that when estimates for the neutral rate vary widely—such as between 1.75% and 2.25%—it becomes “not terribly useful for setting monetary policy.” If ECB operates near either end of the range, it could risk either undershooting or overshooting its inflation target.

    Cipollone also raised concerns about the evolving global trade situation. The immediate impact of US tariffs depends on European retaliation and specific product categories affected, He warned that a “full trade war” between the US and China poses a more significant threat.

    With China accounting for 35% of global manufacturing capacity, broad trade restrictions could flood European markets with Chinese goods. This would create a dual challenge— “deflationary” pressures from lower-priced imports and a “contractionary” effect as European producers struggle to compete.

    Eurozone retail sales falls -0.2% mom in Dec, EU down -0.3% mom

    Eurozone retail sales slipped by -0.2% mom in December, missing market expectations of -0.1% decline and pointing to continued weakness in consumer demand. The drop was largely driven by -0.7% contraction in food, drinks, and tobacco sales, while non-food products saw a modest 0.3% increase. Automotive fuel sales in specialized stores also ticked up 0.2%, providing some offset to the broader decline.

    At the EU-wide level, retail sales fell even further, down 0.3% mom. The country-level breakdown highlights stark contrasts in retail activity. Slovenia (-2.2%), Germany (-1.6%), and Poland (-1.5%) saw the sharpest contractions, while Slovakia (+8.2%), Finland (+2.1%), and Spain (+1.4%) registered solid gains.

    BoJ’s Tamura advocates rate hike to 1% by late fiscal 2025

    BoJ board member Naoki Tamura, a known hawk, reinforced his stance on the need for tighter monetary policy, stating that Japan’s short-term interest rates should rise to at least 1% by the second half of fiscal 2025 to mitigate inflation risks.

    Tamura explained that inflationary pressures are mounting, necessitating a shift away toward a more neutral rate. He highlighted that by late fiscal 2025, the Japanese economy is expected to reach a point where the 2% inflation target can be considered sustainably achieved, supported by broad-based wage increases, including among smaller firms.

    “Bearing in mind that short-term interest rates should be at 1% by the second half of fiscal 2025, I think the Bank needs to raise rates in a timely and gradual manner, in response to the increasing likelihood of achieving its price target,” he said.

    Australia’s NAB business confidence improves, but profitability weakens

    Australia’s NAB Business Confidence rose from -7 to -4 in Q4, reflecting a slight improvement in sentiment. However, Business Conditions remained unchanged at 3, as trading conditions slipped from 6 to 5, and profitability turned negative from 0 to -1. Employment conditions as steady at 3.

    Forward-looking indicators showed a mixed picture. Expected business conditions for the next three months edged lower, but sentiment for the 12-month horizon improved by five points, aligning with a three-point increase in capital expenditure plans, suggesting firms are cautiously optimistic about long-term prospects.

    Cost pressures moderated, with labor cost growth slowing to 0.9% qoq from 1.2%, and purchase costs easing to 0.7% qoq from 1.0%. Retail price growth also softened to 0.5% qoq from 0.7%, though overall product price growth remained stable at 0.4% qoq, indicating ongoing margin pressure despite easing input costs. Wage costs remained the top concern for businesses, while demand constraints and labor shortages persisted as key challenges.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2462; (P) 1.2506; (R1) 1.2548; More…

    GBP/USD dips notably today but stays above 1.2248 support and intraday bias remains neutral. While corrective rebound from 1.2099 could still extend, upside should be limited by 38.2% retracement of 1.3433 to 1.2099 at 1.2609. On the downside, break of 1.2248 support will bring retest of 1.2099 first. Firm break there will resume whole decline from 1.3433. However, decisive break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

    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
    00:30 AUD NAB Business Confidence Q4 -4 -6 -7
    00:30 AUD Trade Balance (AUD) Dec 5.09B 6.73B 7.08B 6.79B
    06:45 CHF Unemployment Rate M/M Jan 2.70% 2.70% 2.60% 2.70%
    07:00 EUR Germany Factory Orders M/M Dec 6.90% 1.70% -5.40% -5.20%
    09:30 GBP Construction PMI Jan 48.1 53.7 53.3
    10:00 EUR Eurozone Retail Sales M/M Dec -0.20% -0.10% 0.10% 0.00%
    12:00 GBP BoE Interest Rate Decision 4.50% 4.50% 4.75%
    12:00 GBP MPC Official Bank Rate Votes 0–9–0 0–8–1 0–3–6
    12:30 USD Challenger Job Cuts Y/Y Jan -39.50% 11.40%
    13:30 USD Initial Jobless Claims (Jan 31) 219K 214K 207K 208K
    13:30 USD Nonfarm Productivity Q4 P 1.20% 1.80% 2.20%
    13:30 USD Unit Labor Costs Q4 P 3.00% 3.30% 0.80%
    15:00 CAD Ivey PMI Jan 53 54.7
    15:30 USD Natural Gas Storage -167B -321B

     



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  • Sterling Awaits BoE Guidance Amid Stagflation Concerns; Yen Leads FX Markets

    Sterling Awaits BoE Guidance Amid Stagflation Concerns; Yen Leads FX Markets


    Yen continues to dominate the forex market this week, additionally supported by further decline in US and European benchmark yields overnight. The persistent strength in Yen is being reinforced by hawkish rhetoric from a known hawkish BoJ board member, who reiterated calls for a gradual rate hike toward the 1% neutral level. While this stance isn’t new, the reaffirmation signals a continued push within the BoJ for higher rates. Recent economic data, including strong wage growth and Tokyo inflation, have provided additional support for the case of tighter monetary policy. As a result, Yen remains anchored as a favored currency, particularly amid falling yields in global markets.

    Meanwhile, market attention shifts to the British Pound ahead of today’s BoE policy announcement. A widely expected 25bps rate cut is already priced in, but the key drivers for Sterling will be the updated economic forecasts, voting split, and guidance from Governor Andrew Bailey. The ongoing debate over stagflation risks in the UK could lead to a further division within the Monetary Policy Committee. Any significant disagreement among policymakers would add further uncertainty to BoE’s rate path and could lead to Sterling volatility.

    Across the broader forex market, Yen remains the best performer of the week, followed by Canadian Dollar and Swiss Franc. On the other end of the spectrum, Dollar remains under pressure as the weakest currency, trailed closely by Euro and New Zealand Dollar. The Australian Dollar and Sterling are hovering in the middle.

    Technically, the anticipated rebound in US 10-year yields from 55 D EMA failed to materialize, with the yield accelerated further overnight to close at 4.422. The next key support level lies at 38.2% retracement of 3.603 to 4.809 at 4.348. Strong rebound from this level, coupled with decisive break above 4.590 resistance, would help reaffirm the broader bullishness. However, a clear break below 4.348 would shift the focus toward the 61.8% retracement level at 4.063%, raising the risk of a deeper correction. Extended fall in 10-year yield could drag USD/JPY through corresponding 38.2% retracement of 139.57 to 158.86 at 151.49 too.

    In Asia, at the time of writing, Nikkei is up 0.55%. Hong Kong HSI is up 0.64%. China Shanghai SSE is up 0.81%. Singapore Strait Times is up 0.38%. Japan 10-year JGB yield is down -0.012 at 1.272. Overnight, DOW rose 0.71%. S&P 500 rose 0.39%. NASDAQ rose 0.19%. 10-year yield fell -0.091 to 4.422.

    BoE to cut 25bps, focus on MPC split and stagflation risks

    BoE is widely expected to lower interest rates by 25bps to 4.50% today, marking its third cut in the current cycle. The central bank is likely to maintain a cautious stance, reinforcing its guidance of a “gradual” approach, which suggests a pace of four quarter-point cuts throughout 2025.

    The Monetary Policy Committee’s vote split will be a key focus, as divisions among policymakers could influence BoE’s forward guidance. Known hawk Catherine Mann may dissent and argue for keeping rates steady, while dovish member Swati Dhingra could push for a more aggressive 50bps cut. A wider split would highlight internal uncertainty over the pace of easing.

    Alongside the rate decision, BoE will release its updated quarterly Monetary Policy Report, which is expected to reflect downward revisions to growth projections for 2025-2027. However, inflation forecasts, at least for 2025, could be revised higher. Such a combination would reinforce concerns over stagflation, a scenario where sluggish growth coincides with persistent inflationary pressures.

    GBP/USD is hovering near a critical technical resistance zone ahead of BoE decision. The zone include 55 D EMA (now at 1.2522) and 38.2% retracement of 1.3433 to 1.2099 at 1.2609. Firm rejection from this zone would reinforce the view that recent price action from 1.2099 remains corrective, keeping the broader bearish trend intact. In this case, decline from 1.3433 should resume through 1.2099 low at a later stage.

    BoJ’s Tamura advocates rate hike to 1% by late fiscal 2025

    BoJ board member Naoki Tamura, a known hawk, reinforced his stance on the need for tighter monetary policy, stating that Japan’s short-term interest rates should rise to at least 1% by the second half of fiscal 2025 to mitigate inflation risks.

    Tamura explained that inflationary pressures are mounting, necessitating a shift away toward a more neutral rate. He highlighted that by late fiscal 2025, the Japanese economy is expected to reach a point where the 2% inflation target can be considered sustainably achieved, supported by broad-based wage increases, including among smaller firms.

    “Bearing in mind that short-term interest rates should be at 1% by the second half of fiscal 2025, I think the Bank needs to raise rates in a timely and gradual manner, in response to the increasing likelihood of achieving its price target,” he said.

    Australia’s NAB business confidence improves, but profitability weakens

    Australia’s NAB Business Confidence rose from -7 to -4 in Q4, reflecting a slight improvement in sentiment. However, Business Conditions remained unchanged at 3, as trading conditions slipped from 6 to 5, and profitability turned negative from 0 to -1. Employment conditions as steady at 3.

    Forward-looking indicators showed a mixed picture. Expected business conditions for the next three months edged lower, but sentiment for the 12-month horizon improved by five points, aligning with a three-point increase in capital expenditure plans, suggesting firms are cautiously optimistic about long-term prospects.

    Cost pressures moderated, with labor cost growth slowing to 0.9% qoq from 1.2%, and purchase costs easing to 0.7% qoq from 1.0%. Retail price growth also softened to 0.5% qoq from 0.7%, though overall product price growth remained stable at 0.4% qoq, indicating ongoing margin pressure despite easing input costs. Wage costs remained the top concern for businesses, while demand constraints and labor shortages persisted as key challenges.

    Goolsbee warns Fed may struggle to distinguish tariff-driven inflation from overheating

    Chicago Fed President Austan Goolsbee cautioned that a “series of new challenges to the supply chain”, ranging from natural disasters to trade policy shifts, could create fresh inflationary pressures.

    He highlighted the increasing risks from events like tariffs and trade wars, hurricanes, port closures, geopolitical tensions, and labor strikes, all of which could complicate the inflation outlook in 2025.

    A key concern for Fed, Goolsbee noted, is differentiating between inflation stemming from economic overheating versus price increases caused by new tariffs. This distinction will be critical in determining the Fed’s policy response.

    Goolsbee also compared the current situation to the 2018 trade tensions under President Donald Trump, noting that while companies previously shifted production out of China, further adjustments could be more challenging this time. The remaining imports from China may be less replaceable.

    “In that case, the impact on inflation might be much larger this time,” Goolsbee noted.

    Separately, Fed Vice Chair Philip Jefferson signaled that the central bank is in no rush to adjust its policy stance as it assesses the economic impact of the Trump administration’s policy policies on tariffs, immigration, deregulation and taxes. “We can be patient and wait to see the net effect of any policy changes by the current administration,” he said.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 151.66; (P) 153.06; (R1) 154.00; More…

    USD/JPY’s fall from 158.86 is in progress and intraday bias stays on the downside for 38.2% retracement of 139.57 to 158.86 at 151.49. Strong support could be seen from there to complete the corrective fall from 158.86. Break of 153.70 minor resistance will turn intraday bias back to the upside for rebound. However, sustained break of 151.49 will raise the chance of bearish reversal.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, 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
    00:30 AUD NAB Business Confidence Q4 -4 -6 -7
    00:30 AUD Trade Balance (AUD) Dec 5.09B 6.73B 7.08B 6.79B
    06:45 CHF Unemployment Rate M/M Jan 2.70% 2.60%
    07:00 EUR Germany Factory Orders M/M Dec 1.70% -5.40%
    09:30 GBP Construction PMI Jan 53.7 53.3
    10:00 EUR Eurozone Retail Sales M/M Dec -0.10% 0.10%
    12:00 GBP BoE Interest Rate Decision 4.50% 4.75%
    12:00 GBP MPC Official Bank Rate Votes 0–8–1 0–3–6
    12:30 USD Challenger Job Cuts Y/Y Jan 11.40%
    13:30 USD Initial Jobless Claims (Jan 31) 214K 207K
    13:30 USD Nonfarm Productivity Q4 P 1.80% 2.20%
    13:30 USD Unit Labor Costs Q4 P 3.30% 0.80%
    15:00 CAD Ivey PMI Jan 53 54.7
    15:30 USD Natural Gas Storage -167B -321B

     



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  • Australia Building Consents Rise 0.7% In December

    Australia Has A$5.085 Billion Trade Surplus


    Australia posted a seasonally adjusted merchandise trade surplus of A$5.085 billion in December, the Australian Bureau of Statistics said on Thursday.

    That was shy of expectations for A$6.560 billion and was down from the downwardly revised A$6.792 billion in November (originally A$7.079 billion)

    Exports were up 1.1 percent on month to A$44.027 billion, driven by metal ores and minerals; exports rose 4.8 percent in the previous month.

    Imports jumped 5.9 percent on month to A$38.942 billion, driven by capital goods; imports were up 1.7 percent a month earlier.

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  • Australian Dollar maintains position, upside seems limited as China braces for US tariffs

    Australian Dollar maintains position, upside seems limited as China braces for US tariffs


    • The Australian Dollar could struggle as China is due to be hit with a 10% tariff later in the day.
    • Traders monitor the development surrounding the tariff deal with China.
    • Trump would suspend his tariffs after both countries agreed to send 10,000 soldiers to the US border to prevent drug trafficking.

    The Australian Dollar (AUD) rebounds on Tuesday, ending its six-day losing streak as the AUD/USD pair rises amid a weakening US Dollar (USD). The USD depreciated after US President Donald Trump announced late Monday that he would pause tariffs on Mexico and Canada. However, market volatility remains a concern as investors closely watch developments in the ongoing tariff negotiations with China, Australia’s key trading partner. China is due to be hit with across-the-board tariffs of 10% that begin at 05.00 GMT on Tuesday.

    President Trump stated that he would suspend steep tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 soldiers to the US border to combat drug trafficking. The tariffs on Mexico and Canada have been postponed for at least 30 days. This decision comes just two days after Trump imposed 25% tariffs on Mexican and Canadian goods and 10% tariffs on imports from China.

    The AUD may lose its ground due to the increased likelihood that the Reserve Bank of Australia (RBA) could consider a rate cut in February. The RBA has maintained the Official Cash Rate (OCR) at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any policy easing.

    Australian Dollar appreciates due to improved risk sentiment

    • The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, stabilizes around 108.70 at the time of writing after giving up most of its gains in the previous session.
    • The White House announced late Monday that US President Donald Trump signed an executive order to initiate the creation of a government-owned investment fund, according to Reuters. This fund could allow the US to profit from TikTok if an American buyer is secured. TikTok has until early April to find an approved partner or purchaser. Trump is pushing for the US to acquire a 50% stake in the company.
    • Data released by the Institute for Supply Management (ISM) on Monday showed that the Manufacturing PMI rose to 50.9 in January from 49.3 in December. This reading came in better than the estimation of 49.8.
    • The US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose 0.3% MoM in December, up from 0.1% in November. On an annual basis, PCE inflation accelerated to 2.6% from the previous 2.4%, while core PCE, which excludes food and energy, remained steady at 2.8% YoY for the third straight month.
    • Fed Chair Jerome Powell emphasized during the post-meeting press conference that the central bank would need to see “real progress on inflation or some weakness in the labor market” before considering any further adjustments to monetary policy.
    • US Treasury Secretary Scott Bessent warned Key Square Capital Management partners a year ago that “tariffs are inflationary and would strengthen the US Dollar—hardly a good starting point for a US industrial renaissance.” However, according to the Financial Times (FT), Bessent last week advocated for new universal tariffs on US imports, proposing an initial 2.5% rate that would gradually increase.
    • President Trump announced his threat on X (formerly Twitter) to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.
    • Australia’s Retail Sales declined by 0.1% month-on-month in December 2024, marking the first drop in nine months. Although the decline was less severe than the anticipated 0.7% contraction. The annual sales increased by 4.6% compared to December 2023. On a seasonally adjusted basis, sales rose 1.0% QoQ in the December quarter of 2024.
    • China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) declined to 50.1 in January, down from 50.5 in December. The reading fell short of market expectations, which had anticipated a steady 50.5.
    • ANZ, CBA, Westpac, and now National Australia Bank (NAB) all anticipate a 25 basis point (bps) rate cut from the Reserve Bank of Australia (RBA) in February. Previously, the NAB had forecasted a rate cut in May but has now moved its projection forward to the February RBA meeting.
    • The Reserve Bank of Australia released its January 2025 Bulletin, featuring a detailed analysis of how monetary policy changes influence interest rates in the economy and how fluctuations in interest rates impact economic activity and inflation.

    Australian Dollar tests nine-day EMA barrier near descending channel’s upper boundary

    AUD/USD hovers around 0.6210 on Tuesday, trading within the descending channel pattern on the daily chart, signaling a bearish bias. However, the 14-day Relative Strength Index (RSI) has rebounded toward the 50 level, signaling weakening downside momentum. A breakout above the channel and a sustained move above the 50 mark on the RSI could indicate a shift toward a bullish bias.

    On the downside, the AUD/USD pair could test the descending channel’s lower boundary at the 0.6150 level. A break below the channel would guide the pair to navigate the region around 0.6087, the lowest since April 2020, recorded on February 3.

    The AUD/USD pair tests its initial barrier at the nine-day Exponential Moving Average (EMA) of 0.6225, aligned with the upper boundary of the descending channel.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.26% -0.19% 0.31% -0.76% -0.44% -0.41% -0.09%
    EUR 0.26%   0.07% 0.58% -0.50% -0.18% -0.14% 0.17%
    GBP 0.19% -0.07%   0.48% -0.57% -0.26% -0.22% 0.10%
    JPY -0.31% -0.58% -0.48%   -1.04% -0.73% -0.71% -0.38%
    CAD 0.76% 0.50% 0.57% 1.04%   0.31% 0.35% 0.68%
    AUD 0.44% 0.18% 0.26% 0.73% -0.31%   0.04% 0.38%
    NZD 0.41% 0.14% 0.22% 0.71% -0.35% -0.04%   0.31%
    CHF 0.09% -0.17% -0.10% 0.38% -0.68% -0.38% -0.31%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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