Tag: CAD

  • Equities Extend Losses on Tariff Fears, But Forex Markets Hold Steady in Consolidation

    Equities Extend Losses on Tariff Fears, But Forex Markets Hold Steady in Consolidation


    US stock markets suffered another brutal session overnight, with NASDAQ leading the decline, shedding nearly -2%. All three major indexes closed below their respective 55 W EMAs, reinforcing the bearish case that the markets are now in a medium-term correction phase. This technical breakdown suggests that downside momentum is gaining traction, with investors recalibrating their expectations amid escalating economic uncertainty, particularly regarding the relentless stream of tariff threats.

    A major driver of the selloff remains the intensifying trade war, which shows no signs of slowing down. Tariff threats are mounting almost daily, as analysts argue that markets have yet to fully price in the potential economic fallout. The momentum of these escalations is expected to persist well into the second quarter, particularly with reciprocal tariffs set to take effect in April.

    The European Union has already signaled its intent to retaliate against US tariffs, and similar counter measures would be seen from other countries too. Beyond the EU response, additional tariffs are in the pipeline, targeting China with higher duties, and likely extending to non-border-related tariffs against Canada and Mexico. Japan could also find itself in Washington’s crosshairs, particularly over criticism about its weak currency. The sheer breadth of these tariff initiatives suggests that the market’s current adjustment may just be the beginning of a broader risk-off shift. Investors have just started offloading positions to hedge against further risks.

    Meanwhile, despite the turbulence in equities, currency markets have remained relatively steady. So far this week, the Sterling is currently the strongest performer, followed by Euro and Dollar. On the weaker end of the spectrum, Swiss Franc is the worst performer, trailed by Loonie and Aussie. Kiwi and Yen are positioned in the middle. However, almost all major currency pairs and crosses are still trading within last week’s range, suggesting that the forex market is in a consolidation phase.

    Looking ahead, today’s key data releases—UK GDP and the University of Michigan consumer sentiment and inflation expectations—will be closely watched. U.S. consumer sentiment has already plunged by -10 points over the past two months, reflecting the growing unease surrounding tariff policies. A further steep decline in sentiment could significantly heighten recession fears and deepen the market’s risk-off mood.

    In Asia, at the time of writing, Nikkei is up 0.87%. Hong Kong HSI is up 2.33%. China Shanghai SSE is up 1.71%. Singapre Strait Times is down -0.21%. Japan 10-year JGB yield is down -0.018 at 1.528. Overnight, DOW fell -1.30%. S&P 500 fell -1.39%. NADSAQ fell -1.96%. 10-year yield fell -0.044 to 4.274.

    NZ BNZ manufacturing hits 53.9 as recovery gains unexpected momentum

    New Zealand’s BusinessNZ Performance of Manufacturing Index rose from 51.7 to 53.9 in February, marking its highest level since August 2022.

    This solid improvement was driven by stronger production (52.4) and new orders (51.5), both also reaching their best levels since August 2022. Meanwhile, employment surged to 54.0, climbing 3.2 points from January and hitting its highest level since September 2021.

    Despite the stronger data, business sentiment remains cautious. The proportion of negative comments from respondents rose to 59.5% in February, up from 57.7% in January. Many manufacturers cited weak orders and sluggish sales as ongoing challenges, signaling that while expansion has resumed.

    BNZ’s Senior Economist Doug Steel welcomed the sustained improvement, noting that “pickup may be a bit faster than we are currently forecasting”.

    Gold hits record high, approaches 3000 amid ceasefire deadlock

    Gold’s up trend resumed overnight and surged to new record highs as the precious metal remains well-supported by escalating global uncertainties. The psychological 3000 level is now in sight as investors flock to the safe-haven asset. The rally is being fueled by multiple factors, including intensifying trade tensions, stalemate in Ukraine-Russia ceasefire negotiations, and the extended broad selloff in US stock markets.

    In particular, the latest developments surrounding the ceasefire talks between Russia and Ukraine have kept uncertainty high. Russian President Vladimir Putin stated that he agreed to the US-led ceasefire proposal in principle but stopped short of fully endorsing it.

    Putin indicated that further discussions with US President Donald Trump would be necessary to ensure that the ceasefire results in a “long-term peace” and addresses the “root causes” of the conflict. He also expressed skepticism, questioning whether the proposed 30-day ceasefire would be used to “supply weapons” or “train newly mobilized units,” and raised concerns over how violations would be monitored.

    Trump, in response, acknowledged that early reports from Russia were “going OK,” but added that “doesn’t mean anything until we hear what the final outcome is.”

    With the ceasefire deal still hanging in the balance, geopolitical risks stays high.

    Technically, the next near term target for Gold is 61.8% projection of 2584.24 to 2956.09 from 2832.41 at 3062.21.

    However, a key test lies ahead in the medium-term rising channel resistance, which has capped price advances since early 2024. Rejection at this level would still maintain gold’s bullish trend but keep its momentum in check.

    On the other hand, decisive breakout above the channel resistance would signal acceleration in Gold’s uptrend. In such a scenario, gold could quickly reach 100% projection level at 3204.26.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.4384; (P) 1.4418; (R1) 1.4477; More…

    Intraday bias in USD/CAD stays neutral as sideway trading continues. Price actions from 1.4791 high are seen as a corrective pattern, with rebound from 1.4150 as the second leg. On the upside, break of 1.4541 will target 100% projection of 1.4150 to 1.4541 from 1.4238 at 1.4629 and above. But for now, strong resistance is expected from 1.4791 to limit upside to bring the third leg. On the downside, break of 1.4238 will confirm that the third leg has started through 1.4150 support.

    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 support holds (2022 high), even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PMI Feb 53.9 51.4 51.7
    07:00 EUR Germany CPI M/M Feb F 0.40% 0.40%
    07:00 EUR Germany CPI Y/Y Feb F 2.30% 2.30%
    07:00 GBP GDP M/M Jan 0.10% 0.40%
    07:00 GBP Industrial Production M/M Jan -0.10% 0.50%
    07:00 GBP Industrial Production Y/Y Jan -0.70% -1.90%
    07:00 GBP Manufacturing Production M/M Jan 0.00% 0.70%
    07:00 GBP Manufacturing Production Y/Y Jan -0.40% -1.40%
    07:00 GBP Goods Trade Balance (GBP) Jan -17.1B -17.4B
    12:30 CAD Manufacturing Sales M/M Jan 2.00% 0.30%
    12:30 CAD Wholesale Sales M/M Jan 1.80% -0.20%
    14:00 USD UoM Consumer Sentiment Mar P 63.8 64.7
    14:00 USD UoM Inflation Expectations Mar P 3.50%

     



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  • Forex Steadies Despite Fresh Tariff Escalations, Euro Starting to Retreat

    Forex Steadies Despite Fresh Tariff Escalations, Euro Starting to Retreat


    Forex markets are holding steady in Asian session today, with major currency pairs and crosses all confined within yesterday’s ranges. This lack of movement comes despite a significant escalation in the US-led trade war, as newly effective 25% tariffs on all imported steel and aluminum products have prompted swift retaliation from key trading partners.

    In swift response, European Commission President Ursula von der Leyen announced that the EU would implement retaliatory tariffs of equal value, totaling USD 28B, on a range of U.S. goods beyond just metals. These measures, set to take effect on April 1, will target products including textiles, home appliances, and agricultural goods. Meanwhile, Canada—the largest supplier of steel and aluminum to the U.S.—is hitting back with USD 20.7B in countermeasures, including a 25% tariff on steel products and increased taxes on US imports ranging from computers and servers to sports equipment and cast-iron products.

    The UK has so far taken a more measured stance, with Prime Minister Keir Starmer stating that his government is adopting a “pragmatic approach” while keeping “all options on the table.” Australia, on the other hand, has opted against imposing retaliatory tariffs for now. Instead, Prime Minister Anthony Albanese has urged Australians to support local industries in response to Trump’s refusal to grant an exemption for Australian steel and aluminum.

    On the currency front, Swiss Franc is so far the weakest performer this week, followed by Loonie and then Dollar. Euro remains the strongest but has begun to pull back in some crosses, with Sterling and Kiwi following. Yen and Aussie are positioned in the middle.

    Technically, EUR/CAD could have formed a short term top at 1.5856, ahead of 200% projection of 1.4483 to 1.5058 from 1.4740 at 1.5890. Some consolidations would be seen with risk of deeper retreat to 55 4H EMA (now at 1.5470). But downside should be contained by 1.5401 support to bring rebound, and up trend resumption later.

    In Asia, at the time of writing, Nikkei is up 0.09%. Hong Kong HSI is down -1.44%. China Shanghai SSE is down -0.73%. Singapore Strait Times is down -0.03%. Japan 10-year JGB yield is up 0.017 at 1.541. Overnight, DOW fell -0.20%. S&P 500 rose 0.49%. NASDAQ rose 1.22%. 10-year yield rose 0.030 to 4.318.

    BoJ’s Ueda expects real wages to rise, boosting consumption

    BoJ Governor Kazuo Ueda signaled optimism about Japan’s economic outlook, telling the parliament today that “import-cost-driven inflation” is expected to moderate while wages continue to “rise steadily.” This shift could lead to an improvement in real wages and consumption, a critical factor for sustaining domestic demand.

    Ueda’s comments align with recent developments in Japan’s annual “shunto” wage negotiations, which have resulted in record pay hikes across major companies.

    Hitachi announced a record 6.2% rise in monthly wages, fully meeting union demands. Toyota’s key auto parts supplier, Denso, also committed to historic pay hikes, while Toyota itself stated that the overall wage increase for its manufacturing staff would match last year’s levels—the highest seen since 1999.

    Further clarity on the scale of wage hikes will come on March 14, when Rengo, Japan’s largest labor union federation representing 7 million workers, releases its preliminary report. Rengo had been seeking an average wage increase of 6.09%, up from last year’s 5.85%.

    US stocks find temporary support, but downside risks persist

    Risk sentiment showed signs of stabilization in the US overnight, with S&P 500 and NASDAQ posting gains. However, stocks are merely digesting recent steep losses rather than having a decisive turnaround.

    The reaction to lower-than-expected US consumer inflation data was relatively muted. The market’s cautious interpretation of the data is justified, as the latest CPI figures do not yet capture the full effects of tariff-related price pressures. There is still a lack clarity on how inflation will evolve under the new tariff regime, particularly when reciprocal tariffs come into play on April 2. Nevertheless, for the moment at least, disinflationary momentum is leaning in the Fed’s favor.

    Interestingly, market pricing has shifted the expected timing of Fed’s next rate cut back from May to June. Futures now show just 31% probability of a 25bps cut in May, while the odds for a June cut have climbed to 78%.

    Traders appear to believe Fed will need additional time to assess the economic impact of tariffs before making a policy move. From a timing perspective, June would align better with Fed’s next round of economic projections, allowing policymakers to incorporate more data into their decision-making.

    As for NASDAQ, oversold condition as seen in D RSI could start to slow downside momentum, and some near term consolidations cannot be ruled out. But risk will stay on the downside as long as 18604.46 resistance holds. Fall from 20204.58 is seen as a correction to the whole up trend from 10088.82 (2022 low) at least. It should extend to 38.2% retracement of 10088.82 to 20204.58 at 16340.36 before bottoming.

    Gold gains as markets await Russia’s response to ceasefire proposal

    Gold picked up momentum as investors closely monitor Kremlin’s response to the proposed ceasefire deal in Ukraine, as US officials head to Russia for negotiations.

    Russia has yet to publicly endorse an immediate ceasefire, but has indicated that it is reviewing the plan, and a phone call between US President Donald Trump and Russian President Vladimir Putin is on the table.

    However, Trump remains skeptical, stating that while he has received “positive messages” about the ceasefire, such reassurances “mean nothing” without concrete action from Putin.

    Trump also warned that if Putin refuses to sign the deal, the US could take “financially very bad” actions against Russia, likely hinting at severe sanctions.

    Ukrainian President Volodymyr Zelenskyy said earlier in the week that stronger Western financial and military support would follow should the ceasefire negotiations fail.

    Technically, Gold’s near term rebound from 2832.41 extended higher today and focus is now on 2956.09 resistance. Decisive break there will resume the larger up trend to 3000 psychological, and possibly further to 61.8% projection of 2584.24 to 2956.09 from 2832.41 at 3062.21.

    However, break of 2905.80 support should extend the corrective pattern from 2956.09 with another falling leg back to 2832.41 and possibly below.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 147.51; (P) 148.35; (R1) 149.10; More…

    Intraday bias in USD/JPY remains neutral for the moment, and more consolidations could be seen above 146.52. Upside of recovery should be limited by 150.92 support turned resistance. On the downside, sustained trading below 61.8% retracement of 139.57 to 158.86 at 146.32 will pave the way to 139.57 support.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:00 AUD Consumer Inflation Expectations Mar 3.60% 4.60%
    00:01 GBP RICS Housing Price Balance Feb 11% 20% 22%
    07:30 CHF Producer and Import Prices M/M Feb 0.20% 0.10%
    07:30 CHF Producer and Import Prices Y/Y Feb -0.30%
    10:00 EUR Eurozone Industrial Production M/M Jan 0.80% -1.10%
    12:30 USD Initial Jobless Claims (Mar 7) 224K 221K
    12:30 CAD Building Permits M/M Jan -4.80% 11.00%
    12:30 USD PPI M/M Feb 0.30% 0.40%
    12:30 USD PPI Y/Y Feb 3.30% 3.50%
    12:30 USD PPI Core M/M Feb 0.30% 0.30%
    12:30 USD PPI Core Y/Y Feb 3.60% 3.60%
    14:30 USD Natural Gas Storage -46B -80B

     



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  • Risk Sentiment Dips in Europe But Euro Holds Steady

    Risk Sentiment Dips in Europe But Euro Holds Steady


    Risk sentiment took a mild turn to the downside in European markets today, with DAX pulling back from last week’s solid gains. Investors are watching developments in Germany’s political arena, where Greens have voiced opposition to proposals by CDU’s Friedrich Merz for a sweeping overhaul of debt rules, including a massive increase in state borrowing and a EUR 500B infrastructure fund.

    While this move appears to have dampened market confidence temporarily, the broader reaction remains measured, suggesting that investors are just waiting for more clarity on any subsequent political negotiations.

    Despite initially rejecting Merz’s plans, Greens have indicated they will present their own ideas and hold further talks with both conservative CDU/CSU and SPD. This could be a strategic negotiation tactic aimed at extracting additional concessions for climate protection measures or other political agenda.

    Meanwhile, Euro is largely unfazed, holding steady in tight range against Dollar. Supporting Euro’s relative resilience, strong investor confidence data in both the Eurozone and Germany stand in stark contrast to deteriorating sentiment in the US.

    Elsewhere, Canadian Dollar lingers as the day’s worst performer, finding little support even after former BoC and BoE Governor Mark Carney emerged as Canada’s next Prime Minister, replacing Justin Trudeau. However, uncertainties loom over Canada’s political and economic future. His Liberal Party has recently gained ground, fueled by renewed sense of national unity against US tariffs. Yet, the party still faces tough challenges from the opposition Conservatives, who have consistently led in the polls for months—often by double digits.

    Carney is expected to call an election soon in an effort to capitalize on the momentum and strengthen the Liberal Party’s position. However, it is clearly an uphill battle as the Conservatives remain well-positioned to challenge for power. While Carney’s track record in central banking has earned him global respect, translating that expertise into electoral momentum could prove challenging.

    Overall in the forex markets, Yen is topping the performance chart today, followed by Kiwi and Swiss Franc, reflecting a slight tilt toward safer assets. At the other end of the spectrum, Loonie is the weakest, with Dollar and Sterling also lagging. Euro and Aussie find themselves in the middle of the pack.

    Technically, EUR/CAD is now eyeing 161.8% projection of 1.4483 to 1.5058 from 1.4740 at 1.5670 after recent strong rally. Firm break of 1.5670 will push the cross further to 200% projection at 1.5890, where it could find strong resistance for short term topping. Or, break of 1.5401 support will argue that a consolidation phase has already started.

    In Europe, at the time of writing, FTSE is down -0.92%. DAX is down -1.25%. CAC is down -0.42%. UK 10-year yield is down -0.007 at 4.596. Germany 10-year yield is down -0.029 at 2.815. Earlier in Asia, Nikkei rose 0.57%. Hong Kong HSI fell -1.57%. China Shanghai SSE fell -0.38%. Singapore Strait Times fell -0.21%. Japan 10-year JGB yield rose 0.063 to 1.587.

    ECB’s Kazimir: No automatic decisions or rushing

    Slovak ECB Governing Council member Peter Kazimir emphasized the need for flexibility in monetary policy, cautioning against premature decisions on interest rate cuts.

    In a blog post, he highlighted that inflation risks remain “tilted to the upside”. He added that historical precedent showing that tariffs tend to slow economic growth while simultaneously pushing prices higher—precisely the scenario ECB seeks to avoid.

    Given these uncertainties, Kazimir reinforced the importance of keeping “all options open,” suggesting that the ECB could either proceed with further rate cuts or pause.

    He made it clear that he is still seeking “undeniable confirmation” that the current disinflation trend will persist before endorsing any easing measures.

    With inflation dynamics remaining complex, he stressed that “now is not the time for automatic decisions or rushing.”

    Eurozone Sentix investor confidence jumps to -2.9, Germany feeling downright euphoric

    Eurozone Sentix Investor Confidence index jumped from -12.7 to -2.9, far exceeding market expectations of -10 and reaching its highest level since June 2024. Current Situation Index improved relatively modestly from -25.5 to -21.8. Expectations Index soared from 1.0 to 18.0, marking its third consecutive increase and the highest reading since July 2021. This month’s surge in expectations represents the largest monthly increase since 2012, signaling a dramatic shift in sentiment among investors.

    Germany saw an even more impressive turnaround. The Invest Confidence index rose from -29.7 to -12.5, its best level since April 2023. Current Situation Index climbed from -50.8 to -40.5, the highest since July 2024. Meanwhile, Expectations surged from -5.8 to 20.5, marking the highest level since July 2021.

    According to Sentix, much of this optimism is rooted in expectations for increased investment in the EU’s armaments sector and Germany’s infrastructure, which has left investors feeling “downright euphoric” about future prospects.

    In contrast, investor sentiment in the US deteriorated significantly. The Sentix Investor Confidence Index plunged from 21.2 to -2.7, its lowest level since 2023. The Current Situation Index dropped from 35.3 to 13.5, the weakest reading since September 2024, while the Expectations Index tumbled from 8.0 to -7.8, its lowest since November 2022.

    Sentix described this downturn as a “historic turning point,” with such a sharp simultaneous decline in both current and expected values only observed once before—during the 2008 financial crisis.

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0780; (P) 1.0834; (R1) 1.0888; More…

    While further rise could be seen in EUR/USD, loss of momentum as seen in 4H MACD could limit upside to bring retreat. On the downside, break of 1.0764 minor support will with bias neutral for consolidations first, before staging another rally. Nevertheless, firm break of 1.0932 will pave the way back to 1.1274 key resistance next.+

    In the bigger picture, the strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Jan 2.80% 3.20% 4.80% 4.40%
    23:50 JPY Bank Lending Y/Y Feb 3.10% 3.10% 3% 2.90%
    23:50 JPY Current Account (JPY) Jan 1.94T 1.99T 2.73T
    05:00 JPY Leading Economic Index Jan P 108 108.1 108.4 108.3
    06:00 JPY Eco Watchers Survey: Current Feb 45.6 48.5 48.6
    07:00 EUR Germany Industrial Production M/M Jan 2.00% 1.50% -2.40% -1.50%
    07:00 EUR Germany Trade Balance (EUR) Jan 16.0B 21.2B 20.7B
    09:30 EUR Eurozone Sentix Investor Confidence Mar -2.9 -10 -12.7

     



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  • Euro Stays Strong, While Markets Stabilize on China’s Stimulus and Hopes for Trump’s Tariff Compromise

    Euro Stays Strong, While Markets Stabilize on China’s Stimulus and Hopes for Trump’s Tariff Compromise


    Despite the steep selloff on Wall Street overnight, sentiment appears to have improved somewhat in Asia. Investors found reasons for optimism as China set a 2025 GDP growth target of around 5% and announced stimulus measures to counter escalating tensions with the U.S. In a notable shift, Beijing raised its budget deficit target to roughly 4% of GDP, marking the highest level since at least 2010. Stocks in Hong Kong led regional gains, reflecting hopes that China’s commitment to boosting domestic growth will help offset some global headwinds.

    In the US, there is cautious optimism following remarks from Commerce Secretary Howard Lutnick, who revealed that President Donald Trump may unveil a compromise deal with Canada and Mexico as early as Wednesday. Such a pact could potentially scale back the recently enacted 25% tariffs. However, any progress on that front may be overshadowed by the looming threat of reciprocal tariffs, particularly on the EU, set to be announced in early April.

    While US equity futures received a minor lift from Lutnick’s comments, investors remain wary that ongoing protectionist policies could still drive the economy toward recession. Upcoming US ISM services data will be a crucial test for investor confidence, as weak results could deepen economic concerns and overshadow any positive developments on trade negotiations.

    Meanwhile, Euro is lifted by Europe’s increasing focus on rearmament. The European Commission has proposed borrowing up to EUR 150B to lend to EU governments under a new defense initiative, citing growing threats from Russia and diminishing confidence in US security commitments. The package, championed by Commission President Ursula von der Leyen, could mobilize up to EUR 800B for European defense priorities, including air defense, missile systems, and drone technology.

    Germany is also making significant moves, with the prospective coalition between the CDU/CSU and SPD pledging to loosen the country’s debt brake. This reform would allow higher defense spending and facilitate the creation of a EUR 500B infrastructure fund over the next decade. By exempting defense spending above 1% of GDP from debt limits, Berlin is positioning itself for a substantial boost in military expenditure—a development viewed positively by market participants anticipating a multi-year European rearmament cycle.

    In the currency markets, Dollar remains the worst performer for the week, despite some respite today. Canadian Dollar and Japanese Yen are also under pressure. Conversely, Euro continues to top the leader board, bolstered by optimism around Europe’s defense plans, while Sterling and Swiss Franc follow. Caught in the middle are the Australian and New Zealand Dollars, which face mixed prospects. On one hand, they remain vulnerable to US-China trade friction, but on the other, they could gain support if China’s stimulus measures help stabilize demand for commodities.

    Technically, EUR/CAD’s strong break of 1.5225 resistance this week confirms resumption of long term up trend from 1.2867 (2022 low). Further rise is now expected to 61.8% projection of 1.2867 to 1.5111 from 1.4483 at 1.5870 in the medium term. This will now remain the favored case as long as this week’s low at 1.5002 holds.

    In Asia, at the time of writing, Nikkei is up 0.44%. Hong Kong HSI is up 2.27%. China Shanghai SSE is up 0.44%. Singapore Strait Times is up 0.30%. Japan 10-year JGB yield is up 0.017 at 1.443. Overnight, DOW fell -1.55%. S&P 500 fell -1.22%. NASDAQ fell -0.35%. 10-year yield rose 0.030 to 4.210.

    BoJ’s Uchida: Interest rate to gradually approach neutral by late FY 2025 to FY 2026

    BoJ Deputy Governor Shinichi Uchida reinforced today that interest rates will continue to rise if the bank’s economic projections hold. He highlighted in a speech that BoJ expects inflation to stabilize around the 2% target in the second half of fiscal 2025 to fiscal 2026, with “effects of the cost-push wane” while underlying inflation strengthens with wages growth.

    “The policy interest rate at that time is considered to approach an interest rate level that is neutral to economic activity and prices,” he added.

    However, Uchida acknowledged that determining the “neutral” interest rate level remains uncertain. While in theory, it should be around 2% plus Japan’s natural rate of interest, estimates for the latter vary significantly from -1% to +0.5%.

    Given this wide range and estimation errors, BoJ will avoid relying solely on theoretical models and instead “examine the response of economic activity and prices as it raises the policy interest rate”

    Japan’s PMI service finalized at 53.7, sector strengthens but confidence wanes on labor shortages and trade risks

    Japan’s PMI Services was finalized at 53.7 in February, up from January’s 53.0, marking a six-month high. PMI Composite also improved from 51.1 to 52.0, the strongest reading since September 2024.

    According to Usamah Bhatti, Economist at S&P Global Market Intelligence, service sector businesses saw higher sales volumes, with export demand contributing to the expansion. Meanwhile, the broader private sector recorded its steepest rise in activity in five months, supported by a milder contraction in manufacturing.

    Despite the growth, overall business confidence showed signs of softening. Bhatti noted Firms expressed concerns over labor shortages and uncertainty stemming from US trade policies, leading to the weakest sentiment since January 2021.

    RBA’s Hauser: Uncertain on further easing disputes market’s rate-cut outlook

    RBA Deputy Governor Andrew Hauser emphasized in a speech today that monetary policy is set to ensure inflation returns to the midpoint of the target range, which is crucial for maintaining price stability over the long run.

    He justified the February rate cut, stating that it “reduces the risks of inflation undershooting that midpoint.”

    However, Hauser pushed back against market expectations of a sustained easing cycle, saying the “Board does not currently share the market’s confidence that a sequence of further cuts will be required”.

    While Hauser acknowledged that interest rates will go where they need to go to balance inflation control with full employment, he made it clear that progress so far does not warrant complacency.

    He stressed that RBA will continue to assess economic developments on a “meeting by meeting” basis.

    Australia’s GDP grows 0.6% qoq in Q4, ending per capita contraction streak

    Australia’s GDP grew by 0.6% qoq in Q4, exceeding expectations of 0.5% qoq, while annual growth stood at 1.3% yoy. A key highlight was the 0.1% qoq per capita GDP growth, marking the first increase after seven consecutive quarters of contraction.

    According to Katherine Keenan, head of national accounts at the ABS, “Modest growth was seen broadly across the economy this quarter.” She noted that both public and private spending contributed positively, alongside a rise in exports of goods and services.

    China’s Caixin PMI services rises to 5.14, but uncertainties rising in employment and income

    China’s Caixin Services PMI climbed to 51.4 in February, up from 51.0, beating market expectations of 50.8. Composite PMI also improved slightly to 51.5, signaling steady expansion across both manufacturing and services for the 16th consecutive month.

    According to Wang Zhe, Senior Economist at Caixin Insight Group, supply and demand showed improvement in both sectors, supported by robust consumption during the Chinese New Year holiday and technological innovations in select industries. However, “employment saw a slight contraction”, mainly due to weakness in the manufacturing sector.

    Concerns remain over China’s broader economic recovery. Wang noted that overall price levels “remained subdued”, with declining sales prices in both manufacturing and services. “Rising uncertainties in employment and household income constraining efforts to boost domestic demand and stabilize the economy,” he added.

    Fed’s Williams: Tariff adds to inflation risks, no rush for rate cuts

    New York Fed President John Williams acknowledged that tariffs could contribute to inflation pressures later this year, noting that consumer goods could likely see immediate price increases while other sectors may experience a more gradual impact.

    However, he emphasized the high level of uncertainty surrounding trade policies, stating, “We don’t know how long the tariffs will apply. We don’t know what other countries may do in response to this.”

    Beyond tariffs, Williams pointed out that fiscal and regulatory policies under the Trump administration would also play a key role in shaping the economic outlook and monetary policy decisions.

    Williams also reiterated that the current policy stance remains appropriate. “I think the current place for policy is good. I don’t see any need to change it right away,” he noted.

    While acknowledging that rate cuts could be a possibility later this year, he was noncommittal, adding that it’s “really hard to know” if further easing will be necessary.

    Looking ahead

    Swiss CPI, Eurozone PMI services final and PPI, UK PMI services final will be released in European session. Later in the day, main focus will be on US ADP private employment and ISM services. Fed will also publish Beige Book economic report.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.0522; (P) 1.0575; (R1) 1.0679; More…

    EUR/USD’s current upside acceleration argues that bullish trend reversal is probably already underway. Intraday bias stays on the upside for 100% projection of 1.0176 to 1.0531 from 1.0358 at 1.0173. Decisive break there will solidify this bullish case and target 161.8% projection at 1.0932 next. On the downside, below 1.0527 resistance turned support will turn intraday bias neutral again first.

    In the bigger picture, the strong rebound from 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199 argues that fall from 1.1274 might be a correction only. Sustained trading above 55 W EMA (now at 1.0668) should indicate that this correction has already completed with three waves down to 1.0176. Rise from 0.9534 (2022 low) might then be ready to resume through 1.1274. Nevertheless, rejection by 55 W EMA would keep outlook bearish for another fall through 1.0176 at a later stage.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD GDP Q/Q Q4 0.60% 0.50% 0.30%
    00:30 JPY Services PMI Feb F 53.7 53.1 53.1
    01:45 CNY Caixin Services PMI Feb 51.4 50.8 51
    07:30 CHF CPI M/M Feb 0.50% -0.10%
    07:30 CHF CPI Y/Y Feb 0.20% 0.40%
    08:50 EUR France Services PMI Feb F 44.5 44.5
    08:55 EUR Germany Services PMI Feb F 52.2 52.2
    09:00 EUR Eurozone Services PMI Feb F 50.7 50.7
    09:30 GBP Services PMI Feb F 51.1 51.1
    10:00 EUR Eurozone PPI M/M Jan 0.30% 0.40%
    10:00 EUR Eurozone PPI Y/Y Jan 1.40% 0%
    13:15 USD ADP Employment Change Feb 140K 183K
    13:30 CAD Labor Productivity Q/Q Q4 0.30% -0.40%
    14:45 USD Services PMI Feb F 49.7 49.7
    15:00 USD ISM Services PMI Feb 53 52.8
    15:00 USD Factory Orders M/M Jan 1.50% -0.90%
    15:30 USD Crude Oil Inventories 0.6M -2.3M
    19:00 USD Fed’s Beige Book

     



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  • Dollar Surges as Trump Confirms Tariff Plans, Euro Looks Vulnerable

    Dollar Surges as Trump Confirms Tariff Plans, Euro Looks Vulnerable


    Dollar surged sharply across the board in early US session trading after US President Donald Trump reinforced his tariff plans, clarifying uncertainties that had lingered in the market. In a Truth Social post, Trump confirmed that the tariffs on Canada and Mexico will “go into effect, as scheduled” on March 4. Additionally, China will face an extra 10% tariff on the same date. The April 2 reciprocal tariff announcement will also remain “in full force and effect,” he stated.

    Market reaction was swift, with the greenback rallying against all major peers, even as incoming US economic data provided a mixed picture. January durable goods orders came in stronger than expected, but only driven largely by transportation equipment. Also, the labor market flashed a potential warning sign, as initial jobless claims surged to their highest level since December.

    Yen and Swiss Franc are on the softer side today as US and European benchmark yields rebounded. However, neither currency showed a strong directional push. Euro, on the other hand, appears increasingly vulnerable, particularly against the British Pound. The latest selloff in EUR/GBP looks poised to gain further traction, as Eurozone fundamentals remain weak and tariff threats linger.

    For the week so far, Dollar is now the strongest one with today’s rally. Sterling is sitting as the second, followed by Yen. Kiwi and Aussie are the worst performers for now, followed by Loonie. Euro and Swiss Franc are mixed in the middle.

    Technically, USD/CAD’s strong break of 1.4378 resistance suggests that corrective pullback from 1.4791 has already completed at 1.4150. Further rise is expected as long as 55 4H EMA (now at 1.4275) holds, for retesting 1.4791 high. Strong resistance might be seen there to limit upside on first attempt.

    However, the final implementation of tariffs on Canada might provided the needed fuel to power USD/CAD through 1.4791 to resume the larger up trend.

    In Europe, at the time of writing, FTSE is up 0.04%. DAX is down -1.20%. CAC is down -0.77%. UK 10-year yield is up 0.014 at 4.520. Germany 10-year yield is up 0.002 at 2.438. Earlier in Asia, Nikkei rose 0.30%. Hong Kong HSI fell -0.29%. China Shanghai SSE rose 0.23%. Singapore Strait Times rose 0.34%. Japan 10-year JGB yield rose 0.003 to 1.396.

    US durable goods orders rise 3.1% mom, led by transportation equipment

    US durable goods orders rose 3.1% mom to USD 286.0B in January, well above expectation of 2.0% mom. Transportation equipment led the increase by 9.8% to USD 96.5B.

    Ex-transport orders was flat at 189.5B, below expectation of 0.4% mom. Ex-defense orders rose 3.5% mom to USD 268.7B.

    US initial jobless claims jump to 242k, above expectation 220k

    US initial jobless claims rose 22k to 242k in the week ending February 22, above expectation of 220k. Four-week moving average of initial claims rose 8.5k to 224k.

    Continuing claims fell -5k to 1862k in the week ending February 15. Four-week moving average of continuing claims rose 3k to 1865k.

    ECB Minutes: No room for forward guidance as caution prevails

    ECB’s January 29-30 meeting account revealed that policymakers saw a “clear case” for a 25bps rate cut. Members agreed that disinflation is “well on track”, and confidence in inflation converging to target has grown.

    However, the accounts highlighted several lingering uncertainties that warranted a cautious approach going forward. Policymakers emphasized the need to maintain a data-dependent stance, with “no room for forward guidance” at this stage.

    Upside risks to inflation remained from elevated energy and food prices, strong wage growth, and persistent services inflation.

    ECB also flagged geopolitical tensions, fiscal policy concerns within Eurozone, and global trade uncertainties as downside risks to growth, “which typically also implied downside risks to inflation over longer horizons.”

    Swiss GDP expands 0.2% qoq in Q4, driven by domestic demand

    Switzerland’s economy maintained steady growth in Q4, with GDP expanding 0.5% qoq when adjusted for sporting events. Without the adjustment, GDP rose 0.2% qoq, in-line with expectations.

    Private consumption increased by 0.5%, supported by higher spending on health, recreation, and culture. Government consumption also grew at the same pace, slightly exceeding historical trends.

    Investment in equipment rebounded 1.0%, breaking a two-quarter decline, largely due to higher spending on aircraft and other volatile categories.

    The increase in domestic demand also led to a 0.9% rise in imports of goods and services, with foreign trade contributing positively to GDP growth.

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

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

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0464; (P) 1.0496; (R1) 1.0518; More…

    EUR/USD dips notably in early US session but stays above 1.0400 support. Intraday bias stays neutral first. Firm break of 1.0400 should indicate that corrective pattern from 1.0400 has completed. Intraday bias will be back on the downside for retesting 1.0176/0210 support zone. Overall, near term outlook will stay bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds in case of another recovery.

    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
    00:00 NZD ANZ Business Confidence Feb 58.4 54.4
    00:30 AUD Private Capital Expenditure Q4 -0.20% 0.60% 1.10% 1.60%
    08:00 CHF GDP Q/Q Q4 0.20% 0.20% 0.40%
    09:00 EUR Eurozone M3 Money Supply Y/Y Jan 3.60% 3.80% 3.50% 3.40%
    10:00 EUR Eurozone Economic Sentiment Feb 96.3 96 95.2 95.3
    10:00 EUR Eurozone Industrial Confidence Feb -11.4 -12 -12.9 -12.7
    10:00 EUR Eurozone Services Sentiment Feb 6.2 6.8 6.6 6.7
    10:00 EUR Eurozone Consumer Confidence Feb F -13.6 -13.6 -13.6
    12:30 EUR ECB Meeting Accounts
    13:30 CAD Current Account (CAD) Q4 -5.0B -3.2B -3.2B -3.6B
    13:30 USD Initial Jobless Claims (Feb 21) 242K 220K 219K 220K
    13:30 USD GDP Annualized Q4 P 2.30% 2.30% 2.30%
    13:30 USD GDP Price Index Q4 P 4.20% 2.20% 2.20%
    13:30 USD Durable Goods Orders Jan 3.10% 2.00% -2.20%
    13:30 USD Durable Goods Orders ex Transport Jan 0.00% 0.40% 0.30%
    15:00 USD Pending Home Sales M/M Jan -1.30% -5.50%
    15:30 USD Natural Gas Storage -276B -196B

     



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  • Dollar Stuck Between Falling Yields and Risk Aversion, Struggles for Direction

    Dollar Stuck Between Falling Yields and Risk Aversion, Struggles for Direction


    Dollar remains stuck in a tug-of-war of conflicting forces. On one side, extended decline in US Treasury yields is pressuring the greenback, while on the other, risk aversion is offering some support.

    10-year Treasury yield fell to its lowest level since December, looks on track to test the next Fibonacci support at 4.2%. Bond markets appear to be betting on a downturn, reflecting growing fears that the US economy could be headed for a rough landing as the administration’s policies weigh on consumer confidence.

    Meanwhile, risk aversion is pressuring US stock markets, indirectly giving Dollar some support as a safe-haven asset. S&P 500 closed lower for the fourth straight session, while NASDAQ shed -1% following weak consumer confidence data. The uncertainty surrounding tariffs, fiscal policy, and economic growth is amplifying recession fears, leading investors to seek refuge in bonds and defensive assets.

    The key issue is that both declining yields and falling equities stem from the same core concerns—whether the US economy is losing steam faster than anticipated. Confidence in Washington’s economic policies is rapidly deteriorating. This dual pressure on stocks and yields is keeping markets on edge, with Dollar stuck between a weakening growth outlook and flight-to-safety flows.

    Adding to the market’s cautious stance is Nvidia’s highly anticipated earnings report, set to be released Wednesday after the bell. Given the company’s pivotal role in the AI-driven stock market rally, its results could have significant implications for risk sentiment for the near term.

    In the currency markets, European majors are leading the session, with Swiss Franc being the strongest, followed by Euro and Sterling. On the weaker side, commodity currencies are underperforming, with Loonie being the worst, followed by Aussie and Kiwi.

    Technically, the case of near term reversal in 10-year yield is building up after strong break of 38.2% retracement of 3.603 to 4.809 at 4.348. Further break of 50% retracement at 4.206 will argue that fall from 4.809 is indeed another leg inside the medium term corrective pattern from 4.997. That would set up deeper decline to 61.8% retracement at 4.063 and below.

    In Asia, at the time of writing, Nikkei is down -0.72%. Hong Kong HSI is up 3.03%. China Shanghai SSE is up 0.64%. Singapore Strait Times is down -0.18%. Japan 10-year JGB yield is down -0.0086 at 1.368. Overnight, DOW rose 0.37%. S&P 500 fell -0.47%. NASDAQ fell -1.35%. 10-year yield fell -0.095 to 4.298.

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

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

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

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

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

    Fed’s Barkin: Staying modestly restrictive until inflation risks clear

    Richmond Fed President Tom Barkin highlighted the need for a “modestly restrictive” monetary policy stance until there is greater confidence that inflation is firmly returning to the 2% target.

    Speaking in a speech overnight, Barkin emphasized the importance of remaining “steadfast” in tackling inflation, warning that history has shown the risks of easing policy too soon.

    “We learned in the ’70s that if you back off inflation too soon, you can allow it to reemerge. No one wants to pay that price,” he cautioned.

    Barkin acknowledged the high level of uncertainty surrounding economic policy changes, geopolitical tensions, and natural disasters, all of which could influence inflation dynamics.

    He noted that tariffs imposed during Donald Trump’s first administration in 2018 added about 30 basis points to inflation. However, he cautioned that the effect of the latest round of trade policies is harder to predict, as firms may either pass costs onto consumers or absorb them.

    Beyond trade policies, Barkin also flagged uncertainties around deregulation, tax policies, government spending, and immigration reforms, all of which could shape labor market dynamics and broader economic conditions.

    Given these unknowns, he prefers to “wait and see how this uncertainty plays out” before advocating any adjustments to monetary policy.

    Looking ahead

    German Gfk consumer climate and Swiss UBS economic expectations will be released in European session. Later in the day, US will release new home sales.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.4266; (P) 1.4293; (R1) 1.4345; More…

    Intraday bias in USD/CAD stays neutral with focus turning to 1.4378 resistance as rebound from 1.4150 extends. Firm break there will suggest that the correction from 1.4791 has completed, and turn bias back to the upside for retesting 1.4791. On the downside, 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 support holds (2022 high), even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD Monthly CPI Y/Y Jan 2.50% 2.60% 2.50%
    00:30 AUD Construction Work Done Q4 0.50% 0.80% 1.60% 2.00%
    07:00 EUR Germany GfK Consumer Sentiment Mar -21.1 -22.4
    09:00 CHF UBS Economic Expectations Feb 17.7
    15:00 USD New Home Sales Jan 677K 698K
    15:30 USD Crude Oil Inventories 2.5M 4.6M
    15:00 USD Consumer Confidence Feb 103.3 104.1

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Looking ahead

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

    AUD/USD Daily Report

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

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

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

    Economic Indicators Update

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

     



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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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  • Dollar Slides as Markets Cheer Tariff Delay, Kiwi Surges on Manufacturing Rebound

    Dollar Slides as Markets Cheer Tariff Delay, Kiwi Surges on Manufacturing Rebound


    Dollar’s selloff is accelerating as the week draws to a close, with investors continuing to react to the evolving trade policy stance from the White House. Wall Street posted broad gains overnight, as markets took relief in the fact that US President Donald Trump’s much-anticipated reciprocal tariff plan did not impose immediate trade restrictions. Instead, the administration will conduct a detailed review of tariff disparities before deciding on specific measures.

    Despite the optimism in US equities, risk-on sentiment was not fully carried over into Asian session. While Hong Kong stocks extended recent strong gains, other major indexes struggled for direction, reflecting lingering caution. Investors remain wary of how the tariff situation will unfold, particularly as Trump’s trade team begins its assessment of countries with large trade surpluses with the US. This process is expected to take weeks, leaving room for further volatility in global markets.

    The immediate focus now shifts to US retail sales data for January, which will provide fresh insights into consumer spending. Yet the figures are unlikely to have a significant impact on Fed expectations even with a major surprise. Fed has emphasized that its next move will be dictated by sustained trends rather than single data points. As a result, the Dollar’s downside pressure may persist, with market sentiment favoring risk assets.

    Among major currencies, New Zealand Dollar is leading the pack, buoyed by surprisingly strong manufacturing data. The economy is responding well to RBNZ’s aggressive rate cuts last year. While the central bank is still expected to deliver another 50bps reduction next week as the march to neutral continues, the resurgence in manufacturing could mean the central bank may not need to push rates into stimulatory territory.

    Technically, as NZD/USD rebounds, focus is now on 0.5701 resistance. Firm break there will resume the rise from 0.5515, as a correction to fall from 0.63780. Further rally should then be seen to 38.2% retracement of 0.6378 to 0.5515 at 0.5848.

    In Asia, at the time of writing, Nikkei is down -0.35%. Hong Kong HSI is up 2.48%. China Shanghai SSE is up 0.25%. Singapore Strait Times is down -0.17%. Japan 10-year JGB yield is up 0.0018 at 1.351. Overnight, DOW rose 0.77%. S&P 500 rose 1.04%. NASDAQ rose 1.50%. 10-year yield fell -0.0112 to 4.525.

    S&P 500 nears record high as Trump’s reciprocal tariff plan delays immediate action

    U.S. stocks closed higher overnight as President Donald Trump unveiled his long-awaited reciprocal tariff plan without enforcing immediate measures. The market responded favorably to the lack of fresh tariffs, easing concerns about an abrupt escalation in trade tensions. In turn, Treasury yields and the U.S. dollar moved lower, reflecting a shift in sentiment away from safe-haven assets.

    Trump’s directive instructs his administration to begin assessing tariff discrepancies between the US and its trading partner, including evaluation of non-tariff barriers. Also, the White House appears to be taking a targeted approach, prioritizing countries with large trade surpluses and high tariff rates on US exports.

    Howard Lutnick, Trump’s nominee for Commerce Secretary, will lead the study, with findings expected by April 1. This extended timeline gives markets some breathing room and suggests that while trade tensions remain a concern, abrupt disruptions are unlikely in the near term.

    Equities responded positively to the development, with S&P 500 rebounding strongly and edging closer to its all-time high of 6128.18. Technically, firm break of 6128.18 will resume the long term up trend, with 618% projection of 5119.26 to 6099.97 from 5773.31 at 6379.38 as next target.

    NZ BNZ manufacturing rises to 51.4, first expansion in nearly two years

    New Zealand’s manufacturing sector finally returned to expansion in January, with BusinessNZ Performance of Manufacturing Index surging from 46.2 to 51.4. This marks the first expansion in 23 months and the highest reading since September 2022. While the rebound is a positive sign for the economy, the index remains below its long-term average of 52.5, suggesting that the sector has yet to regain full strength.

    Encouragingly, all sub-indexes entered expansionary territory. Production saw a significant jump from 42.7 to 50.9. Employment also rose from 47.7 to 50.2. New orders climbed from 46.8 to 50.9, while finished stocks and deliveries improved to 51.9 and 51.7, respectively.

    BNZ’s Senior Economist Doug Steel highlighted the significance of the data, noting that the sector is “shifting out of reverse and into first gear.” He acknowledged the improvement as a relief after two difficult years but cautioned that the PMI still lags behind its historical average.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.4147; (P) 1.4229; (R1) 1.4274; More…

    USD/CAD’s fall from 1.4791 resumed by breaking through 1.4260 cluster support decisively. The development suggests that deeper corrective is underway and turn intraday bias to the downside for 1.3946 cluster support (61.8% retracement at 1.3942). For, risk will stay on the downside as long as 1.4378 resistance holds, in case of recovery.

    In the bigger picture, long term up trend is tentatively seen as resuming with 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
    21:30 NZD Business NZ PMI Jan 51.4 45.9 46.2
    07:30 CHF PPI M/M Jan 0.10% 0.00%
    07:30 CHF PPI Y/Y Jan -0.90%
    10:00 EUR Eurozone Q/Q Q4 P 0.00% 0.00%
    13:30 CAD Manufacturing Sales M/M Dec 0.60% 0.80%
    13:30 CAD Wholesale Sales M/M Dec 0.40% -0.20%
    13:30 USD Retail Sales M/M Jan -0.20% 0.40%
    13:30 USD Retail Sales ex Autos M/M Jan 0.30% 0.40%
    13:30 USD Import Price Index M/M Jan 0.50% 0.10%
    14:15 USD Industrial Production M/M Jan 0.30% 0.90%
    14:15 USD Capacity Utilization Jan 77.80% 77.60%

     



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  • Dollar’s Wild Week Ends in Uncertainty, Awaits Next Tariff Cue

    Dollar’s Wild Week Ends in Uncertainty, Awaits Next Tariff Cue


    Dollar faced significant volatility last week as shifting trade policy signals from the White House left investors scrambling for clarity. Initially, tariffs on Canadian and Mexican imports were imposed, only to be quickly suspended for 30 days following new agreements on border security and fentanyl control. Now, the focus turns to “reciprocal tariffs,” a move that could see the US impose duties equivalent to those faced by American exports in key markets.

    While traders hope for clarity once the reciprocal tariffs are officially announced, the risk of another abrupt reversal remains high. The unpredictability of the administration’s trade stance, particularly regarding its approach toward key partners like the European Union, suggests continued volatility in currency markets. Until the full scope of Trump’s trade strategy is revealed, market sentiment is likely to remain fragile, with investors hesitant to commit to a firm direction.

    Amid these confusions, Yen stood out as the strongest performer, supported by positive economic data that reinforced expectations of further BoJ rate hikes. Canadian Dollar followed behind, benefiting from a temporary tariff reprieve and stronger-than-expected employment report. Meanwhile, Australian and New Zealand Dollars managed to recover some ground, but their gains were limited by the continued US tariffs on Chinese goods and the lack of any progress in US-China trade negotiations.

    On the weaker side, Euro was the worst-performing currency, struggling under the weight of tariff threats. Despite its late-week bounce, Dollar ended the week near the bottom of the performance rankings. British Pound also weakened after the BoE delivered a surprisingly dovish rate cut, while the Swiss Franc was also soft.

    Duel Uncertainty of Trade War and Hawkish Fed Outlook in the US

    Investors in US financial markets are grappling with two major uncertainties—President Donald Trump’s evolving tariff strategy and Fed’s interest rate outlook. This dual uncertainty has led to volatile but indecisive trading in major equity indices and large price swings in Dollar, reflecting broader confusion in the markets.

    Trump’s Tariff Play: Economic Policy or Political Leverage?

    The core intention behind Trump’s tariff policies remains unclear. His administration initially imposed 25% tariffs on imports from Canada and Mexico, only to suspend them for 30 days following agreements with both nations on border security and fentanyl control measures. This move suggests that Trump may be using tariffs as a tool for securing non-trade-related concessions rather than purely as an economic strategy. The immediate delay in enforcement highlights that these tariffs could be more of a negotiation tactic than an outright protectionist measure.

    However, fresh concerns emerged on Friday when Trump said that the US would announce, in the coming days, “reciprocal tariffs” on a range of trading partners to ensure American exports are treated “evenly.” This move, if implemented broadly, could have far-reaching economic consequences, particularly if the US targets major trade partners like the European Union. Unlike the previous round of tariffs during Trump’s first term, which were primarily aimed at China, this time the scope appears much wider, raising the specter of more extensive trade disruptions.

    The biggest risk is that tariffs could become an ongoing feature of US trade policy rather than a temporary bargaining tool. With Trump also eyeing the EU as a target, the outlook for global trade is highly uncertain. For now, investors are clearly staying in wait-and-see mode, monitoring Trump’s next steps closely.

    Strong US Job Market to Keep Fed on Hold, Inflation Risks Re-Emerging?

    While trade concerns dominate the headlines, the strength of the US labor market has reinforced expectations that Fed will remain in a prolonged pause on rate cuts.

    Dallas Fed President Lorie Logan articulated a noteworthy point last week. She argued falling inflation with robust labor market means interest rates are already near neutral. That would leave little room for further easing in the near term. Fed would then stay on hold until there is clear evidence of a labor market slowdown, not just declining inflation.

    Friday’s non-farm payroll report added weight to this narrative. While job growth slowed to 143K, falling short of expectations, revisions to previous months were significant, with December’s figure being adjusted upward to 307K. Additionally, the unemployment rate unexpectedly declined from 4.1% to 4.0%, suggesting that the labor market remains resilient. Wage growth also accelerated, with average hourly earnings rising 0.5% mom —above expectations—bringing the annual increase to 4.1%.

    Another concerning development in recent data was the sharp rise in consumer inflation expectations. University of Michigan’s Surveys of Consumers revealed that short-term inflation expectations jumped from 3.3% to 4.3%, the highest level since November 2023. Long-term inflation expectations also ticked higher, reaching 3.3%, marking the highest reading since June 2008.

    If inflation expectations continue rising alongside strong wage growth, Fed could face renewed pressure to reconsider its monetary policy stance. A scenario where inflation remains stubbornly above target while employment stays strong could force Fed to maintain high rates longer than markets currently anticipate. In an extreme case, policymakers may even have to consider reintroducing rate hikes—an outcome that is not currently priced into the market but remains a potential risk, albeit minor.

    S&P 500 Stuck in Range, Upside Appears Limited

    Technically, S&P 500’s price actions from 6128.18 (Jan high) are still corrective looking, suggesting larger up trend remains intact. However, even in case of up trend resumption, loss of momentum as seen in D MACD could limit upside at 61.8% projection of 5119.26 to 6099.97 from 5773.31 at 6379.38.

    On the other hand, strong break of 55 D EMA (now at 5970.70) would put 5773.31 structural support into focus. Firm break of 5773.31 will argue that a medium term top was already in place, and larger scale correction is underway.

    Sideway Trading to Continue in Dollar Index and 10-Year Yield

    Dollar Index’s initial spike was capped below 110.17 resistance, and followed by steep pull back. Overall outlook is unchanged that consolidation pattern from 110.17 is still extending. In case of another selloff, downside should be contained by 38.2% retracement of 100.15 to 110.17 at 106.34 to bring rebound. However, firm break of 110.17 is needed to confirm up trend resumption, which is unlikely for the near term. Hence, sideway trading is set to continue for a while.

    10-year yield’s fall from 4.809 extended lower last week but recovered notably on Friday to close at 4.487. As long as 38.2% retracement of 3.603 to 4.809 at 4.348 stays intact, price actions from 4.809 are viewed as a corrective pattern. Break of 4.590 will bring stronger rebound. But upside should be limited by 4.809, at least on first attempt. That is, similar to Dollar Index, range trading will likely continue for a while.

    EUR/JPY and GBP/JPY Tumble as Yen Rides Rate Expectations and Trade Uncertainty

    Yen emerged as a dominant force in the forex markets last week, with EUR/JPY and GBP/JPY among the biggest losers, down -2.7% and -2.3% respectively. The shift was driven by a combination of declining US and European benchmark yields, alongside increasing expectations of further BoJ rate hikes. These factors reinforced the Yen’s bullish momentum and kept both EUR/JPY and GBP/JPY under heavy selling pressure.

    BoJ board member Naoki Tamura, the most hawkish voices within the central bank, continued to advocate his view that interest rates should rise to at least 1% by the end of fiscal 2025. His stance gained additional credibility after IMF also backed a gradual rate hike approach, recommending that the policy rate reach the midpoint of 1.5% within the 1-2% neutral range by the end of 2027.

    The case for BoJ tightening has been reinforced by strong nominal wage growth, with real wages increasing for a second consecutive month. More importantly, the wage gains are feeding into stronger consumption, a critical factor in sustaining inflation at the central bank’s 2% target. If this trend continues, BoJ will have even more reason to proceed with further hikes.

    Meanwhile, Euro came under additional pressure from Trump’s tariff threats. With a formal reciprocal tariff announcement expected soon, the EU is almost certain to be included, raising fears of another prolonged trade conflict. Given the region’s reliance on exports, such a development could have a significant negative impact on Eurozone already sluggish growth prospects, forcing ECB to take a more dovish stance than currently anticipated.

    ECB Chief Economist Philip Lane has been advocating for a “middle path” in policy easing, balancing inflation risks with economic headwinds. However, should tariffs materialize, ECB might be forced to accelerate rate cuts to cushion the economy from external shocks

    The UK has fared somewhat better as it is not a primary target of Trump’s trade measures. However, BOE’s unexpectedly dovish rate cut last week has left the Pound vulnerable too. Notably, hawkish policymaker Catherine Mann made a surprising U-turn, voting for a 50bps rate cut, a sharp departure from her previous stance. The base case still remains a quarterly 25bps cut throughout 2025 for BoE, but the risk is now tilted slightly toward a more aggressive easing cycle.

    Technically, as selloff in EUR/JPY intensified, the development in the next few weeks would be crucial. Attention will be on 100% projection of 100% projection of 166.7 to 156.16 from 164.89 at 154.38, which is close to 154.40 key support.

    Firm break there will resume whole pattern from 175.41 medium term top. More importantly, that would make 38.2% retracement of 114.42 to 175.41 at 152.11 key long term fibonacci level vulnerable.

    For GBP/JPY, the focus will be on 100% projection of 198.94 to 189.31 from 194.73 at 185.10. Decisive break there could prompt downside acceleration through 180.00 low to resume whole decline from 208.09 medium term top. That would at least put 38.2% retracement of 123.94 to 208.09 at 175.94 as next target.

    USD/CAD Weekly Outlook

    USD/CAD spiked higher to 1.4791 last week but reversed sharply from there. Nevertheless, downside is contained by 1.4260 cluster support (38.2% retracement of 1.3418 to 1.4791 at 1.4267), which is also close to 55 D EMA (now at 1.4264). There is no sign of reversal yet. Initial bias remains neutral this week first. On the upside, above 1.4501 minor resistance will turn bias back to the upside for stronger rebound. Larger up trend is expected to resume through 1.4791 at a later stage. However, firm break of 1.4260 will indicate that deeper correction is underway.

    In the bigger picture, long term up trend is tentatively seen as resuming with 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.

    In the longer term picture, up trend from 0.9506 (2007 low) is in progress and possibly resuming. Next target is 61.8% projections of 0.9406 to 1.4689 from 1.2005 at 1.5270. While rejection by 1.4689 will delay the bullish case, further rally will remain in favor as long as 55 M EMA (1.3392) holds.



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  • Dollar Struggles Continue Despite Strong ADP, Caution Prevails

    Dollar Struggles Continue Despite Strong ADP, Caution Prevails


    Dollar remains on the backfoot in early US session, despite the strong ADP private employment report. The data highlights continued resilience in the labor market, with services-driven job growth and sustained wage pressures. While this should theoretically reinforce the case for Fed to maintain its pause in easing for longer, traders appear reluctant to react decisively ahead of Friday’s Non-Farm Payroll report, which will provide a more comprehensive labor market picture.

    Beyond economic data, uncertainty surrounding US-China trade relations is another key factor keeping traders from placing larger bets on the greenback. The additional 10% duties on Chinese goods remain firmly in place. Traders are monitoring the anticipated phone call between US President Donald Trump and Chinese President Xi Jinping, but no official timeline has been set. The lack of diplomatic engagement has kept market caution elevated.

    Adding to the confusion, the US Postal Service reversed its earlier suspension of inbound packages from China and Hong Kong. Instead, it will now work closely with US Customs and Border Protection to enforce the new tariff collection measures more effectively. This aligns with Trump’s decision to close the “de minimis” trade loophole, which previously allowed Chinese e-commerce giants like Temu and Shein to ship goods into the US duty-free in high volumes.

    Overall in the forex markets, Canadian Dollar continues to lead gains this week, supported by the avoidance of US tariffs. Japanese Yen follows closely, buoyed by strong wage growth data, which is raising expectations for further rate hikes from BoC. Australian Dollar has also shown some resilience too. Dollar remains the weakest performer, followed by Euro and New Zealand Dollar. Sterling and Swiss Franc are positioned in the middle of the pack.

    Technically, USD/CAD is now pressing an important cluster support level at 1.4260, with 38.2% retracement of 1.3418 to 1.4791 at 1.4267, and 55 D EMA at 1.4267. Strong support is expected there to complete the pull back from 1.4791 and bring rebound. However, decisive break of 1.4260 will be a sign of broad-based weakness in Dollar for the near term. USD/CAD could dive further to 618% retracement at 1.3942, along with extended selloff in Dollar elsewhere.

    In Europe, at the time of writing, FTSE is up 0.37%. DAX is up 0.15%. CAC is down -0.21%. UK 10-year yield is down -0.061 at 4.464. Germany 10-year yield is down -0.0391 at 2.364. Earlier in Asia,Nikkei rose 0.09%. Hong Kong HSI fell -0.93%. China Shanghai SSE fell -0.65%. Singapore Strait Times fell -0.20%. Japan 10-year JGB yield rose 0.0076 to 1.284.

    US ADP jobs beats expectations with 183k gain, led by services

    US ADP private employment report showed a stronger-than-expected job gain of 183K in January, surpassing market forecasts of 149K.

    Service sector was the clear driver of employment, adding 190K jobs, while goods-producing industries shed -6K positions. By company size, small businesses contributed 39K jobs, medium-sized firms led with 92K, and large corporations added 69K.

    Wage growth remained elevated, with annual pay increases for job-stayers at 4.7% yoy, while job-changers saw an even stronger 6.8% yoy rise.

    According to Nela Richardson, Chief Economist at ADP, the report reveals a “dichotomy” in the labor market, with consumer-facing industries leading the way, while business services and production lag behind.

    Eurozone PPI rises 0.4% in Dec, flat annually

    Eurozone PPI increased by 0.4% mom in December, slightly below market expectations of 0.5% MoM. On a year-over-year basis, PPI was unchanged, above expectations of a -0.1% yoy decline.

    Breaking down the monthly price changes in Eurozone, energy prices saw the biggest increase at 1.4%, followed by durable consumer goods (+0.2%). Capital goods, intermediate goods, and non-durable consumer goods all edged up by 0.1%.

    At the EU level, PPI rose 0.4% mom and 0.1% yoy. The biggest price gains were seen in Bulgaria (+5.1%), Croatia (+2.4%), and Slovakia (+1.5%). On the other hand, Ireland (-1.5%), Romania (-1.3%), and the Netherlands (-0.4%) saw the largest declines.

    Eurozone PMI services finalized at 51.3, no major growth leap expected

    Eurozone Composite PMI was finalized at 50.2 in January, up from 49.6 in December, marking the first month of economic expansion since August. However, PMI Services Index was finalized at 51.3, down from prior month’s1.6, suggesting that while the services sector remains in growth territory, momentum is fading.

    Among individual countries, Spain led the expansion with a Composite PMI of 54.0. Germany’s index climbed to 50.5, hitting an eight-month high, signaling tentative stabilization. Italy remained in contraction at 49.7, while France improved slightly to 47.6.

    According to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, the services sector has been instrumental in preventing a broader economic contraction in the Eurozone. Modest but accelerating new orders and employment offer some optimism that the sector could gain momentum in Q1 2025. However, rising costs in services, particularly due to wage pressures, remain a concern for the ECB.

    The services outlook is “modest”, with business expectations declining slightly and staying below historical averages since mid-2024. Political uncertainties in the Eurozone, including Germany’s upcoming elections and France’s fragile government, continue to weigh on sentiment.

    “No major growth leaps are expected in this sector for now,” de la Rubia added.

    UK PMI services finalized at 15-month low, stagflation concerns rise

    UK PMI Services was finalized at 50.8 in January, slipping from December’s 51.1, marking its joint-lowest level in 15 months. PMI Composite edged up slightly to 50.6, indicating that overall economic activity remains stagnant, with minimal expansion.

    According to Tim Moore, Economics Director at S&P Global Market Intelligence, “stagflation conditions appeared to take a firmer hold”, with weak output growth coupled with persistent cost pressures. Input cost inflation accelerated for the fifth consecutive month, reaching its highest level since April 2024.

    Renewed decline in new business volumes adds to signs that the UK’s economic outlook remains weak, as firms report softening demand conditions. Business confidence has also taken a hit, with expectations for future activity dropping to their lowest level since December 2022.

    The most concerning development is the sharp deterioration in employment trends, as service providers cut jobs at the fastest pace in four years. The “twin perils” of shrinking workloads and rising payroll costs has forced many firms to halt recruitment.

    Japan’s nominal wage growth surges 4.8% yoy in Dec, real wages rise for second month

    Japan’s labor market showed strong wage growth in December, with labor cash earnings surging 4.8% yoy, significantly above expectations of 3.8% yoy and accelerating from 3.9% yoy in the prior month. This marks the 36th consecutive month of annual wage increases.

    Regular pay, which includes base salaries, rose 2.7% yoy, while special cash earnings—mainly reflecting winter bonuses—jumped 6.8% yoy, providing an additional boost to workers’ disposable income.

    Real wages, which adjust for inflation, climbed 0.6% yoy, marking the second straight month of positive growth. This improvement comes despite a notable acceleration in consumer inflation, with the price index used to calculate real wages—excluding rent but including fresh food—rising 4.2% yoy, up from 3.4% yoy in November and reaching the highest level since January 2023.

    China’s Caixin PMI services PMI drops to 51.0

    China’s Caixin Services PMI slipped to 51.0 in January, down from 52.2 and below expectations of 52.3. PMI Composite also edged lower from 51.4 to 51.1, marking a four-month low, as both manufacturing and services sectors struggled to gain momentum.

    According to Caixin Insight Group, while supply and demand conditions showed improvement, services growth lagged behind, pointing to weaker consumer activity.

    Wang Zhe, Senior Economist added, “Employment in both sectors fell significantly, and overall price levels remained subdued, particularly factory-gate prices in manufacturing.”

    New Zealand’s unemployment rate rises to 5.1%

    New Zealand’s labor market softened further in Q4, with unemployment rate climbing from 4.8% to 5.1%, in line with expectations and marking the highest level since 2016, excluding the brief spike following the 2020 Covid lockdown.

    Employment fell by -0.1% in the quarter, slightly better than the expected -0.2% decline, but still reflecting ongoing weakness in job creation. Meanwhile, wage growth continued to moderate, with the labor cost index rising 0.6% qoq, bringing the annual rate down to 3.3% from 3.8%.

    The latest data supports the case for further monetary easing by RBNZ, which remains committed to swiftly bringing the OCR down from the current 4.25% toward neutral level. A 50bps rate cut is still widely anticipated at the upcoming policy meeting this month.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0305; (P) 1.0346; (R1) 1.0421; More…

    While EUR/USD’s recovery from 1.0210 continues today, upside is still limited below 1.0531 resistance. Intraday bias remains neutral and further decline is expected. On the downside, break of 1.0176 will resume whole fall from 1.1213. However, sustained break of 1.0531 will rise the chance of bullish reversal and turn bias back to the upside for stronger rally.

    In the bigger picture, immediate focus is back 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 support 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 Employment Change Q4 -0.10% -0.20% -0.50% -0.60%
    21:45 NZD Unemployment Rate Q4 5.10% 5.10% 4.80%
    21:45 NZD Labour Cost Index Q/Q Q4 0.60% 0.60% 0.60%
    23:30 JPY Labor Cash Earnings Y/Y Dec 4.80% 3.80% 3.00% 3.90%
    00:30 JPY Services PMI Jan F 53 52.7 52.7
    01:45 CNY Caixin Services PMI Jan 51 52.3 52.2
    07:45 EUR France Industrial Output M/M Dec -0.40% -0.10% 0.20% 0.10%
    08:50 EUR France Services PMI Jan F 48.2 48.9 48.9
    08:55 EUR Germany Services PMI Jan F 52.5 52.5 52.5
    09:00 EUR Eurozone Services PMI Jan F 51.3 51.4 51.4
    09:30 GBP Services PMI Jan F 50.8 51.2 51.2
    10:00 EUR Eurozone PPI M/M Dec 0.40% 0.50% 1.60% 1.70%
    10:00 EUR Eurozone PPI Y/Y Dec 0.00% -0.10% -1.20%
    13:15 USD ADP Employment Change Jan 183K 149K 122K 176K
    13:30 USD Trade Balance (USD) Dec -98.4B -97.1B -78.2B -78.9B
    13:30 CAD Trade Balance (CAD) Dec 0.7B 0.4B -0.3B -1.0B
    14:45 USD Services PMI Jan F 52.8 52.8
    15:00 USD ISM Services PMI Jan 54.2 54.1
    15:30 USD Crude Oil Inventories 2.4M 3.5M

     



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  • Markets Stabilize, But Trade Risks Persist as US Imposes China Tariffs, Beijing Strikes Back

    Markets Stabilize, But Trade Risks Persist as US Imposes China Tariffs, Beijing Strikes Back


    Global markets found some stability after the US agreed to a 30-day delay on tariffs against Mexico and Canada following agreements on fentanyl trafficking and border security measures. However, trade tensions remain elevated as Washington proceeded with the additional 10% tariff on all Chinese imports. In response, China retaliated by imposing a 15% tariff on US coal and LNG, along with a 10% levy on crude oil, farm equipment, and select automobiles, set to take effect on February 10.

    Further escalation could be on the horizon, as US President Donald Trump signaled that additional tariff hikes on China remain a possibility unless Beijing takes further steps to curb fentanyl exports. Meanwhile, trade friction with the EU is also building. Trump hinted over the weekend that European imports could be his next target, prompting EU leaders at a summit in Brussels to prepare countermeasures while expressing willingness for negotiations. Developments on both fronts will be closely monitored in the days ahead.

    In the currency markets, Canadian Dollar is leading gains for the week so far, rebounding strongly following the tariff delay. Japanese Yen follows as the second-strongest performer, benefiting from risk aversion, while British Pound holds up well. On the weaker side, New Zealand Dollar is underperforming, followed by Euro and Australian Dollar. Dollar has retraced most of its earlier gains and is now trading in the middle of the performance rankings alongside Swiss Franc.

    Technically, Gold hit another record high on risk aversion yesterday after initial volatility. For now, outlook will stay bullish as long as 2730.34 support holds. Next target is 38.2% projection of 1810.26 to 2789.92 from 2584.24 at 3074.07, which is close to 3000 psychological. This level will be crucial in determining the underlying momentum of Gold.

    In Asia, at the time of writing, Nikkei is up 0.82%. Hong Kong HSI is up 1.76%. China is still on holiday. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is up 0.0228 at 1.272. Overnight, DOW fell -0.28%. S&P 500 fell -0.76%. NASDAQ fell -1.20%. 10-year yield fell -0.026 to 4.543.

    CAD rebounds as US pauses tariffs for 30 days

    Canadian Dollar rebounded sharply after US President Donald Trump announced a 30-day pause on planned tariffs against Canadian imports, just hours after implementing a similar delay for Mexico.

    The decision came after negotiations between Trump and Canadian Prime Minister Justin Trudeau, who confirmed that Canada would take aggressive new measures to combat fentanyl trafficking, including deploying nearly 10,000 personnel to reinforce border security. Canada also committed to appointing a “Fentanyl Czar”, classifying cartels as terrorist organizations, and launching a Canada-US “Joint Strike Force” targeting organized crime and money laundering.

    Markets welcomed the de-escalation, as the tariff pause removes immediate downside risks for the Canadian economy. Trump emphasized that the suspension is conditional on further progress in security measures and that an “Economic deal with Canada” may still need to be structured.

    Technically, a short term top is likely formed at 1.4791 in USD/CAD after this week’s strong volatility. More sideway trading should now be seen in the near term. However, outlook will continue to stay bullish as long as 1.4260 cluster support holds (38.2% retracement of 1.3418 to 1.4791 at 1.4267), which is also close to 55 D EMA (now at 1.4267). USD/CAD’s up trend is still in favor to resume at a later stage when the consolidation completes.

    Fed officials stress patience on rate cuts amid tariff uncertainty

    A trio of Fed officials cautioned that new broad-based tariffs could add upward pressure to consumer and producer prices, suggesting a slower pace of rate cuts than previously anticipated.

    Boston Fed President Susan Collins highlighted yesterday that tariffs on both final and intermediate goods risk inflating costs throughout supply chains, requiring “patient” policy decisions.

    “It’s really appropriate for policy to be patient, careful, and there’s no urgency for making additional adjustments, especially given all of the uncertainty, even though, of course, we’re still somewhat restrictive,” Collins said.

    Chicago Fed President Austan Goolsbee also stressed “a ton of uncertainty,” warning that a premature return to lower rates could reignite inflation.

    “We’ve got to be a little more careful and more prudent of how fast rates could come down because there are risks that inflation is about to start kicking back up again,” Goolsbee said.

    Meanwhile, Atlanta Fed President Raphael Bostic noted that any tariff-related surge in prices or inflation expectations might warrant close monitoring before further easing steps are taken.

    BoJ’s Ueda prioritizes underlying inflation trends, not short-term volatility

    BoJ Governor Kazuo Ueda reiterated the central bank’s commitment to achieving its 2% inflation target on a sustained basis, emphasizing that the focus remains on underlying inflation rather than temporary price fluctuations.

    Speaking before parliament, Ueda highlighted that BoJ filters out one-off factors such as fuel and volatile fresh food prices when assessing inflation trends.

    However, he acknowledged “that process at times could be difficult”, reinforcing the need for careful analysis before making policy adjustments.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6130; (P) 0.6184; (R1) 0.6279; More…

    Intraday bias in AUD/USD is turned neutral as it recovered notably after dipping to 0.6087. Some consolidations would be seen first. But outlook will stay bearish as long as 0.6329 resistance holds. Break of 0.6087 will resume larger decline from 0.6941. Next target is 61.8% projection of 0.6687 to 0.6130 from 0.6329 at 0.5985.

    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 0.6511) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Building Permits M/M Dec -5.60% 5.30% 4.90%
    23:50 JPY Monetary Base Y/Y Jan -2.50% -0.50% -1.00%
    15:00 USD Factory Orders M/M Dec -0.70% -0.40%

     



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  • Trade War 2.0 Shakes Global Markets as Dollar Rallies

    Trade War 2.0 Shakes Global Markets as Dollar Rallies


    Global markets kicked off February under heavy strain as US President Donald Trump’s long-anticipated tariffs on Canada, Mexico, and China came into full effect. Investor sentiment turned sharply negative, with Japan’s Nikkei tumbling over 1,000 points in response. Dollar opened the week with a strong gap higher and maintained solid gains throughout Asian session. Commodity-linked currencies bore the brunt of the selloff, particularly New Zealand and Australian Dollars, which struggled even more than Canadian Dollar—despite Canada being directly targeted by the new tariffs. Meanwhile, Euro and Pound also weakened, though not as severely as the major commodity currencies.

    Looking ahead, the trade dispute theme should continue to dominate market sentiment for the foreseeable future. The US administration has hinted at the likelihood of expanding tariffs to Europe and possibly the UK, though there appears to be some willingness to discuss matters further with London. Beyond trade tensions, upcoming events such as BoE’s policy decision—which is widely expected to involve a 25bps rate reduction—will also command attention. Additionally, a series of key US data releases, including the ISM manufacturing and services indexes plus non-farm payrolls, could further influence the risk mood.

    Another noteworthy shift is taking shape in the cryptocurrency market, where both Bitcoin and Ethereum have taken a steep hit. Although the new tariffs reaffirm Trump’s commitment to his promises—such as turning the US into a major crypto hub—virtual currencies have not benefitted. Instead, global uncertainty has driven investors toward safer assets, prompting a retreat from riskier corners of the market.

    Technically, for now, there’s no panic for Bitcoin yet as 89127 support remains intact. The recent up trend is still in favor to resume for another take on 100k market at a later stage. However, firm break of 89127 support will complete a double top pattern, and could trigger deeper correction back to 73812 resistance turned support and possibly below.

    In Asia, at the time of writing, Nikkei is down -2.74%. Hong Kong HSI is down -0.74%. China is on holiday. Singapore Strait Times is down -0.29%. Japan 10-year JGB yield is down -0.0118 at 1.230.

    Trade War 2.0 kicks off, USD/CAD breaks key resistance with 1.50 in sight

    The long-anticipated escalation in trade tensions has officially materialized as US President Donald Trump imposed sweeping tariffs over the weekend. A 25% tariff is now in effect on imports from Canada and Mexico, while China faces a 10% levy on its exports to the US. The move, widely expected, marks the formal start of what is being called Trade War 2.0.

    In immediate response, Canada announced retaliatory tariffs of 25% on USD 155B worth of US goods, while China indicated that it would file a case against the US at the World Trade Organization.

    Dollar gapped higher as the week started in response to the development. USD/CAD broke through 1.4689 key resistance (2016 high) to resume the long term up trend. Technically, the next medium term target for USD/CAD is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993.

    Though given the scale of uncertainty surrounding the trade dispute, further upside cannot be ruled out. A lack of near-term resolution could see USD/CAD extend even higher toward 61.8% projection of 0.9406 to 1.4689 from 1.2005 at 1.5270 before topping.

    BoJ opinions signal more rate hikes as inflation risks tilt higher

    BoJ’s Summary of Opinions from the January 23-24 meeting indicates a growing shift toward policy normalization, as multiple board members highlighted mounting inflationary pressures.

    Rising import costs driven by the weak yen have led more businesses to raise prices, prompting concerns that inflation could overshoot expectations.

    One member noted that with economic activity and prices remaining stable, “risks to prices have become more skewed to the upside,” emphasizing that rate hikes should be “timely and gradual.”

    Some policymakers warned that continued Yen depreciation and excessive risk-taking could lead to an overheating of financial activities. To counter this, one board member argued for additional rate hikes to stabilize the currency and prevent further distortions in market expectations regarding BoJ policy.

    At the January meeting, the BoJ raised its short-term policy rate from 0.25% to 0.50%, marking another step away from ultra-loose monetary policy. The central bank also revised its price forecasts higher, reinforcing its confidence that rising wages will sustain inflation near the 2% target.

    Japan’s PMI manufacturing finalized at 48.7, deepest contraction in 10 Months

    Japan’s PMI Manufacturing was finalized at 48.7 in January, down from December’s 49.6. This marks the sharpest decline in output since March 2024, as firms faced a steeper drop in new orders. Weak demand conditions forced manufacturers to scale back production, reflecting ongoing headwinds for the sector.

    According to S&P Global, businesses reacted to falling demand by cutting both inventories and raw material holdings, while also reducing input purchases at the fastest pace in nearly a year. Employment growth also slowed, highlighting a cautious approach to hiring amid economic uncertainty.

    Despite the downturn, manufacturers maintained a positive outlook for future output, though confidence fell to its lowest level since December 2022. While firms expect a recovery in demand, concerns persist over when such an improvement will materialize. The slowdown in input price inflation to a nine-month low provides some relief, but overall, sentiment remains fragile.

    Australia’s retail sales dip -0.1% mom in Dec, less than expected

    Australia’s retail sales turnover edged down by -0.1% mom in December, a smaller decline than the expected -0.7% mom. While the contraction marks a pullback from the strong growth seen in previous months—0.7% mom in November and 0.5% in October mom—it suggests that consumer spending remains relatively resilient.

    According to Robert Ewing, head of business statistics at the Australian Bureau of Statistics, retail activity was supported by extended promotional events, helping to smooth spending patterns over the quarter. He noted that Cyber Monday, which fell in early December, boosted demand for discretionary items, particularly furniture, homewares, electronics, and electrical goods.

    China’s Caixin PMI manufacturing slips to 50.1, growth momentum weakens

    China’s Caixin Manufacturing PMI edged down to 50.1 in January from 50.5 in December.

    According to Caixin Insight Group, manufacturers saw improved logistics and a slight pickup in supply and demand. However, employment levels deteriorated notably, and new export orders remained weak, reflecting sluggish global demand.

    External risks also remain a key concern, with rising geopolitical uncertainty adding pressure to China’s export environment. Disruptions in global trade policies could further dampen overseas demand, making it difficult for manufacturers to sustain current production levels.

    Domestically, consumer spending remains sluggish, highlighting the need for policy measures aimed at boosting disposable income and restoring confidence.

    BoE Set to Cut, NFP to Steer Dollar Outlook

    This week’s forex market focus will largely center on BoE upcoming policy decision, where a 25bps rate cut to 4.50% is widely anticipated. Along with the rate announcement, traders will closely watch the MPC voting breakdown and the release of new economic projections.

    Data from the UK since November’s rate cut have painted a mixed picture: GDP growth has stagnated, inflation has eased, but wage growth has unexpectedly picked up. These conflicting signals leave the door open for surprises when the MPC releases its updated forecasts.

    The general consensus favors a gradual easing path for BoE, with a quarterly tempo of 25bps cuts, totaling 100bps for the entire year. However, market expectations are somewhat more conservative, pricing in just over 75bps of easing in 2025.

    Heightened uncertainty stems from several factors, including the domestic effects of the Autumn budget and the fallout from US tariff threats. The new projections and the voting details could help clarify the BoE’s assessment of these risks, especially regarding inflation and growth outlooks.

    MPC voting will be a prime area of focus. Known hawk Catherine Mann aligning with the broader committee in supporting a cut would send a notably dovish signal. Conversely, if the typically dovish Swati Dhingra refrains from advocating a 50bps cut, markets could interpret that as unexpectedly “hawkish”. The interplay of these votes will likely set the tone for Sterling, as traders decipher how unified or divided the committee is on monetary policy strategy.

    Beyond BoE decision, US non-farm payrolls report and ISM manufacturing and services data will grab attention too. After last week’s FOMC hold, Fed Chair Jerome Powell indicated explicitly that the central bank is not in a hurry to cut rates further, even though policy easing remains on course.

    The futures market currently suggests a better-than-even chance that Fed will keep policy on pause at least until May. Unless this week’s data delivers significant surprises—either in job growth or wage pressures—this expectation is unlikely to shift meaningfully.

    The key question revolves around the pace of easing in the second half of the year and the eventual terminal rate. However, given Powell’s recent comments, it’s unlikely that these questions will be answered in the near term.

    Elsewhere, key economic indicators from Eurozone, Japan, Canada, Australia, and New Zealand will also contribute to currency market movements. In particular, Eurozone’s CPI flash, Japan’s wage and household spending, Canada’s employment report, Australia’s retail sales and New Zealand’s employment data will be closely watched.

    Here are some highlights for the week:

    • Monday: BoJ summary of opinions, Japan PMI manufacturing final; Australia retail sales, build approvals; China Caixin PMI manufacturing; Swiss PMI manufacturing; Eurozone PMI manufacturing final, CPI flash; UK PMI manufacturing final; US ISM manufacturing.
    • Tuesday: Japan monetary base; US factory orders.
    • Wednesday: New Zealand employment; Japan labor cash earnings; China Caixin PMI services; Eurozone PMI services final, PPI; UK PMI services final; US ADP employment, trade balance, ISM services; Canada trade balance.
    • Thursday: Australia trade balance, NAB quarterly business confidence; Swiss unemployment rate; Eurozone retail sales; BoE rate decision; US jobless claims, non-farm productivity; Canada Ivey PMI.
    • Friday: Japan household spending, leading indicators; Germany industrial production, trade balance; Swiss foreign currency reserves; Canada employment; US non-farm payrolls.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6189; (P) 0.6226; (R1) 0.6249; More…

    AUD/USD’s fall from 0.6941 resumed by breaking through 0.6130 support today. Intraday bias is back on the downside fro 61.8% projection of 0.6687 to 0.6130 from 0.6329 at 0.5985 next. For now, outlook will stay bearish as long as 0.6329 resistance holds, in case of recovery.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6511) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY BOJ Summary of Opinions
    00:30 AUD Retail Sales M/M Dec -0.10% -0.70% 0.80% 0.70%
    00:30 AUD Building Permits M/M Dec 0.70% 1.00% -3.60% -3.40%
    00:30 JPY Manufacturing PMI Jan F 48.7 48.8 48.8
    01:45 CNY Caixin Manufacturing PMI Jan 50.1 50.5 50.5
    08:30 CHF Manufacturing PMI Jan 48.4
    08:50 EUR France Manufacturing PMI Jan F 45.3 45.3
    08:55 EUR Germany Manufacturing PMI Jan F 44.1 44.1
    09:00 EUR Eurozone Manufacturing PMI Jan F 46.1 46.1
    09:30 GBP Manufacturing PMI Jan F 48.2 48.2
    10:00 EUR Eurozone CPI Y/Y Jan P 2.40% 2.40%
    10:00 EUR Eurozone CPI Core Y/Y Jan P 2.60% 2.70%
    14:30 CAD Manufacturing PMI Jan 52.2
    14:45 USD Manufacturing PMI Jan F 50.1 50.1
    15:00 USD ISM Manufacturing PMI Jan 49.3 49.3
    15:00 USD ISM Manufacturing Prices Paid Jan 52.6 52.5
    15:00 USD ISM Manufacturing Employment Index Jan 45.3
    15:00 USD Construction Spending M/M Dec 0.30% 0.00%

     



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  • CAD Steady After BoC Cut, DOW Nears Record Ahead of FOMC Hold

    CAD Steady After BoC Cut, DOW Nears Record Ahead of FOMC Hold


    Canadian Dollar is steady after BoC delivered its sixth consecutive rate cut, lowering its policy rate by 25bps to 3.00% as expected. The pace of easing has slowed from December’s 50bps reduction, reflecting a more measured approach as interest rate sits inside neutral zone. BoC explicitly warned of risks stemming from potential US tariffs, noting that a prolonged trade conflict could weigh on economic growth while simultaneously exerting upward pressure on inflation.

    Governor Tiff Macklem reinforced this concern in his press conference, describing US trade policy as a “major source of uncertainty,” with multiple possible outcomes. He also noted that tariffs reduce economic efficiency and cannot be offset by monetary policy alone, adding that with only one policy tool—the interest rate—the BoC cannot simultaneously combat “weaker output and higher inflation.”

    Attention now shifts to Fed, which is widely expected to hold its policy rate steady at 4.25–4.50% today. The key question is whether Fed will signal an extended pause in its rate-cutting cycle, either through its statement or Chair Jerome Powell’s press conference. Powell’s tone will be crucial in shaping market expectations—any indication of a prolonged pause could bolster the Dollar and weigh on risk assets, while a more dovish stance could encourage renewed risk-taking.

    In equities, DOW’s response to FOMC decision will be closely watched. The index has remained resilient despite this week’s tech sector volatility and is now approaching the record high of 45073.63.

    Decisive break above this level would confirm long-term uptrend resumption, and target 61.8% projection of 38499.27 to 45073.63 from 41844.89 at 45907.85. In this bullish scenario, risk-on sentiment could spread to other sectors and take S&P 500 and NASDAQ higher too.

    However, break of 44026.27 support will delay the bullish case and bring another fall to extend the consolidation from 45073.63 instead.

    Overall in the currency markets, Yen is trading as the strongest for the week so far, followed by Dollar and then Swiss Franc. Aussie is the worst, followed by Kiwi, and then Euro. Sterling and Loonie are positioning in the middle.

    BoC cuts rates to 3.00%, flags trade risks and ends QT

    BoC lowered its overnight rate target by 25bps to 3.00% as widely expected. In accompanying statement, the central bank warned that a prolonged trade conflict with the US could strain economic growth and drive inflation higher.

    BoC noted that “if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.” Policymakers emphasized that they will closely monitor trade developments and assess their impact on economic activity, inflation, and future policy decisions.

    The updated projections suggest a modest recovery in economic growth. Following an estimated 1.3% expansion in 2024, GDP is now expected to grow by 1.8% in both 2025 and 2026, slightly exceeding potential growth. Inflation is projected to remain near the 2% target over the next two years, reinforcing expectations that BoC will maintain a cautious approach to policy easing.

    The central bank also announced plans to complete the normalization of its balance sheet by ending quantitative tightening. BoC will restart asset purchases in early March, adopting a gradual pace to ensure balance sheet stabilization while aligning with economic growth.

    German Gfk consumer sentiment falls to -22.4, recovery hopes fade

    Germany’s GfK Consumer Sentiment Index for February fell to -22.4, down from -21.4 and missing expectations of -20.5.

    In January, economic expectations dropped by 1.9 points to -1.6, while income expectations declined by 2.5 points to -1.1. The most concerning development came from willingness to buy, which fell 3 points to -8.4, its lowest level since August 2024,.

    Rolf Bürkl, consumer expert at NIM, noted that “the Consumer Climate has suffered another setback and starts gloomy into the new year.”

    The moderate optimism seen in late 2024 has faded, with Bürkl adding that the trend since mid-2024 has been stagnation at best. A key concern is inflation, which has recently picked up again, limiting prospects for a meaningful rebound in consumer demand.

    Australia’s CPI slows to 2.4% in Q4, trimmed mean CPI down to 3.2%

    Australia’s Q4 CPI rose just 0.2% qoq, same as the prior quarter, falling short of expectations of 0.4% yoy. Trimmed mean CPI also undershot forecasts, rising 0.5% qoq versus the expected 0.6% qoq.

    On an annual basis, headline CPI slowed from 2.8% yoy to 2.4% yoy, slightly below 2.5% yoy consensus. Trimmed mean CPI fell from 3.6% yoy to 3.2% yoy, missing 3.3% yoy estimate.

    These weaker inflation prints reinforce expectations that RBA may begin easing policy as early as its February 17-18 meeting.

    The decline in annual inflation was largely driven by steep drops in electricity prices (-25.2%) and automotive fuel (-7.9%). Goods inflation slowed sharply to 0.8% yoy, down from 1.4% yoy in Q3. Meanwhile, services inflation remained elevated at 4.3% yoy, though slightly lower than the 4.6% yoy in the previous quarter.

    In December, monthly CPI rebounded from 2.3% yoy to 2.5% yoy, matched expectations.

    RBNZ’s Conway sees cautious OCR path to neutral

    RBNZ Chief Economist Paul Conway stated in a speech today that Official Cash Rate at 4.25% remains “north of neutral”. The central bank estimates the neutral rate between 2.5% and 3.5%.

    “Easing domestic pricing intentions and the recent drop in inflation expectations help open the way for some further easing,” Conway added.

    However, Conway emphasized a cautious approach, noting that policymakers will “feel our way” as rates approach neutral. RBNZ will continuously reassess its neutral rate estimate, adjusting based on economic conditions.

    If neutral is underestimated, stronger-than-expected activity and inflation would signal a less restrictive policy than intended, prompting recalibration, he added.

    The central bank expects potential output growth to range between 1.5% and 2% annually over the next three years, reflecting a lower economic “speed limit.” This weaker outlook stems from sluggish productivity and reduced net immigration, limiting long-term economic capacity.

    USD/CAD Mid-Day Outlook

    Daily Pivots: (S1) 1.4367; (P) 1.4394; (R1) 1.4428; More…

    USD/CAD rebounded notably today but stays in range below 1.4516 short term top. Intraday bias remains neutral and more consolidations could be seen. Further rally is expected as long as 1.4260 support holds. On the upside, firm break of 1.4516 will resume larger up trend to 1.4667/89 key resistance zone. Nevertheless, firm break of 1.4260 will turn bias to the downside for deeper pullback to 55 D EMA (now at 1.4235) and below.

    In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish 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
    23:50 JPY BoJ Meeting Minutes
    00:30 AUD Monthly CPI Y/Y Dec 2.50% 2.50% 2.30%
    00:30 AUD CPI Q/Q Q4 0.20% 0.40% 0.20%
    00:30 AUD CPI Y/Y Q4 2.40% 2.50% 2.80%
    00:30 AUD RBA Trimmed Mean CPI Q/Q Q4 0.50% 0.60% 0.80%
    00:30 AUD RBA Trimmed Mean CPI Y/Y Q4 3.20% 3.30% 3.50% 3.60%
    05:00 JPY Consumer Confidence Jan 35.2 36.5 36.2
    07:00 EUR Germany GfK Consumer Sentiment Feb -22.4 -20.5 -21.3 -21.4
    09:00 CHF UBS Economic Expectations Jan 17.7 -20
    09:00 EUR Eurozone M3 Money Supply Y/Y Dec 3.50% 4.10% 3.80%
    13:30 USD Goods Trade Balance (USD) Dec P -122.1B -105.4B -102.9B -103.5B
    13:30 USD Wholesale Inventories Dec P -0.50% 0.10% -0.20% -0.10%
    14:45 CAD BoC Rate Decision 3.00% 3.00% 3.25%
    15:30 CAD BoC Press Conference
    15:30 USD Crude Oil Inventories   2.2M -1.0M
    19:00 USD Fed Rate Decision 4.50% 4.50%
    19:30 USD FOMC Press Conference

     



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  • Dollar Softness Continues as Forex Markets Tread Calm Waters

    Dollar Softness Continues as Forex Markets Tread Calm Waters


    The forex markets remain unusually quiet today, with Dollar staying soft despite multiple attempts to rebound. The greenback has only managed meaningful gains against the weaker Yen and the struggling Canadian Dollar, while failing to build momentum against other major currencies. With little in the way of significant economic data on the calendar today, trading is expected to remain subdued. However, volatility could resurface, probably just temporarily, later in the week, with BoJ’s anticipated rate hike and key PMI releases from major economies slated for Friday.

    Loonie, nonetheless, could see movement today, with retail sales data due. BoC is widely expected to cut rates by 25 bps at its upcoming meeting next Wednesday, a view supported by a Reuters survey where 25 out of 31 economists forecast such a move. Additionally, median expectations point to another 25 bps cut in March, followed by a further reduction later in the year, bringing the overnight rate to 2.50%.

    For USD/CAD, however, the real driver for a decisive range breakout, beyond brief jitters, would lie in developments surrounding US-Canada trade relations. The market awaits details of tariffs expected to be announced on February 1, including their scope and which products will be affected.

    So far this week, Yen has been the weakest performer, followed by Dollar and Loonie. At the other end of the spectrum, the Kiwi remains the strongest, while Euro and Aussie. Sterling and Swiss are still stuck in middle positions.

    A key development this week has been the sharp decline in USD/CNH, which is viewed as a sign of a stabilizing risk sentiment toward global trade. Technically, a short term top should be formed at 7.3694, just ahead of 7.3745 key resistance (2022 high). More consolidative is expected in the near term with risk of deeper pull back. But downside should be contained by 38.2% retracement of 6.9709 to 7.3694 at 7.2172. Eventual upside break remains in favor.

    Gold surges on Dollar weakness, Silver lags

    Gold prices surged past 2750 mark this week, supported largely by a weaker Dollar. The overall market sentiment is on a relatively calmer backdrop, with US President Donald Trump’s decision to delay tariff implementations contributed to easing trade-related fears. Additionally, geopolitical tensions receded as a ceasefire between Israel and Hamas took hold earlier in the week.

    Hence, as whether Gold can break its record high of 2789 will depend largely on the depth of Dollar’s correction in the coming days.

    Technically, Gold’s rebound from 2536.67 is currently seen as the second leg of the corrective pattern from 2789.92 high. Strong resistance could be seen from this resistance to limit upside. Break of 2689.21 support will argue that the third leg of the pattern has started back towards 2536.67 support. Nevertheless, decisive break of 2789.92 will confirm up trend resumption.

    Silver’s performance, by comparison, has been relatively subdued. Its recovery from 28.74 remains weak and corrective in nature. For now, as long as 32.30 resistance holds, fall from 34.84 is still in favor to resume at a later stage, to 26.44 cluster support zone.

    Japan posts first trade surplus in six months

    Japan recorded a trade surplus of JPY 130.9B in December, the first surplus in six months, driven by a 2.8% yoy rise in exports to JPY 9.91T. Imports also jumped, rising 1.8% yoy to JPY 9.8T.

    However, exports to the two largest trading partners saw declines, with shipments to China falling by -3.0% yoy and to the US by 2.1% yoy.

    On a month-on-month seasonally adjusted basis, exports rose 6.3% mom to JPY 9.44T. Imports increased 2.2% mom to JPY 9.47T, resulting in a seasonally adjusted trade deficit of JPY 33B.

    For the entirety of 2024, Japan’s trade deficit narrowed significantly, shrinking by 44% from the previous year to JPY -5.33T. Exports reached a record high of JPY 107.09T, up 6.2%, bolstered by strong demand for vehicles and semiconductor-related products. Imports also rose by 1.8% to JPY 112.42T.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.4322; (P) 1.4357; (R1) 1.4412; More…

    Range trading continues in USD/CAD and intraday bias remains neutral. Further rise is expected as long as 1.4260 support holds. Break of 1.4516 will resume larger up trend to 1.4667/89 key resistance zone. Nevertheless, firm break of 1.4260 will turn bias to the downside for deeper pullback to 55 D EMA (now at 1.4205) and below.

    In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish 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
    23:50 JPY Trade Balance (JPY) Dec -0.03T -0.64T -0.38T -0.39T
    13:30 USD Initial Jobless Claims (Jan 17) 220K 217K
    13:30 CAD Retail Sales M/M Nov 0.20% 0.60%
    13:30 CAD Retail Sales ex Autos M/M Nov 0.10% 0.10%
    15:00 EUR Eurozone Consumer Confidence Jan P -14 -15
    15:30 USD Natural Gas Storage -270B -258B
    16:00 USD Crude Oil Inventories -0.1M -2.0M

     



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  • Loonie Weakness Persists in Calmer Markets, AUD/CAD Challenges Key Resistance

    Loonie Weakness Persists in Calmer Markets, AUD/CAD Challenges Key Resistance


    Forex markets have settled into quieter trading as the immediate impact of US President Donald Trump’s inauguration and initial executive orders fades. While Trump’s proposed tariffs remain a significant concern, their delayed implementation suggests a more calculated and strategic approach, tied to future negotiations. This tempered stance has brought a sense of cautious optimism to the markets, as the eventual impact may not be as severe as initially feared—especially if major agreements are reached with key allies like the EU.

    Despite this relative calm, Canadian Dollar remains under significant pressure. As the most immediate target of Trump’s tariff agenda, with measures likely set to take effect on February 1. Loonie’s recovery struggled to gain traction. This weakness has been compounded by softer-than-expected Canadian CPI data for December. While energy prices saw a boost due to base effects, other areas of the economy, such as food and restaurant pricing, contributed to the overall deceleration in inflation. With inflation hovering near the 2% target, BoC is expected to continue easing monetary policy, albeit at a slower pace.

    So far this week, Dollar has been the weakest performer, followed by Loonie and Yen. On the other side of the spectrum, Kiwi leads the gainers, followed by Euro and Sterling. Swiss Franc and Australian Dollar are positioned more neutrally, sitting in the middle of the performance table.

    Technically, AUD/CAD’s rebound extended this week on Loonie’s weakness. It’s now pressing 0.9016 resistance and 55 D EMA. Sustained break there would argue that 0.8851 support was successfully defended, and corrective rally from 0.8562 (2023 low) remains intact. Further rise should then be seen back to retest 0.9375 high.

    In Europe, at the time of writing, FTSE is up 0.09%. DAX is down -0.09%. CAC is up 0.18%. UK 10-year yield is down -0.053 at 4.610. Germany 10-year yield is down -0.011 at 2.518. Earlier in Asia, Nikkei rose 0.32%. Hong Kong HSI rose 0.91%. China Shanghai SSE fell -0.05%. Singapore Strait Times fell -0.33%. Japan 10-year JGB yield fell -0.0073 to 1.190.

    Canada’s Inflation Slows to 1.8% in Dec Amid Food Price Decline

    Canada’s annual inflation rate eased to 1.8% yoy in December, down from 1.9% yoy in November and slightly below expectations of 1.9% yoy. The deceleration was largely driven by declines in food prices and alcohol-related expenses.

    Canadians paid 1.6% less for food purchased from restaurants on a year-over-year basis, marking the first annual decline in this index. Excluding food, CPI rose by 2.1% yoy.

    Gasoline prices, for example, rose 3.5% yoy in December, reversing a -0.5% yoy decline in November. The increase was attributed to a base-year effect, as December 2023 saw a sharp -4.4% monthly decline due to concerns about oil demand amid high supply levels. However, on a month-over-month basis, gasoline prices edged down by -0.6% mom.

    Looking at the core measures, CPI median slowed from 2.6% yoy to 2.4% yoy versus expectation of 2.5% yoy. CPI trimmed slowed from 2.6% yoy to 2.5% yoy, matched expectations. CPI common was unchanged at 2.0% yoy, above expectation 1.9% yoy.

    German ZEW falls to 10.3 as Eurozone shows relative resilience

    German ZEW Economic Sentiment fell sharply in January, dropping from 15.7 to 10.3 and missing market expectations of 15.1. In contrast, Current Situation Index showed slight improvement, rising from -93.1 to -90.4, slightly better than forecasts of -93.0.

    Meanwhile, Eurozone ZEW Economic Sentiment painted a more optimistic picture, climbing from 17.0 to 18.0, exceeding expectations of 16.9. Current Situation Index for the Eurozone also rose, gaining 1.2 points to -53.8.

    ZEW President Achim Wambach attributed the decline in Germany’s sentiment to persistent economic headwinds. He noted, “The second consecutive year of recession caused economic expectations in Germany to fall.”

    Key factors include weak private household spending and low demand in the construction sector. Wambach warned that if these trends persist, “Germany will fall further behind the other countries of the Eurozone.”

    Adding to the challenges, Wambach highlighted growing political uncertainty in Germany due to the complexities of coalition-building and the unpredictability of economic policies under the new Trump administration in the US.

    UK payrolled employment falls -47k in Dec, unemployment rate rises to 4.4% in Nov

    UK payrolled employment fell -47k or -0.2% mom in December. Median monthly pay rose 5.6% yoy, down from 6.4% yoy in November and 7.9% yoy in October. Claimant count rose 0.7k, below expectation of 10.3k.

    In the three months to November, unemployment rate ticked up to 4.4%, above expectation of 4.3%. Average earnings excluding bonus rose 5.6% yoy, up from 5.2% yoy, and above expectation of 5.5% yoy. Average earnings including bonus rose 5.6% yoy, up from 5.2% yoy, matched expectations.

    NZ BNZ services fall to 47.9, contracts for 10th month

    New Zealand’s BNZ Performance of Services Index declined from 49.1 to 47.9 in December, well below historical average of 53.1. This also marks the 10th consecutive month of contraction.

    The breakdown of the data highlights broad weakness: activity/sales fell from 48.3 to 46.2, and supplier deliveries dropped sharply from 52.5 to 47.7. New orders/business remained stagnant at 49.5, just below the threshold for expansion, while employment showed a marginal improvement, rising from 46.7 to 47.4. Stocks/inventories also slipped into contraction territory, falling from 52.0 to 48.8.

    Negative sentiment among respondents increased to 57.5% in December, up from 53.6% in November, with cost-of-living pressures and concerns about the general economic climate dominating feedback.

    BNZ’s Senior Economist Doug Steel remarked, “Comparing across our key trading partners, New Zealand has the only PSI in contraction. Our neighbour Australia is the closest comparison, but their equivalent PSI is sitting more comfortably at 50.8.”

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2211; (P) 1.2278; (R1) 1.2395; More…

    Intraday bias in GBP/USD remains neutral for the moment. Consolidations from 1.2099 could extend with stronger recovery But outlook will remain bearish as long as 12486 support turned resistance holds. On the downside, break of 1.2099 will resume the fall from 1.3433 to 100% projection of 1.3433 to 1.2486 from 1.2810 at 1.1863.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433, 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.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PSI Dec 47.9 49.5
    07:00 GBP Claimant Count Change Dec 0.7K 10.3K 0.3K -25.1K
    07:00 GBP ILO Unemployment Rate (3M) Nov 4.40% 4.30% 4.30%
    07:00 GBP Average Earnings Excluding Bonus 3M/Y Nov 5.60% 5.50% 5.20%
    07:00 GBP Average Earnings Including Bonus 3M/Y Nov 5.60% 5.60% 5.20%
    10:00 EUR Germany ZEW Economic Sentiment Jan 10.3 15.1 15.7
    10:00 EUR Germany ZEW Current Situation Jan -90.4 -93 -93.1
    10:00 EUR Eurozone ZEW Economic Sentiment Jan 18 16.9 17
    13:30 CAD CPI M/M Dec -0.40% -0.40% 0.00%
    13:30 CAD CPI Y/Y Dec 1.80% 1.90% 1.90%
    13:30 CAD CPI Median Y/Y Dec 2.40% 2.50% 2.60%
    13:30 CAD CPI Trimmed Y/Y Dec 2.50% 2.50% 2.70% 2.60%
    13:30 CAD CPI Common Y/Y Dec 2.00% 1.90% 2.00%

     



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  • Loonie on a Rollercoaster on Tariff Threats, Canadian CPI Watched

    Loonie on a Rollercoaster on Tariff Threats, Canadian CPI Watched


    Canadian Dollar endured a rough ride, heavily influenced by US President Donald Trump’s tariff rhetoric. The Loonie initially gained some ground yesterday, as Dollar weakened broadly after Trump refrained from imposing immediate tariffs during his first day in office. However, optimism was short-lived as Trump warned of 25% tariffs on both Mexico and Canada starting February 1, citing border security concerns and labeling Canada a “very bad abuser.”

    Trump’s remarks, made during a press briefing accompanying his wave of executive orders, have brought uncertainty back to the already fragile sentiment. In the background, BoC’s latest business outlook survey highlighted apprehension among Canadian businesses. Conducted during November 2024, the survey revealed that 40% of respondents expected negative effects from the new US administration, while one-third were uncertain about the fallout.

    On the horizon, Canada’s December CPI report due today could trigger more volatility in Loonie. Both headline and core inflation are expected to ease further, reinforcing the case for another 25-bps rate cut at BoC’s January 29 meeting. Despite signaling a slower pace of monetary easing this year, BoC appears not ready for a pause yet. At least one more cut is generally expected, especially with inflation hovering near the 2% target.

    Technically for USD/CAD, near term bullishness was revived after yesterday’s huge volatility. For now, further rise is expected as long as 1.4260 support holds. Current rally should continue towards 1.4667 key long term resistance. Nevertheless, a firm break there might not happen until the tariff picture is cleared. For any dip, through 1.4260, the next level of defense would be 55 D EMA (now at 1.4203).

    UK payrolled employment falls -47k in Dec, unemployment rate rises to 4.4% in Nov

    UK payrolled employment fell -47k or -0.2% mom in December. Median monthly pay rose 5.6% yoy, down from 6.4% yoy in November and 7.9% yoy in October. Claimant count rose 0.7k, below expectation of 10.3k.

    In the three months to November, unemployment rate ticked up to 4.4%, above expectation of 4.3%. Average earnings excluding bonus rose 5.6% yoy, up from 5.2% yoy, and above expectation of 5.5% yoy. Average earnings including bonus rose 5.6% yoy, up from 5.2% yoy, matched expectations.

    NZ BNZ services fall to 47.9, contracts for 10th month

    New Zealand’s BNZ Performance of Services Index declined from 49.1 to 47.9 in December, well below historical average of 53.1. This also marks the 10th consecutive month of contraction.

    The breakdown of the data highlights broad weakness: activity/sales fell from 48.3 to 46.2, and supplier deliveries dropped sharply from 52.5 to 47.7. New orders/business remained stagnant at 49.5, just below the threshold for expansion, while employment showed a marginal improvement, rising from 46.7 to 47.4. Stocks/inventories also slipped into contraction territory, falling from 52.0 to 48.8.

    Negative sentiment among respondents increased to 57.5% in December, up from 53.6% in November, with cost-of-living pressures and concerns about the general economic climate dominating feedback.

    BNZ’s Senior Economist Doug Steel remarked, “Comparing across our key trading partners, New Zealand has the only PSI in contraction. Our neighbour Australia is the closest comparison, but their equivalent PSI is sitting more comfortably at 50.8.”

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 155.17; (P) 155.88; (R1) 156.33; More…

    Intraday bias in USD/JPY is back on the downside with breach of 154.97 temporary low. Sustained break of 55 D EMA (now at 154.61) will extend the fall from 158.86 to 38.2% retracement of 139.57 to 158.86 at 151.49 next. Nevertheless, firm break of 156.67 resistance will argue that the pull back has completed, and turn bias back to the upside for retesting 158.86 high instead.

    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
    21:30 NZD Business NZ PSI Dec 47.9 49.5
    07:00 GBP Claimant Count Change Dec 0.7K 10.3K 0.3K -25.1K
    07:00 GBP ILO Unemployment Rate (3M) Nov 4.40% 4.30% 4.30%
    07:00 GBP Average Earnings Excluding Bonus 3M/Y Nov 5.60% 5.50% 5.20%
    07:00 GBP Average Earnings Including Bonus 3M/Y Nov 5.60% 5.60% 5.20%
    10:00 EUR Germany ZEW Economic Sentiment Jan 15.1 15.7
    10:00 EUR Germany ZEW Current Situation Jan -93 -93.1
    10:00 EUR Eurozone ZEW Economic Sentiment Jan 16.9 17
    13:30 CAD CPI M/M Dec -0.70% 0.00%
    13:30 CAD CPI Y/Y Dec 1.70% 1.90%
    13:30 CAD CPI Median Y/Y Dec 2.50% 2.60%
    13:30 CAD CPI Trimmed Y/Y Dec 2.50% 2.70%
    13:30 CAD CPI Common Y/Y Dec 1.90% 2.00%

     



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