Tag: United States

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

    Risk Aversion Drags Yields Down, But Lifts Dollar Higher

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

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

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

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

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

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

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

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

    Bitcoin and Gold Tumble on Risk-Off Sentiment

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

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

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

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

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

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

    EUR/USD Weekly Outlook

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

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

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



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  • Sentiment Lifted by In-Line PCE Data, But Tariffs Could Limit Optimism

    Sentiment Lifted by In-Line PCE Data, But Tariffs Could Limit Optimism


    Risk sentiment received a boost in early US trading as January’s PCE inflation data came in line with expectations, lifting hopes that Fed may have room to cut rates in the first half of the year. Both headline and core PCE inflation slowed, adding to expectations that disinflation remains on track. Fed fund futures now indicate a roughly 70% chance of a 25bps rate cut in June, up from around 63% just a week ago.

    However, it remains to be seen whether the bounce in equities, as suggested by higher futures, can hold. Market sentiment remains fragile, particularly with ongoing uncertainty surrounding US tariff policies. Investors are cautious about the economic fallout from trade measures, which could overshadow any optimism from cooling inflation data.

    In the currency markets, Dollar is on track to close the week as the best performer, followed by Sterling and Swiss Franc. Meanwhile, Kiwi remains the weakest, followed by Aussie and Loonie, with little sign of a reversal. Euro and Yen are positioning in the middle.

    In Europe, at the time of writing, FTSE is up 0.36%. DAX is down -0.57%. CAC is down -0.55%. UK 10-year yield is down -0.024 at 4.490. Germany 10-year yield is down -0.026 at 2.394. Earlier in Asia, Nikkei fell -2.88% Hong Kong HSI fell -3.28%. China Shanghai SSE fell -1.98%. Singapore Strait Times fell -0.65%. Japan 10-year JGB yield fell -0.02 to 1.376.

    US PCE inflation slows as expected, personal income surges but spending contracts

    The latest US PCE inflation data showed price pressures moderating slightly in January. Both headline and core PCE (excluding food and energy) price indices rose 0.3% month-over-month, aligning with market expectations.

    On an annual basis, headline PCE inflation slowed to 2.5% yoy from 2.6% yoy, while core PCE eased to 2.6% yoy from 2.9% yoy, reinforcing the view that disinflation remains on track despite persistent price pressures in some sectors.

    However, the consumer sector showed signs of strain. Personal income surged 0.9% mom, far exceeding expectations of 0.3%, but personal spending unexpectedly declined by -0.2%, missing the anticipated 0.2% gain.

    Canada’s GDP grows 0.2% mom in Dec, misses expectations

    Canada’s GDP expanded by 0.2% mom in December, falling short of the expected 0.3% growth. Both services-producing (+0.2%) and goods-producing industries (+0.3%) contributed to the increase, marking the fifth gain in the past six months. A total of 11 out of 20 industrial sectors posted growth.

    Looking ahead, preliminary data suggests GDP grew by 0.3% mom in January, with gains led by mining, quarrying, oil and gas extraction, wholesale trade, and transportation. However, retail trade remained a weak spot, partially offsetting the overall growth.

    BoE’s Ramsden sees inflation risks two-sided

    BoE Deputy Governor Dave Ramsden indicated a shift in his inflation outlook, stating that he no longer views risks to achieving the 2% target as skewed to the downside. Instead, he now sees inflation risks as “two-sided,” acknowledging the potential for “more inflationary as well as disinflationary scenarios”.

    Ramsden also raised concerns about the UK’s sluggish economic growth, highlighting the possibility that the economy’s supply capacity might be “even weaker” than previously assessed by BoE.

    If this proves true, the UK’s “speed limit” for growth would be lower, leading to prolonged tightness in the labor market and sustained wage pressures. That would result in “greater persistence in domestic inflationary pressures.”

    Swiss KOF falls to 101.7, manufacturing and services under pressure

    Switzerland’s KOF Economic Barometer declined from 103.0 to 101.7 in February, missing expectations of 102.1.

    The data suggests weakening momentum in the economy, with most production-side sectors facing increasing pressure. According to KOF, manufacturing and services sectors saw the most notable deterioration.

    However, the report also pointed to some stabilizing factors, as foreign demand and private consumption showed resilience, helping to offset some of the negative trends.

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

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

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

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

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

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

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

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

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0365; (P) 1.0430; (R1) 1.0462; More…

    Intraday bias in EUR/USD stays on the downside at this point. Consolidations from 1.0176 should have completed with three waves up to 1.0527. Deeper fall should be seen to retest 1.0176/0210 support zone. Firm break there will resume whole decline from 1.1213. For now, risk will stay on the downside as long as 1.0527 holds, in case of 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
    23:30 JPY Tokyo CPI Y/Y Feb 2.90% 3.40%
    23:30 JPY Tokyo CPI Core Y/Y Feb 2.20% 2.30% 2.50%
    23:30 JPY Tokyo CPI Core-Core Y/Y Feb 1.90% 1.90%
    23:50 JPY Industrial Production M/M Jan P -1.10% -0.90% -0.20%
    23:50 JPY Retail Trade Y/Y Jan 3.90% 4.00% 3.70% 3.50%
    00:30 AUD Private Sector Credit M/M Jan 0.50% 0.60% 0.60%
    05:00 JPY Housing Starts Y/Y Jan -4.60% -2.60% -2.50%
    07:00 EUR Germany Import Price Index M/M Jan 1.10% 0.70% 0.40%
    07:00 EUR Germany Retail Sales M/M Jan 0.20% 0.10% -1.60%
    07:45 EUR France Consumer Spending M/M Jan -0.50% -0.80% 0.70%
    07:45 EUR France GDP Q/Q Q4 -0.10% -0.10% -0.10%
    08:00 CHF KOF Economic Barometer Feb 101.7 102.1 101.6 103
    08:55 EUR Germany Unemployment Change Jan 5K 15K 11K
    08:55 EUR Germany Unemployment Rate Jan 6.20% 6.20% 6.20%
    13:00 EUR Germany CPI M/M Feb P 0.40% 0.40% -0.20%
    13:00 EUR Germany CPI Y/Y Feb P 2.30% 2.30% 2.30%
    13:30 CAD GDP M/M Dec 0.20% 0.30% -0.20%
    13:30 USD Personal Income M/M Jan 0.90% 0.30% 0.40%
    13:30 USD Personal Spending Jan -0.20% 0.20% 0.70% 0.80%
    13:30 USD PCE Price Index M/M Jan 0.30% 0.30% 0.30%
    13:30 USD PCE Price Index Y/Y Jan 2.50% 2.50% 2.60%
    13:30 USD Core PCE Price Index M/M Jan 0.30% 0.30% 0.20%
    13:30 USD Core PCE Price Index Y/Y Jan 2.60% 2.60% 2.80% 2.90%
    13:30 USD Goods Trade Balance (USD) Jan P 153.3B -114.9B -122.0B
    13:30 USD Wholesale Inventories Jan P 0.70% 0.10% -0.50% -0.40%
    14:45 USD Chicago PMI Feb 40.3 39.5

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Fed’s Hammack signals cautious approach, stresses policy patience

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

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

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

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

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

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

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

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

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

    Looking ahead

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

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

    AUD/USD Daily Report

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

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

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

    Economic Indicators Update

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

     



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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 Attempts Another Comeback, Aussie Lags

    Dollar Attempts Another Comeback, Aussie Lags


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Looking ahead

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

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

    USD/CHF Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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

    Greenback Drops Ahead of Consumer Data, Risk Sentiment in Focus


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    GBP/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

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

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Yen Ends Week Strong as BoJ Might Hike Rates Again Sooner

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

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

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

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

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

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

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

    AUD/NZD Reverses after RBA and RBNZ Rate Cuts

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

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

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

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

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

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

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

    EUR/USD Weekly Outlook

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

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

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



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

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


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

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

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

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

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

    ECB’s Schnabel: Rate Cut Pause May Be Approaching

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

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

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

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

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

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

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

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

    UK CPI surges to 3.0%, highest since March 2024

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

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

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

    RBNZ cuts by 50bps, signals further easing through 2025

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

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

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

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

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

    Australian wages growth slow 0.7% qoq, pressures easing

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

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

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

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

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

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

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

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

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

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

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

    GBP/USD Mid-Day Outlook

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

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

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD PPI Input Q/Q Q4 -0.90% 1.40% 1.90%
    21:45 NZD PPI Output Q/Q Q4 -0.10% 1.10% 1.50%
    23:50 JPY Machinery Orders M/M Dec -1.20% 0.30% 3.40%
    23:50 JPY Trade Balance (JPY) Jan -0.86T -0.24T -0.03T -0.22T
    00:30 AUD Wage Price Index Q/Q Q4 0.70% 0.80% 0.80% 0.90%
    01:00 NZD RBNZ Rate Decision 3.75% 3.75% 4.25%
    07:00 GBP CPI M/M Jan -0.10% -0.30% 0.30%
    07:00 GBP CPI Y/Y Jan 3.00% 2.80% 2.50%
    07:00 GBP Core CPI Y/Y Jan 3.70% 3.70% 3.20%
    07:00 GBP RPI M/M Jan -0.10% -0.10% 0.30%
    07:00 GBP RPI Y/Y Jan 3.60% 3.70% 3.50%
    07:00 GBP PPI Input M/M Jan 0.80% 0.70% 0.10% 0.20%
    07:00 GBP PPI Input Y/Y Jan -0.10% -0.50% -1.50% -1.30%
    07:00 GBP PPI Output M/M Jan 0.50% 0.20% 0.10% -0.20%
    07:00 GBP PPI Output Y/Y Jan 0.30% 0.10% 0.10% -0.10%
    07:00 GBP PPI Core Output M/M Jan 0.30% 0%
    07:00 GBP PPI Core Output Y/Y Jan 1.50% 1.50% 1.60%
    09:00 EUR Eurozone Current Account (EUR) Dec 38.4B 30.2B 27.0B 25.1B
    13:30 USD Building Permits Jan 1.48M 1.45M 1.48M
    13:30 USD Housing Starts Jan 1.37M 1.39M 1.50M
    19:00 USD FOMC Minutes

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

    In the new economic projections:

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

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

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

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

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

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

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

    Looking ahead

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

    AUD/USD Daily Report

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

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

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

    Economic Indicators Update

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

     



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  • Yen Rallies as Strong GDP Fuels BoJ Rate Hike Speculation

    Yen Rallies as Strong GDP Fuels BoJ Rate Hike Speculation


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

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

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

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

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

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

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

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

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

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

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

    NZ BNZ services rises to 50.4, stabilization rather than elevation

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

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

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

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

    RBA, RBNZ rate cuts, FOMC minutes, and more

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

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

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

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

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

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

    Here are some highlights for the week:

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

    USD/JPY Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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

    Dollar at Crossroads: Rebound Possible, But Bearish Risks Intensify


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Hong Kong Stocks Surge as China AI Optimism Builds

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

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

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

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

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

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

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

    Dollar at a Crossroads as Risk Sentiment Keeps Pressure On

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

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

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

    AUD/USD Weekly Report

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

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

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



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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 Muted Despite Strong PPI, Awaits Reciprocal Tariffs

    Dollar Muted Despite Strong PPI, Awaits Reciprocal Tariffs


    The currency markets are treading cautiously, with traders showing little reaction to stronger-than-expected US PPI data and a better-than-anticipated jobless claims report. Despite these inflationary signals, Dollar has struggled to gain further traction, as market participants hold their positions ahead of a highly anticipated announcement on US “reciprocal tariffs” from President Donald Trump. The announcement, expected later today in a news conference at the Oval Office, could provide a clearer picture of how US trade policy will evolve and its impact on global markets.

    While Fed’s restrictive stance on interest rates remains intact, this week’s hot CPI and PPI data suggest that inflation is proving more persistent than policymakers had hoped. Chair Jerome Powell has already reinforced that Fed is in no hurry to cut rates, and expectations for rate reductions in the first half of the year have now diminished. Market focus will now shift to upcoming US retail sales figures and additional comments from Fed officials, as traders assess how these data points might influence the central bank’s next policy moves.

    Sterling briefly found some boost after stronger-than-expected UK GDP data, which helped ease immediate concerns over a recession. However, the currency’s gains were short-lived, as investors remain cautious about the country’s sluggish economic outlook. While BoE has signaled a path of gradual easing, the market are more conservative than BoE guidance, with traders still pricing in just two rate cuts before year-end. Given the uncertainty around inflation and growth, the pace of BoE rate cuts will remain a key point of debate in the coming months.

    For the day, Swiss Franc leads currency gains as Japanese Yen follows behind, while Sterling holds firm too. On the weaker end, Australian and New Zealand Dollars are struggling. Dollar, despite its inflation-fueled rally earlier in the week, has lost momentum, as traders await further trade policy developments. Euro and Canadian Dollar are stuck in the middle of the pack.

    In Europe, at the time of writing, FTSE is down -0.56%. DAX is up 1.64%. CAC is up 1.40%. UK 10-year yield is down -0.045 at 4.493. Germany 10-year yield is down -0.050 at 2.431. Earlier in Asia, Nikkei rose 1.28%. Hong Kong HSI fell -0.20%. China Shanghai SSE fell -0.42%. Singapore Strait Times rose 0.21%. Japan 10-year JGB yield rose 0.0028 to 1.350.

    US PPI up 0.3% mom, 3.5% yoy in Jan, above expectations

    US PPI for final demand rose by 0.4% mom in January, exceeding market expectations of 0.2% mom.

    Final demand services increased by 0.3% mom, while final demand goods rose by 0.6% mom. Core PPI measure, which strips out volatile food, energy, and trade services, climbed 0.3% mom.

    On an annual basis, headline PPI accelerated to 3.5% yoy, surpassing forecasts of 3.2% yoy. Core PPI followed closely, advancing 3.4% yoy.

    US initial jobless claims falls to 213k vs exp 221k

    US initial jobless claims fell -7k to 213k in the week ending February 8, below expectation of 221k. Four-week moving average of initial claims fell -1k to 216k.

    Continuing claims fell -36k to 1850k in the week ending February 1. Four-week moving average of continuing claims fell -1k to 1872k.

    Eurozone industrial production falls -1.1% mom in Dec, EU down -0.8% mom

    Eurozone industrial production fell by -1.1% mom in December, significantly worse than the market expectation of -0.6% mom. The decline was driven by sharp contractions in intermediate and capital goods, while non-durable consumer goods provided some offset.

    Breaking down the data, intermediate goods production declined by -1.9% mom. The production of capital goods fell even further, down -2.6% mom. Durable consumer goods also posted a modest decline of -0.7% mom. On the other hand, energy production rose by 0.5% mom, and non-durable consumer goods surged by 5.1% mom.

    At the broader EU level, industrial production contracted by -0.8% mom, with Belgium (-6.8%), Portugal (-4.4%), and Austria (-3.3%) suffering the steepest declines. Meanwhile, Ireland (+8.2%), Luxembourg (+6.7%), and Croatia (+6.3%) posted strong rebounds.

    Swiss inflation softens again as CPI slows to 0.4% in Jan

    Switzerland’s CPI declined by -0.1% mom in January, in line with market expectations. Core CPI, which excludes fresh and seasonal products, energy, and fuel, also dropped by -0.1% mom. While domestic product prices ticked up by 0.1% mom, the steep -0.7% mom decline in imported product prices suggests that external factors continue to exert deflationary pressure on the Swiss economy.

    On a year-over-year basis, headline inflation eased from 0.6% yoy to 0.4% yoy, also matching expectations. However, core CPI edged higher to 0.9% yoy from 0.7% yoy. Domestic product inflation slowed from 1.5% yoy to 1.0% yoy, reflecting weaker demand and subdued price pressures in the local economy. Meanwhile, imported product prices remained in deflationary territory, improving slightly from -2.2% yoy to -1.5% yoy.

    UK GDP surprises to the upside, services lead the growth

    The UK economy outperformed expectations in December, with GDP expanding by 0.4% mom, significantly stronger than the 0.1% growth forecast. The services sector led the way, posting 0.4% monthly growth, while production output also rebounded, rising by 0.5%. However, the construction sector remained weak, contracting -0.2% mom.

    For Q4 as a whole, GDP increased by 0.1% qoq, defying expectations for a -0.1% contraction. Services grew by 0.2% in Q4, maintaining its position as the primary growth driver, while construction saw a moderate expansion of 0.5%. However, industrial production was a notable drag, shrinking by -0.8%.

    For full-year 2024, GDP increased by 0.8% compared to 2023, a modest but better-than-feared outcome given the economic uncertainties. Services expanded by 1.3%, cushioning the economy, while production sector contracted by -1.7%, and construction grew slightly by 0.4%.

    RBNZ survey shows rate cut expectations firm up

    The latest RBNZ Survey of Expectations showed a mixed shift in inflation forecasts, with short-term price pressures edging higher but long-term expectations trending lower. The survey, nonetheless, reinforces anticipation of further rate cuts.

    One-year-ahead inflation expectation rose from 2.05% to 2.15%, marking a slight uptick. However, two-year-ahead inflation expectations dipped from 2.12% to 2.06%, while five-year and ten-year expectations both declined by 11-12 basis points to 2.13% and 2.07%, respectively.

    RBNZ’s Official Cash Rate currently stands at 4.25% following 50bps reduction in last November. Survey respondents broadly expect another 50-bps cut to 3.75% by the end of Q1. The one-year-ahead OCR expectation also moved lower, falling 10bps to 3.23%, reinforcing the view that RBNZ will continue easing policy at a measured pace.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2387; (P) 1.2435; (R1) 1.2493; More…

    Outlook in GBP/USD is unchanged and intraday bias stays neutral. Corrective rebound from 1.2099 could still extend higher. But upside should be limited by 38.2% retracement of 1.3433 to 1.2099 at 1.2609. On the downside, below 1.2331 minor support will turn bias to the downside for 1.2248 support. Firm break there will argue that the correction has completed and bring retest of 1.2099 low. However, decisive break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y Jan 4.20% 4.00% 3.80% 3.90%
    00:00 AUD Consumer Inflation Expectations Feb 4.60% 4.00%
    00:01 GBP RICS Housing Price Balance Jan 22% 27% 28% 26%
    02:00 NZD RBNZ Inflation Expectations Q1 2.06% 2.12%
    07:00 EUR Germany CPI M/M Jan F -0.20% -0.20% -0.20%
    07:00 EUR Germany CPI Y/Y Jan F 2.30% 2.30% 2.30%
    07:00 GBP GDP Q/Q Q4 P 0.10% -0.10% 0.00%
    07:00 GBP GDP M/M Dec 0.40% 0.10% 0.10%
    07:00 GBP Industrial Production M/M Dec 0.50% 0.30% -0.40% -0.50%
    07:00 GBP Industrial Production Y/Y Dec -1.90% -2.10% -1.80%
    07:00 GBP Manufacturing Production M/M Dec 0.70% 0.10% -0.30%
    07:00 GBP Manufacturing Production Y/Y Dec -1.40% -1.90% -1.20% -1.10%
    07:00 GBP Goods Trade Balance (GBP) Dec -17.4B -18.3B -19.3B -18.9B
    07:30 CHF CPI M/M Jan -0.10% -0.10% -0.10%
    07:30 CHF CPI Y/Y Jan 0.40% 0.40% 0.60%
    09:00 EUR ECB Economic Bulletin
    10:00 EUR Eurozone Industrial Production M/M Dec -1.10% -0.60% 0.20% 0.40%
    13:30 USD PPI M/M Jan 0.40% 0.20% 0.20% 0.50%
    13:30 USD PPI Y/Y Jan 3.50% 3.20% 3.30%
    13:30 USD PPI Core M/M Jan 0.30% 0.30% 0.00%
    13:30 USD PPI Core Y/Y Jan 3.60% 3.30% 3.50%
    13:30 USD Initial Jobless Claims (Feb 7) 213K 221K 219K 220K
    15:30 USD Natural Gas Storage -90B -174B

     



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  • Dollar Surges as Hot Inflation Data Solidifies Prolonged Fed Pause, Yields Surge

    Dollar Surges as Hot Inflation Data Solidifies Prolonged Fed Pause, Yields Surge


    Dollar rallied sharply in early US trading after inflation data came in hotter than expected, reinforcing expectations that Fed will maintain its restrictive policy stance for longer than previously anticipated. 10-year Treasury yield surged past 4.6%, extending its strong rebound from earlier in the week. US equity futures plunged, with DOW futures down around -1% as traders reassessed the likelihood of near-term rate cuts. The report shattered market hopes that the Fed might move forward with another rate cut by mid-year, instead strengthening the case for a prolonged pause.

    Both headline and core CPI surpassed forecasts, rising more than expected on both a monthly and annual basis. This marks a clear warning sign that inflation pressures remain persistent. Fed fund futures now imply a nearly 65% probability that Fed will keep rates unchanged through June, a notable increase from 50% just a day earlier. While it is still premature, it couldn’t be totally ruled out that another rate hike could be back on the table if inflationary pressures intensifies further.

    US trade policy is another key wildcard for future price pressures. President Donald Trump’s tariff war is still in its early stages. Reports indicated that his administration is finalizing details for reciprocal tariffs. Trade analysts suggest that structuring these tariffs might be more challenging than anticipated, potentially delaying their rollout. However, if implemented aggressively, these tariffs could drive further price increases, creating additional inflationary risks that Fed would have to contend with.

    The currency markets reacted decisively, with Dollar emerging as the strongest performer for the day, followed by Swiss Franc and Euro. Yen, however, is the worst performer, struggling under the weight of rising US yields. Australian and New Zealand Dollars also faced significant pressure, caught in the wave of risk aversion triggered by inflation fears and concerns over global trade tensions. Meanwhile, Canadian Dollar and British Pound traded with a more neutral stance, positioning in the middle of the performance spectrum.

    In Europe, at the time of writing, FTSE flat. DAX is up 0.06%. CAC is down -0.18%. UK 10-year yield is up 0.071 at 4.583. Germany 10-year yield is up 0.043 at 2.477. Earlier in Asia, Nikkei rose 0.42%. Hong Kong HSI rose 2.64%. China Shanghai SSE rose 0.85%. Singapore Strait Times rose 0.36%. Japan 10-year JGB yield rose 0.0406 to 1.347.

    US CPI rises to 3% in Jan, core CPI up to 3.3%

    US headline CPI rose 0.5% mom in January, exceeding expectations of 0.3% mom and marking the fastest monthly pace since August 2023. Core CPI, which strips out food and energy prices, also outpaced forecasts (0.3% mom) at 0.4% mom, the highest since March 2024.

    Key inflation drivers for the month included a 0.4% mom increase in shelter costs, a 1.1% mom jump in energy prices, and a 0.4% mom rise in food prices.

    On an annual basis, CPI accelerated from 2.9% yoy to 3.0% yoy, beating expectations of 2.9% yoy and extending its upward streak for the fourth consecutive month.

    Core CPI also climbed, rising from 3.2% yoy to 3.3% yoy, surpassing the projected 3.1% yoy. Energy prices rose 1.0% yoy, while food costs were up 2.5% yoy.

    ECB’s Villeroy warns of negative impact from US tariffs

    French ECB Governing Council member Francois Villeroy de Galhau cautioned that US President Donald Trump’s tariffs will “very likely” have a “negative effect” on the economy.

    Speaking on France Culture radio, Villeroy criticized “protectionism is a seductive short-term policy, but in the long term it is a losing strategy.”

    Despite trade tensions, Villeroy maintained an optimistic view on France’s economic resilience. He reaffirmed that the country is likely to avoid a recession in 2025.

    Bank of France indicated on Tuesday that French GDP is on track to expand by 0.1% to 0.2% in the first quarter.

    ECB’s Holzmann: Inflation risks rising, rate cuts require patience

    Austrian ECB Governing Council member Robert Holzmann emphasized caution regarding rate cuts, citing renewed inflation risks from tariffs.

    Speaking to CNBC, Holzmann noted that while inflation pressures had previously “somewhat dissipated,” the latest developments, particularly increased trade frictions, pose fresh threats to price stability. As a result, policymakers must be careful in their approach on policy easing.

    Holzmann explained that while increased trade barriers may reduce economic growth, they also contribute to inflationary pressures. “We will have to be more patient,” he stated.

    Addressing speculation about a larger 50 basis point rate cut, Holzmann dismissed the idea, arguing that ECB’s mandate is to manage inflation, not stimulate growth.

    “Using the interest rate in order to initiate a higher growth is not the way how we should work,” he stated.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 151.90; (P) 152.25; (R1) 152.86; More…

    USD/JPY’s strong break of 153.70 support turned resistance should confirm that corrective pull back from 158.86 has completed at 150.92. That came after drawing support from 38.2% retracement of 139.57 to 158.86 at 151.49. Intraday bias is back on the upside for retesting 158.86. Firm break there will resume whole rally from 139.57 to retest 161.94 high. For now, risk will stay on the upside as long as 150.92 support holds, in case of retreat.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Money Supply M2+CD Y/Y Jan 1.30% 1.30% 1.30%
    06:00 JPY Machine Tool Orders Y/Y Jan P 4.70% 11.20% 12.60%
    13:30 USD CPI M/M Jan 0.50% 0.30% 0.40%
    13:30 USD CPI Y/Y Jan 3.00% 2.90% 2.90%
    13:30 USD CPI Core M/M Jan 0.40% 0.30% 0.20%
    13:30 USD CPI Core Y/Y Jan 3.30% 3.10% 3.20%
    15:30 USD Crude Oil Inventories 2.4M 8.7M

     



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  • US CPI rises to 3% in Jan, core CPI up to 3.3%

    US CPI rises to 3% in Jan, core CPI up to 3.3%


    US headline CPI rose 0.5% mom in January, exceeding expectations of 0.3% mom and marking the fastest monthly pace since August 2023. Core CPI, which strips out food and energy prices, also outpaced forecasts (0.3% mom) at 0.4% mom, the highest since March 2024.

    Key inflation drivers for the month included a 0.4% mom increase in shelter costs, a 1.1% mom jump in energy prices, and a 0.4% mom rise in food prices.

    On an annual basis, CPI accelerated from 2.9% yoy to 3.0% yoy, beating expectations of 2.9% yoy and extending its upward streak for the fourth consecutive month.

    Core CPI also climbed, rising from 3.2% yoy to 3.3% yoy, surpassing the projected 3.1% yoy. Energy prices rose 1.0% yoy, while food costs were up 2.5% yoy.

    Full US CPI release here.



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