US OUTLOOK/OPINION: A Stacked Week Ahead For US Macro
Feb-28 21:45
- Next week sees a series a key risk points, starting with trade policy and Trump’s Mar 4 deadline for an additional 10% tariffs on China (for 20% total) and the imposition of the delayed 25% tariffs on Canada and Mexico. US Treasury Sec Bessent offered a potential offramp here, saying Friday afternoon the US wants to see Canada and Mexico match tariffs on China. Whilst following through with that could see temporary de-escalation in US trade tensions with Canada and Mexico, it would likely stoke greater likelihood of China retaliation and/or further fiscal support.
- It’s bookended by ISM manufacturing (Mon) and services (Wed) reports, watched to see whether sharp increases in manufacturing prices paid seen in other surveys first show up in this broader measure and whether there is sign of spillover to services.
- The main data release of the week comes on Friday though, with the nonfarm payrolls report for February.
- The January report saw a modest miss for nonfarm payrolls but it was more than offset by a robust two-month net revision along with a smaller than expected benchmark revision. Further, the unemployment rate again surprised lower at 4.0% for its lowest since May 2024 in a further step away from the 4.3% the median FOMC member forecast for 4Q25 in the December SEP.
- Early days for the Bloomberg survey see nonfarm payrolls growth at a seasonally adjusted 155k in February and for the unemployment rate to hold at that lower 4.0%.
- Note that the nature of the DOGE “deferred resignation program”, with some 77k federal employees accepting the offer, shouldn’t see any direct impact on payrolls growth (in the establishment survey) until the October report as workers will remain on the payroll in the interim. One area where the direct impact could show however is the household survey. Assuming those who accepted the offer are treated as equivalent to a furloughed worker, they’ll register as unemployed. A word of caution though, it’s a much more volatile survey, with a 90% confidence level of +-600k for employment vs +-136k for payrolls.
- Note that post-payrolls Fedspeak sees a notable addition this time, with Fed Chair Powell set to talk on the economic outlook with both text and Q&A, starting at 1230ET. Data and tariff deliberations should still set the tone, but at this juncture we wouldn’t be surprised to see a continued call for patience in rate cut expectations considering dovish repricing seen over the past week. This is a theme that could be seen from other notable Fedspeakers throughout the week, including permanent voters Williams, Waller and Kugler.
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JPY: Yen Outperforms Broader USD Gains, USD/JPY Near Term Bear Threat Remains
Jan-29 21:37
USD/JPY struggled for meaningful upside through Wednesday trade. Moves above 155.50 drew selling interest, while dips to just under 155.00 drew buying interest. We track near 155.30 in early Thursday dealings, after a yen gain of around 0.15% for Wednesday's session. Yen outperformed the rest of the G10, with most currencies down, led by the A$.
- The DXY and BBDXY USD indices are a touch higher for Wednesday trade, with a brief spike higher as the FOMC unfolded. The FOMC decided to remove the reference to inflation making progress towards the goal, despite it remaining somewhat elevated. However, Chair Powell explained that this was merely “cleaning up the language” and was not intended to send a signal.
- US yields sit slightly higher at the front end of the curve, but little changed at the back end. US-JP yield differentials are holding close to recent lows.
- A softer US equity tone (SPX off 0.47%, Nasdaq down 0.51%), with a flurry of earnings from the tech space late in US trade, may have also helped the yen at the margins. AUD/JPY is sub all key EMs, and back around the 96.70/75 handle. The 96.00 region has marked lows so far in 2025.
- For USD/JPY technicals, a near term bear threat persists following Monday's sharp pull back (low of 153.72). A resumption of weakness would open 152.55, a Fibonacci retracement point. Initial firm resistance is at 156.75, the Jan 23 high.
- Note in the option expiry space today, the following for NY cut later today: Y154.00($627mln), Y154.75($700mln), Y155.00($1.4bln), Y156.00($544mln).
- On the local data calendar today we just have weekly offshore investment flows.
ASIA: Coming Up In The Asian Session On Thursday
Jan-29 21:31
| 0200GMT | 1000HKT | 1300AEDT | Philippines 4Q GDP |
ASIA: Coming Up In The Asia-Pac Session On Thursday
Jan-29 21:31
| 2145GMT | 0545HKT | 0845AEDT | New Zealand Dec Trade Balance |
| 2350GMT | 0750HKT | 1050AEDT | Japan Jan Investors Flows |
| 0000GMT | 0800HKT | 1100AEDT | New Zealand Jan ANZ Activity Outlook |
| 0000GMT | 0800HKT | 1100AEDT | New Zealand Jan Business Confidence |
| 0030GMT | 0830HKT | 1130AEDT | Australia 4Q Import Price Index |
| 0110GMT | 0910HKT | 1210AEDT | Japan Rinban Operations |
| 0135GMT | 0935HKT | 1235AEDT | New Zealand To Sell 31, 36 & 41 Bonds |
| 0320GMT | 1120HKT | 1420AEDT | Australia RBA's Jones-Fireside Chat |
| 1001GMT | 1801HKT | 2101AEDT | New Zealand Jan CoreLogic Home Value |
