AUD: AUDUSD Strengthens But A$ Continues To Struggle Against The Euro

USDCAD briefly goes through 1.4500 on CNN journalist Kaitlan Collins reporting Trump said the call with Canada's Trudeau went "very well" - even if the president was ambiguous on the end-result of the discussion ("Asked if the tariffs against Canada are still going into effect tonight, he said, "Watch.")

• The latter ambiguity sees CAD hold weaker of that 1.45 round number - we await further details.

While Aussie fell sharply on Monday following the US’ commitment to tariffs, it wasn’t the worst performer in the G10, that was kiwi. AUDUSD fell to a low of 0.6088 during the APAC session but stabilised after WSJ reports that China would negotiate with the US and wouldn’t devalue the yuan. The pair then climbed over the rest of the day and is now down 0.4% to 0.6195. 

• AUDUSD broke below the bear trigger at 0.6131 and round number support at 0.6100 confirming the bearish trend. Initial support is now yesterday’s low of 0.6088. Initial resistance is at 0.6220. Moving average studies are in a bear mode highlighting a dominant downtrend.
• With kiwi underperforming AUDNZD trended higher with the pair up 0.4% to 1.1056. At the other end, the yen outperformed leaving AUDJPY 0.7% lower at 95.70 but off the intraday low of 94.62.
• AUDEUR is 0.2% higher at 0.6007 after a low of 0.5956 but then Europe was also threatened with US tariffs. AUDGBP fell 0.5% to 0.4988 though as President Trump said that the UK may be able to avoid tariffs.
• Equities sold with the S&P down 0.8%, Euro stoxx -1.3% and FTSE -1.0%. Oil prices are off their intraday highs but still up on the day with Brent +0.2% to $75.82/bbl. Copper is up 0.9% and iron ore is around $104/t.
• Today December household spending prints and is forecast to rise 0.3% m/m and 3.4% y/y. 

The NY Fed's measure of multivariate core trend (MCT) inflation was unchanged in Dec vs Nov at 2.3% - though unrounded at 2.31%, it marked the lowest level since November 2020. This measure has been running roughly at/below the main core PCE Y/Y measure since March 2024.

• The monthly measure - which comes out the Monday after the PCE prices release - shows the MCT estimate relative to its pre-pandemic average and components contributing to the deviation from trend. In December it showed that of the 0.49% measure of above-trend inflation (lowest since November 2020), ex-housing services were responsible for 0.44pp.
• In the other two key categories, core goods contributed 0.03pp and like ex-housing services appears to have flatlined since late 2023; housing contributed 0.03pp. All three sub-categories were unchanged from November.
• Overall this suggests that while price pressures aren't picking up, there is some lack of disinflationary progress evident in both core goods and the key ex-housing services sector that could provide some cause for concern by FOMC policymakers (who have already adopted a cautious stance on further rate cuts).
• Per the NY Fed: "Whether inflation is short-lived or persistent, concentrated in a few sectors or broad-based, is of deep relevance to policymakers. The approach underlying Multivariate Core Trend (MCT) Inflation estimates a dynamic factor model on monthly data for the major sectors of the personal consumption expenditures (PCE) price index to assess the extent of inflation persistence and its broadness. The results give a measure of trend inflation and shed light on whether inflation dynamics are dominated by a trend common across sectors or are sector-specific."