FED: Chicago's Goolsbee Eyes Tariff Inflation Impact Warily

NZD/USD spiked as high as 0.5685 in Monday trade, amid reports that Trump was considering a watered down tariff plan (per the Washington Post). Trump’s aides are reportedly "exploring plans" to apply tariffs to every country “but only cover critical imports”. However, bearish dollar sentiment was tempered as President-Elect Trump later claimed the article to be fake news. The NZD/USD sits back at 0.5640/45 in early Tuesday dealings, which is still up ~0.55% for Monday's session. This slightly lagged broader USD index trends, with the DXY and BBDXY index both off around 0.60-0.65%. 

• Monday intra-session highs for NZD/USD tested briefly above the 20-day EMA (around 0.5680), but once again we couldn't sustain this break. This has been a theme since early October of last year. On the downside, recent cycle lows rest just under 0.5590.
• In the cross asset space, equity sentiment was mostly positive across the major indices, EU markets up 2.36%, while tech outperformed in the US, with the Nasdaq climbing a further 1.24%. US yields were softer at the front (2yr down nearly 2bps), but higher at the back end. Sentiment was dominated by Trump related tariff speculation.
• The local NZ data calendar remains empty today. Barfoot noted that average Dec house prices rose 4.7%m/m, although sales and new listings were down compared to Nov levels. 

Aussie underperformed all of the G10 again, except the yen, as concerns over China’s economy continue to weigh. AUDUSD finished up 0.4% to 0.6244 after reaching a high of 0.6302 following a Washington Post report that the Trump administration will only impose tariffs on “critical imports” but when President-elect Trump denied it the pair fell to 0.6240. The USD finished 0.6% lower off the tariff-news low.

• Yesterday’s gains don’t alter AUDUSD’s bearish trend condition. Initial support is at 0.6179, December 31 low, while initial resistance is at 0.6627, 20-day EMA.
• AUDJPY rose 0.7% to 98.41 after a high of 98.91. AUDNZD is slightly lower at 1.1068 after reaching 1.1089. The euro and pound outperformed on Monday leaving AUDEUR down 0.4% to 0.6010, close to the intraday low, and AUDGBP -0.4% to 0.4987 after a high of 0.5025.
• Equities rallied with the S&P up 0.5% and Euro stoxx +2.4%. Oil prices were lower with Brent -0.4% to $76.23/bbl. Copper rose 1.9% but iron ore is down to around $98/t.
• Today November building approvals are released and forecast to fall 1.0% m/m.