STIR: $-Bloc Markets Soften Sharply Following Trump Tariff Details
Apr-04 03:04
Rate expectations across the $-bloc have softened sharply through December 2025 following President Trump’s announcement of reciprocal tariffs late Wednesday.
- Since last Friday, markets have repriced significantly: US rate expectations have eased by 40bps, Australia by 37bps, New Zealand by 30bps, and Canada by 19bps.
- On Tuesday, the RBA left the cash rate unchanged at 4.10%. In its accompanying statement, the central bank acknowledged a significant decline in inflation since 2022 in line with forecasts but maintained a cautious tone amid ongoing uncertainty around growth, inflation, and global trade. The RBA reiterated its priority of returning inflation to target sustainably and signalled it will adjust policy as required.
- Looking ahead, the next key policy decisions in the $-bloc are the RBNZ on 9 April and the BoC on 16 April. Markets are currently more than fully pricing a 27bp cut from the RBNZ, while assigning only a 35% probability to a cut from the BoC.
- Looking ahead to December 2025, the projected official rates and cumulative easing across the $-bloc are as follows: US (FOMC): 3.31%, -103bps; Canada (BOC): 2.12%, -63bps; Australia (RBA): 3.08%, -102bps; and New Zealand (RBNZ): 2.75%, -100bps.
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CNH: USD/CNH Back Above 7.2700, Little Cross-Asset Impact From NPC At This Stage
Mar-05 02:55
USD/CNH is rising, the pair back above 7.2700. This is around 0.25% weaker in CNH terms. Onshore USD/CNY spot is around 7.2700 as well. USD/CNH is back above the 100-day EMA (near 7.2620).
- Broader USD sentiment has ticked higher, with all of the major currencies down against the USD, with AUD and NZD the weakest performers.
- Headlines are crossing from China's NPC. Growth of around 5% is targeted, while the CPI forecast was lowered to 2%, from 3%. More work is expected to aid domestic demand, with fiscal policy to be more pro-active, along with RRR and rate cuts (albeit at the right time0>
- China equities are modestly higher at this stage in terms of aggregate indices, but not showing strong shifts on the NPC headlines.
- US-CH yield differentials have ticked back up in the aftermath of a strong yield rebound in US Tsys on Tuesday. CGB yields are little changed so far today. Wider fiscal deficits are projected for 2025 in China, although this has been expected by the market.
EQUITIES: Equities Off Session highs
Mar-05 02:54
- US equity futures are now trading at session lows, NADSAQ +0.35%, giving back about 0.30%.
- HK benchmarks are also giving back morning gains, the HSI was up 2.30% earlier, and now trades up 1.45%, HS Tech Index has also given back about 1% of the mornings gains. In mainland China, the CSI 300 now trades little changed for the session.
- Trump is currently giving an address to a joint session of congress
CHINA: Caixin PMI Services Bounce Back Past Lunar New Year.
Mar-05 01:57
- The resilience of the service sector is evident in today’s release as the impact of the Lunar New Year holiday begins to fade.
- February’s release for the Caixin PMI Services was +51.4 was up from January’s +51
- The release has maintained strong momentum since late 2022, reflecting that despite the challenges for the domestic economy stemming from the property sector, domestic demand remains stable.
