EQUITIES: Edging lower

At ~1425GMT (0925ET, 1525CET), Chancellor of the Exchequer Rachel Reeves will take part in a fireside chat at the MakeUK manufacturers' association conference. Reports claim Reeves intends to use the event to “fire up Britain’s industrial base” to boost arms production and to cut red tape to facilitate faster procurement of defence equipment. 

• The latest 'important issues' opinion poll from YouGov shows defence and security leaping as one of the top issues facing the country. In the 1-3 March survey, the three most important issues in the minds of respondents remained the same; the economy was raised by 51% of respondents (down 3% from 22-23 Feb), immigration by 46% (+1) and healthcare 38% (+1). Defence and security came in fourth place, raised by 31% of respondents (+4%). This figure is the highest since Russia launched its full-scale invasion of Ukraine in Feb 2022.
• The increased public concern about the UK's defence outlook could ease pressure on PM Sir Keir Starmer after some within his centre-left Labour Party criticised his gov'ts decision to cut aid spending to boost the UK's military capacity, sparking the resignation of one minister.
• Reuters reports comments from the PM's spox. Confirms Starmer held a call with US President Donald Trump on the evening of 3 March. Spox does not confirm if Starmer was informed of Trump's impending decision to pause aid to Ukraine, instead saying, "The prime minister and President Trump are focused on the same outcome, which is delivering a secure and lasting peace in Ukraine".

• +5,000 FVM5 108-12.75, buy through 108-12.5 post time offer at 0726:20ET, DV01 $205,000. The 5Y contract trades 108-11.5 last (+8.75).

As was the case yesterday, US markets are extending the weaker USD theme at the crossover and pushing the USD Index to fresh lows. This is helping the latest bidtone in both EUR/USD (testing 1.0550) and GBP/USD (testing 1.2750) to mark a new YTD high across both pairs

• How much further could the USD downdraft go? We remain ~1.75% higher in the USD Index relative to election results day in November, and 5.75% above the September lows. This leaves 105.178 as a key level ahead - the 50% retracement of the Trump-tied rally off last year's lows, which would equate to (approximately) 1.0630 for EUR/USD.
• Tariff target currencies are performing very well, despite tariff pressure, with MXN 1% off overnight lows, USD/CNH on track to post the biggest daily downtick since January and - perhaps most impressively given oil prices - USD/CAD over 125 pips off the Monday high.
• Yesterday's closing volumes were solid for currency futures (EUR futures saw daily turnover of 40% above average) and that will likely be repeated today - with volatile spot markets driving participation.