OIL: Rally Stalls As Demand Impact From Tariffs Worries Market

In local morning trade, NZGBs are slightly cheaper despite US tsys rallying on Friday, finishing near mid-December yield lows. Global trade, tariff uncertainty, and data that leaned towards softer inflation remained supportive.

• US Core PCE eased to 2.647% Y/Y from an upward revised 2.865% Y/Y (initial 2.794%) in Dec, as it starts to be helped by more favourable base effects. The Atlanta Fed’s GDPNow for Q1 has been slashed to -1.5% from 2.3% annualised on Feb 19.
• Meanwhile, Chicago PMI, produced with MNI increased 6.0 points to 45.5 in February. This is the second consecutive monthly gain, taking the reading to the highest level since June 2024, though it remains in contractionary territory for the fifteenth consecutive month.
• USD gained ground after President Trump & Zelenskyy failed to reach an accord, chances of an imminent ceasefire looking less likely.
• NZ terms of trade rose 3.1% q/q (estimate +1.4%) in Q4.
• Swap rates are flat to 1bp higher.
• RBNZ dated OIS pricing is little changed. 26 bps of easing is priced for April, with a cumulative 67bps by November 2025.

Risk-sensitive Aussie was again one of the underperformers in the G10 with AUDUSD falling below 62c to a low of 0.6193 following the clash at the White House with President Zelensky which increases global uncertainty. The pair recovered slightly to 0.6209 to be down 0.4% on the day and 2.3% on the week as further US tariffs, especially on China, weighed on the AUD. It is currently higher at 0.6215. The USD rose on the developments and finished up 0.3%. 

• Last week’s AUD softness has undermined the recent bullish theme and opened up the possibility of a deeper retracement. AUDUSD is trading below the 20- and 50-day EMAs and opened support at 0.6171, 4 February low. The bear trigger is at 0.6088. Initial resistance is at 0.6313 50-day EMA.
• Kiwi was the worst performer on Friday leaving AUDNZD up 0.15% to 1.1090. It continues to trade towards 1.1100 and is currently around 1.1094.
• The yen also struggled at the end of last week with AUDJPY up 0.1% to 93.52 and the pair has started the week at 93.72.
• While all G10 currencies were lower against the greenback, Europe outperformed. AUDGBP fell 0.3% to 0.4935 after a low of 0.4924 and was down 1.9% last week. AUDEUR reached a low of 0.5962 before recovering to 0.5983 to be down 0.2%. It is currently around 0.5974.
• Equities were mixed with the S&P up 1.6% but the Euro stoxx down 0.2%. Oil prices were moderately lower with Brent -0.7% to $72.81/bbl. Copper fell 1.2% and iron ore is down to around $102.50/t.
• Today S&P Global final February manufacturing PMI, Q4 profits & inventories, February ANZ job ads and Melbourne Institute inflation gauge are released. 

• NZD/USD fell 0.60% on Friday, to 0.5598, however those moves came in the first half of the session before trading in a very narrow range for the remainder. The pair is facing challenges due to escalating global trade tensions and uncertainties surrounding domestic monetary policy in New Zealand. The 25% tariff on Mexican and Canadian goods effective March 4, and escalated tariffs on Chinese imports—now at 20% following an additional 10% levy tied to drug trafficking concerns, on top of a prior 10% tariff from February 4. Given China’s significance as New Zealand’s top trading partner, these developments put further pressure on the NZD.
• We are trading just on key support at 0.5600 after briefly breaking below it on Friday a clear break here would then open up a move to retest the Feb 3 lows of 0.5516. To the upside 0.5695/.5705 (20-, 50-Day EMA) are seen as key resistance, a break back above here would open a move to retest the ytd highs of 0.5769.
• Expiries 0.6350 (AUD411m), 0.6600 (AUD360.3m), 0.6310 (AUD300m). Upcoming notable strikes: 0.6350 (AUD1.25b March 5), 0.6335 (AUD1.17b March 4), 0.6395 (AUD506.6m March 5)
• The CFTC reported a decline in speculative net positions on the NZD, dropping to -53.7K, from the previous -52.2K. This shift indicates a growing bearish sentiment among traders toward the NZD, possibly driven by increasing uncertainties or anticipated economic challenges in New Zealand.
• RBNZ dated-OIS is fully pricing in a 25bps cut in April, while there is about a 87% chance of a further 25bps cut priced for May up from about 70% mid last week, with a cumulative 64bps of cut priced by November.
• The local calendar is quiet this week, with Building Permits tomorrow, and ANZ Commodity Price on Wednesday