CHINA: /RATINGS: Fitch Downgrades China to 'A'; Outlook Stable
Fitch note that "the downgrade reflects our expectations of a continued weakening of China's public finances and a rapidly rising public debt trajectory during the country's economic transition. In our view, sustained fiscal stimulus will be deployed to support growth, amid subdued domestic demand, rising tariffs and deflationary pressures. This support, along with a structural erosion in the revenue base, will likely keep fiscal deficits high. We expect the government debt/GDP to continue its sharp upward trend over the next few years, driven by these high deficits, ongoing crystallisation of contingent liabilities and subdued nominal GDP growth."
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FOREX: Markets Happy to Sell Into Already Weak USD Market at NY Crossover
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.
USDJPY TECHS: Bear Cycle Resumed
- RES 4: 154.80 High Dec 12 ‘24 and a key resistance
- RES 3: 152.83 50-day EMA
- RES 2: 151.30 High Mar 3 and a key near-term resistance
- RES 1: 149.65 Intraday high
- PRICE: 148.14@ 12:27 GMT Mar 4
- SUP 1: 148.01 Low Oct 9 ‘24
- SUP 2: 147.02 2.0% 10-dma envelope
- SUP 3: 146.95 61.8% retracement of the Sep 16 ‘24 - Jan 10 bull leg
- SUP 4: 145.92 Low Oct 4 ‘24
USDJPY is trading lower today. The move down has resulted in a print below support at 148.57, the Feb 25 low, to confirm a resumption of the downtrend. The break lower has also resulted in a clear breach of 148.65, the Dec 3 ‘24 low. This paves the way for an extension towards 146.95, a Fibonacci retracement. On the upside, key short-term resistance has been defined at 151.30, the Mar 3 high. Clearance of this level is required to signal a base.
FED FUNDS FUTURES: BLOCK: May'25 FF Update, Large Volumes
- 42,000 FFK5 95.77, post time offer at 0706:53ET - prior to the 10k Block at 0708:57 that appeared to be a sale. The May contract leads volume so far, over 163,700 at the moment.
