FOREX: USD Index Firms Amid Fresh Tariff Threats, Yen Marginally Outperforms
Feb-27 04:40
The USD BBDXY index has ticked up to 1288.5, a modest 0.15% gain. Still, the technical picture for this index looks a little less adverse than it did at the start of the week. The USD is up against all of the G10 currencies, and also firmer against all of the Asian currencies as well.
- The US Wednesday session was buffeted by various tariff headlines from Trump and administration officials. In the wash up tariff announcements on Mexico and Canada could still take place next week, after earlier Trump remarks pointed to a delay. Trump also had strong rhetoric against the EU, proposing a 25% tariff.
- EUR/USD is off around 0.20%, last near 1.0465. EU equity futures are off close to 0.60% for Euro Stoxx.
- Higher beta plays are off 0.25-0.30%, with AUD and NZD slightly underperforming the rest of the G10. AUD/USD was last just under 0.6290, off 0.25%, which is fresh lows back to mid Feb. NZD/USD is near 0.5680, also around multi week lows.
- The A$ looked through RBA Deputy Governor Hauser’s comments before the Senate Economics Committee, which were in line with the February meeting statement and Governor Bullock’s press conference. Q4 Capex in Australia was weaker than forecast, pointing to a drag on GDP growth.
- USD/JPY has been supported below 149.00, with lows of 148.75. We have seen US yields tick higher, but JGB yields are also higher, biasing US-JP yield differentials lower. Yen is marginally outperforming the G10.
- US equity futures are lower for the Nasdaq, as the market digested the Nvidia result earlier. Headline earnings were better than forecast but this hasn't boosted aggregate sentiment.
- Later the Fed’s Barkin, Schmid, Barr, Bowman, Hammack and Harker all speak. Revised Q4 US GDP, preliminary January orders, jobless claims, February Kansas Fed manufacturing, euro area February EC survey, preliminary February Spanish CPI and ECB January meeting accounts are published.
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AUSSIE BONDS: Richer Ahead Of Tomorrow’s Q4 CPI & FOMC (Thu Morning Local Time)
Jan-28 04:32
ACGBs (YM +6.0 & XM +5.0) are stronger but off session bests after business conditions improved in December.
- The NAB survey showed that conditions climbed 3 points to +6, reversing declines from the prior month and almost returning to its long-run average. Business confidence edged up 1 point to -2.
- Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after yesterday’s strong rally.
- Cash ACGBs are 5-6bps richer with the AU-US 10-year yield differential at -12bps.
- Swap rates are 5bps lower.
- The bills strip has bull-flattened, with pricing +2 to +7.
- Tomorrow’s Q4 CPI data could be pivotal in determining whether the RBA initiates a long-anticipated monetary easing cycle. It may also influence the timing of an election, which must be held by May 17. Economists predict the trimmed-mean CPI will have declined to 3.3%, marking its lowest level in three years.
- RBA-dated OIS pricing is 1-6bps softer across meetings today. A 25bp rate cut is more than fully priced for April (124%), with the probability of a February cut at 78% (based on an effective cash rate of 4.34%).
US TSYS: Tsys Futures Slightly Lower, Focus On FOMC Tomorrow
Jan-28 04:27
- It has been a relatively quiet session today, following last nights sell-off in risk assets, focus is now on Wednesday FOMC meeting. Tsys futures have given back a small portion of the overnight gains, although still trade near closing levels, with TU -01⅜ at 102-27⅝, while TY is -06 at 108-31.
- Cash tsys curves have flattened a tough throughout the session, with the 2yr +1.7bps at 4.212%, while the 10yr is +1.6bps at 4.551%. The 2s10s unchanged at 33bps, while the 2s30s is -0.5bps at 58bps.
- President Trump’s Treasury pick, Scott Bessent, reportedly supports a universal tariff on US imports starting at 2.5%, with monthly increases of the same amount. Meanwhile, Trump has signaled a preference for significantly higher tariffs, stating they should be “much bigger” than 2.5%.
- Trump has also expressed eagerness to work with Congress on what he calls the largest tax cuts and reforms in US history. Speaking at a House Republican retreat in Florida, he emphasized avoiding delays in the budget process and said he is flexible on whether the changes are passed in one bill or multiple bills. Trump reiterated his campaign promises not to tax tips, Social Security, or overtime payments, stressing the goal of lowering taxes for all Americans, not just the wealthy.
- The majority of Asian markets will be out at some point this week for Chinese New Years, so expect trading to be on the quiet side, later tonight we have Durable Goods Orders, FHFA House Price Index, Conf. Board Consumer Confidence, Richmond Fed Manufact. Index as well as earnings from PACCAR, Sysco Corp, Synchrony Financial, Lockheed Martin Corp, Veradigm, Royal Caribbean, Polaris Inc., Boeing, NextEra Energy, JetBlue Airways, General Motors, Kimberly-Clark Corp, Invesco, Starbucks, Qorvo and Stryker Corp
FOREX: Dollar Rebounds On Trump Tariff Threats
Jan-28 04:20
The USD has been on the front foot for much of today's Asia Pac session. The BBDXY index was last +0.40% and trading above 1302.00. The DXY was up around 107.9, +0.50%.
- A number of Trump related tariff headlines have crossed, which has aided broad based USD sentiment. Early comments saw Trump state tariffs would be imposed in the near future across a wide/key set of industries. These were followed by comments later on that Trump would want a much higher universal tariff rate than 2.5% (which according to the FT is what incoming Treasury Secretary Bessent is pushing for as an initial step on tariffs, before rising gradually).
- The comments reinforce that tariffs are front and centre of Trumps economic plans.
- US yields have ticked higher, although gains are not much 1-1.5bps across the key Tsy benchmarks. US equity futures are mixed, but not much beyond flat after Monday's sharp cash falls, led by the tech side (amid fresh AI competition fears from China). Regional equity markets are mixed.
- Yen is unwinding some of Monday's outperformance (off around 0.85%). USD/JPY was last 155.80/85, back above the 50-day EMA (in the low 155.00 region). Yesterday's intra-session lows were at 153.72. Earlier data showed weaker than expected PPI services, up 2.9%y/y, versus 3.2% forecast.
- AUD/USD is down 0.70%, last near 0.6250 and close to session lows. This puts us back close to the 20-day EMA support point. Earlier data showed Dec NAB business conditions rose to +6 form +3 in Nov. Confidence was weaker though and in negative territory.
- In NZ, NZD/USD is off by 0.60%, last tracking under 0.5660. ERU/USD is down 0.55% to 1.0430/35.
- Looking ahead, we have various US data points coming up, along with some Fed surveys (including the Richmond print). There is also some ECB speak.
