FOREX: Yen Outperforming, AUD and NZD Weaker
Mar-04 00:56
Yen is the only G10 currency tracking higher against the USD at this stage. The BBDXY index is close to unchanged in the first part of Tuesday dealings, last near 1292.4.
- USD/JPY was last near 149.20/25, up around 0.25% in yen terms. Session lows rest at 148.99, which is just under Monday intra-session lows of 149.10.
- We have had comments from Japan's Finance Minister Kato, who stated the country is not devaluing the currency. This comes after Monday comments from US President Trump that weaker FX levels from Japan (and China) were harmful to the US and could result in tariffs.
- US yields continue to track lower, the 10yr last near 4.12%, off a further 3.5bps. This is lows back to Oct last year. This is likely helping yen at the margins. US equity futures are marginally higher, following strong cash losses in Monday trade. Regional equities are mostly tracking lower in line with Wall St moves.
- Tariff concerns remain front and center, while the US has also announced it will cease military aid to the Ukraine.
- On the data front, Japan's Q4 Capex was weaker than expected. This suggests Q4 GDP will be revised lower. Ex software spending was still positive in q/q terms. Company profits were also up strongly, providing some offset.
- AUD/USD is down, but at 0.6205/10 is still up from Monday lows (0.6199). We are 0.25% weaker against the USD, with NZD/USD down by a similar amount, last near 0.5605/10.
- The RBA mins have printed, which outlined the RBA's hawkish cut case. On the data front, retail sales rose 0.3%m/m, in line with forecasts, while net exports will add 0.2ppts to Q4 GDP (which prints tomorrow). Public sector demand is expected to have added 0.2ppt to Q4 growth.
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FED: Powell To Deliver Semi-Annual Testimony In Mid-Feb
Jan-31 21:48
The House Financial Services Committee's website confirms that Fed Chair Powell will deliver his semi-annual Monetary Policy Report on Wednesday Feb 12 at 1000ET.
- The Semi-annual testimony will be closely eyed as Powell's first scheduled appearance since the January FOMC - and the House testimony on the 12th is the same day as the release of January CPI (and the week after nonfarm payrolls and benchmark revisions) so will be of particular interest.
US OUTLOOK/OPINION: Nonfarm Payrolls, Revisions Highlight Next Week In US Macro
Jan-31 21:39
Friday’s nonfarm payrolls for January highlights the US macro week. It's a highly anticipated report that could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- The preliminary estimate for the benchmark revision pointed to the level of payrolls being some 818k lower than currently reported for back in March 2024. There’s a broad expectation from what we can gather that the hit seen next week won’t be as large but it could still be significant. We also watch the seasonal revisions closely, as whilst they should have a zero-sum impact over the calendar year, we’ve noted some particularly favorable seasonal factors in recent months that have biased seasonally adjusted jobs growth higher.
- With these considerations in mind, the early days of the Bloomberg consensus points to nonfarm payrolls growth of 150k after a solid three-month average of 170k. Note that the unemployment rate from the separate household survey won’t be affected by these revisions, having already seen its own seasonal factor revisions last month. A population control will complicate month-on-month changes in the levels of employment and unemployment but shouldn’t be significant for the rate, which is seen unchanged at 4.1% having surprised lower with 4.09% in December. The recent high is technically 4.23% in November having first popped to 4.22% back in July.
- Two other special mentions for the week are: 1) rare remarks from FOMC Vice Chair Jefferson speaking on the economic outlook and monetary policy late on Tuesday with both text and Q&A, having last spoke on Oct 9. 2) ISM services on Wednesday after its priced paid series jumped 5.9pts to 64.4 in December for the highest since Feb 2023.
- Away from macro but still material, the coming week brings the US Treasury's quarterly refunding process - our preview is here.
MACRO ANALYSIS: MNI US Macro Weekly: Uncertainty Vindicates Fed’s Patience
Jan-31 21:37
In a largely positive week for economic activity data, including in core durable goods and MNI Chicago PMI, the Q4 GDP accounts stood out by showing a very strong end to 2024 for the consumer.
- As we go to press, though, President Trump has confirmed that tariffs would be imposed on Canada, Mexico, and China beginning this weekend – while also threatening further action against the likes of the European Union and across various import categories.
- The combination of solid growth and policy uncertainty, along with stubborn “supercore” PCE inflation for December, seemingly vindicated the Federal Reserve’s “hawkish hold” at its January meeting.
- A March rate cut is still a possibility but the bar for such an outcome has been set high.
- That gets us to the first key release between now and then: Friday’s nonfarm payrolls for January is the highlight of the US macro week, and could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- Other highlights in the upcoming week include ISM Services and the Treasury’s quarterly Refunding announcement (Wednesday), while FOMC Vice Chair Jefferson delivers commentary on the economic outlook and monetary policy Tuesday.
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