EUR: EUR/USD - Digesting Tariffs
Apr-02 22:44
- Wednesday had a range of 1.0780 - 1.0924, with Asia open trading pretty much in the middle of that around 1.0835. We sit a little lower now, last near 1.0825/30 as markets digest Trump's tariff announcement. The EU will face a reciprocal tariff of 20%, which is higher than the broader import tariff announced at 10%.
- EUR remains one of the markets favored instruments to express USD weakness but with risk trading so poorly the daily shadow and failure above 1.0900 dents bullish momentum in the pair.
- EUR/JPY is looking to break lower as a favored pair to express clear risk aversion, this will provide the EUR with headwinds in our session. We were last 160.65 (earlier lows were at 160.12).
- A move sub 1.0750/80 in EUR/USD could see some stale longs capitulate, but any move back to 1.0600 area is expected to find buyers once more.
- On the day expect EUR/USD to continue to trade heavy while risk remains under pressure.
- Earlier, the EU had said it was preparing a package of potential emergency measures to shield parts of its economy that may be hardest hit. This headline also crossed from Reuters: " EUROPEAN COMMISSION PRESIDENT VON DER LEYEN WILL DELIVER STATEMENT AT 5 A.M. BRUSSELS TIME (0300 GMT) FOLLOWING US TARIFF ANNOUNCEMENT" -RTRS.
Fig 1: EUR/USD Spot
Source: MNI - Market News/Bloomberg
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GOLD: Gold Climbs as Sentiment Falls on Tariffs.
Mar-03 22:31
- Following last week’s profit taking, gold’s rally resumed overnight as the threat of tariffs hung over markets.
- As President Trump’s deadline for tariffs draws near, markets sentiment was very weak with the S&P down heavily and bond yields rallying as much as 6bps.
- No surprise in that environment that gold rallied, with bullion up +1.2% on the day.
- Gold it rose steadily all day to finish the US trading session on its highs of $2,892.79.
- US data releases didn’t help to improve investor sentiment with ISM Prices Paid higher than expected whilst ISM Manufacturing softened.
- The weaker than expected data release adds to speculation of potential interest rate cuts by the Federal Reserve which is an additional boost to gold.
AUSSIE BONDS: Richer, Trump’s Tariff Comments Weighed On Market Sentiment
Mar-03 22:24
ACGBs (YM +5.0 & XM +5.0) are stronger after US tsys finished 4-6bps richer, with the 5-10-year zone leading, after a mixed manufacturing survey and falling oil prices sparked investor concerns about slowing growth. The move left US tsy yields at new multi-month lows on Monday.
- The decline in US yields accelerated after President Donald Trump's remarks that “no room left for a deal on Canada, Mexico” ahead of Tuesday’s deadline weighed on markets.
- Earlier, Trump posted on Truth Social: “To the Great Farmers of the United States: Get ready to start making a lot of agricultural product to be sold INSIDE of the United States. Tariffs will go on external products on April 2nd. Have fun!”.
- Morning data showed a sharp rise in ISM Prices Paid, surging to 62.4 (consensus 56.0) from 54.9.
- Cash ACGBs are 5bps richer with the AU-US 10-year yield differential at +12bps.
- Swap rates are 5bps lower.
- The bills strip has bull-flattened, with pricing flat to +4.
- Today, the local calendar will see Q4 Current Account Balance and Net Exports of GDP, and January Retail Sales data alongside the RBA Minutes of the February Policy Meeting.
NZD: NZD/USD Edges Higher, Under Performs G10 FX On China Tariffs News
Mar-03 22:20
- NZD/USD closed +0.3% at 0.56174 ending a five-day losing streak, but the recovery is weak and the overall trend remains bearish after falling below the 20-day EMA to a mid-February low. Technical indicators, including a negative RSI and a bearish MACD crossover, signal ongoing selling pressure and a shaky rebound.
- NZD has underperformed most G10 currencies as the US imposes 20% tariffs on China
- The pair did trade up 0.73% during the US session before headlines starting coming out from Trump on imposing tariffs on China & saying time has run out for Canada & Mexico. We tested key support on Monday at 0.5600, briefly trading below it below ticking higher a clear break here would then open up a move to retest the Feb 3 lows of 0.5516. To the upside, a break above the overnight highs of 0.5640, would then open a move to 0.5695/.5705 (20-, 50-Day EMA) are seen as key resistance.
- New Zealand's home building approvals rose 2.6% m/m in January
- Expiries 0.5855 (NZD869.3m). Upcoming notable strikes: 0.5795 (NZD1.14b March 7), 0.6350 (NZD352.8m March 5), 0.6150 (NZD330m March 6)
- RBNZ dated-OIS is fully pricing in a 25bps cut in April, while there is about a 90% chance of a further 25bps cut priced for May up from about 70% mid last week, with a cumulative 76bps of cut priced by November, up from 64bps
- There is nothing else on the calendar today, tomorrow we have ANZ Commodity Price
