FOREX: EURUSD Slips Back Below 1.13, Antipodeans Outperform
Apr-15 17:02
- Overall, the USD index is firmer on Tuesday as global markets trade in a relatively more stable manner compared to the significant swings last week. Amid this dynamic, EURUSD has slipped back below 1.1300 and trades 0.75% lower at 1.1270 as we approach the APAC crossover.
- The single currency move may have intensified following news that the EU and US have made scant progress bridging trade differences this week as officials from the Trump administration indicated that the bulk of the US tariffs imposed on the bloc will not be removed. With a bull cycle firmly still in play, markets will eye initial support at the 1.1144 breakout level. Key support remains unchanged at the 20-day EMA, now intersecting at 1.0972.
- EUR weakness has been even more evident in the crosses, with a notable 0.87% decline for EURGBP. This has been assisted by GBPUSD breaking above 1.3207 to fresh six-month highs, highlighting a resumption of the medium-term uptrend. Sights are on 1.3274 next, the Oct 3 ‘24 high.
- Even more notable across FX, has been the advances for AUD and NZD, which comfortably outperform in the G10 space. The more stable tone for risk this week continues to foster a more constructive backdrop for higher beta currencies. For NZDUSD specifically, the pair has rallied as high as 0.5944, briefly breaching the late November highs in the process. In just 5 sessions, NZDUSD has bounced over 8% from its cycle lows.
- Canada CPI came in lower than expected, which alongside the greenback bid has prompted a solid bounce for USDCAD. Importantly, this comes ahead of tomorrow’s Bank of Canada decision, where analysts remain divided over whether the BOC will opt for a 25bp cut or an unchanged decision.
- Elsewhere tomorrow, China GDP, UK CPI and US retail sales are highlights of a busy economic calendar. Fed Chair Powell is also due to speak on the economic outlook at the Economic Club of Chicago.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
