FOREX: FX Wrap - USD Move Lower Pauses
The BBDXY has had a tight Asian range of 1229.25 - 1232.89. The move lower is starting to show signs of at least slowing down. The USD has looked in real trouble as a rotation out of US assets seems to be gathering momentum and normal correlations with yield are breaking down.
- EUR/USD - Asian range 1.1316 - 1.1361, dipped initially on the Asian open but it has since bounced off its lows dealing around 1.1355 going into London. EUR/USD had been trading very closely with the 10 year rate differential, this relationship broke down completely last week. Traders are targeting a move back to 1.2000 in the Euro as the USD’s safe haven role is reassessed. See graph below.
- GBP/USD - Asian range 1.3164 - 1.3215, dealing right at the day's highs going into the London session. GBP has been playing catch up to the broad USD weakness.
- USD/CNH - Asian range 7.3074 - 7.3189, the USD/CNY fix was slightly lower at 7.2096. USD/CNH goes into the London open dealing around 7.3120.
- USD/JPY - Asian range 142.94 - 143.59, bounced from the open making its highs into the Japanese fix. It has since drifted lower for most of the session going into London back around 143.00. Huge support is eyed around 140, a break here could see the move really accelerate.
- Cross asset : SPX Futures -0.15%, Gold 3229.50, US 10yr 4.35%, BBDXY 1229, Crude oil 61.77.
- Data/Events : UK unemployment, FR CPI, ECB Lending Survey, Ger ZEW, Empire State Man survey.
Fig 1: EUR/USD Weekly Chart
Source: MNI - Market News/BBG
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
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
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
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
