TARIFFS: Trump Issues Fresh Tariff Threats Against Some EU Members (1/2)
Over the weekend US President Trump threatened Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland with 10% tariffs on US exports starting on Feb 1, rising to 25% in June until "a Deal is reached for the Complete and Total purchase of Greenland.”. The EU is reportedly considering E93bln of reciprocal tariffs in response, with France also leading calls for activation of the EU's Anti Coercion Instrument. Alongside the economic/market risks posed by the latest rise in trade policy uncertainty, we note the following:
- This week's World Economic Forum (WEF) in Davos may allow European leaders to negotiate/de-escalate tensions with Trump.
- The threatened tariffs will presumably fall under IEEPA, and we are still awaiting a US Supreme Court decision on the legality of such measures. The Court's next scheduled opinion day is Tuesday (it would be issued from 10am ET onward). The court does not reveal in advance what opinions it will be releasing, but the previous two opinion days this month bore significant market anticipation. If there is an IEEPA decision in the coming week, the first order question is whether it will favour upholding the tariffs (prediction markets think only about 30% chance the justices will allow them to stand) but there are many permutations, for example striking them down completely and ordering the government to pay refunds retroactively, or allowing the existing revenues to remain but not allow future IEEPA tariffs to be collected. If there is no opinion issued, it would look increasingly likely that a decision may have to wait until late February - or even later.
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AUSSIE 10-YEAR TECHS: (H6) Marked Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.160 @ 15:32 GMT Dec 19
- SUP 1: 95.120 - Low Dec 10
- SUP 2: 95.087 - 2.0% Lower Bollinger Band
- SUP 3: 94.276 - 1.0% 10-dma envelope
Aussie 10-yr futures remain well toward the bottom of the recent range, having taken out all major support levels in the process. With 95.275 cleared, prices are pushing to new contract lows, opening vol-band support through 95.087 and into 94.276. Any recoveries need to break back above 95.900 to signal near-term bullish traction.
AUDUSD TECHS: Corrective Phase Still In Play
- RES 4: 0.6759 High Oct 11 ‘24
- RES 3: 0.6723 High Oct 21 ‘24
- RES 2: 0.6707 High Sep 17 and a key resistance
- RES 1: 0.6661/86 High Dec 16 / 10
- PRICE: 0.6608 @ 15:56 GMT Dec 19
- SUP 1: 0.6593 Low Dec 18
- SUP 2: 0.6566 50-day EMA
- SUP 3: 0.6517 Low Nov 27
- SUP 4: 0.6466/21 Low Nov 26 / 21
The trend condition in AUDUSD remains bullish and the latest pullback appears corrective. The move down is allowing a recent overbought condition to unwind. Support at the 20-day EMA, at 0.6598, has been pierced. The 50-day average is at 0.6566. The area between the two averages represents a key short-term support zone. A resumption of gains would refocus attention on key resistance at 0.6707, the Sep 17 high and bull trigger.
LOOK AHEAD: US Macro Week Ahead: Long-Awaited Q3 GDP Plus Labor Updates
- The week ahead sees a slimmed down data schedule after a particularly busy few weeks, including distorted NFP and CPI reports in the week just gone. There are still some important releases though, with the highlight being the long-awaited “initial” Q3 GDP release on Tuesday.
- This report will replace what would have been the second GDP and the preliminary corporate profits estimates, with the extended tracking window of the Atlanta Fed’s GDPNow pointing to strong real GDP growth of 3.5% annualized after an average 1.6% in 1H25 (-0.65% in Q1 before 3.84% in Q2).
- Expect continued close attention on private demand, best seen by Powell’s preferred PDFP category, which is currently tracking at ~2.4% annualized for similar to the 2.4% averaged in 1H25 (1.9% Q1 before 2.9% in Q2).
- Tuesday also sees updates for the weekly ADP tracker in the four weeks up to Dec 5, getting closer to the reference period for the monthly report, after last week’s further improvement. It’s followed by useful updates for Q4 GDP tracking with durable goods for October and industrial production for both October and November, before the Conference Board consumer survey for December with its closely watched labor differential having stalled at subdued levels but not deteriorated further since September.
- Note as well that Wednesday then sees weekly jobless claims a day early ahead of Christmas Day, with continuing claims capturing the December payrolls reference period. There is currently minimal Fedspeak scheduled and we suspect this will remain the case ahead of Christmas, likely confined to media appearances if any.
