FOREX: USD/JPY Upticks Sold, NZD Challenging YTD Highs
The USD is under pressure in first part of Monday Asia Pac dealings. The BBDXY index was last near 1232.4, just up from recent lows 1229.57 recorded on Friday. JPY is an outperformer, along with NZD. US equity futures are higher, led by the tech side, following late Friday details on tariff reprieves for key US tech imports.
- Initially, EUR and JPY and CHF underperformed, as risk currencies outperformed on the US equity futures bounce. This hasn't had much follow through though. USD/JPY got to highs of 144.31, but sits 130pips lower back under 143.00 in latest dealings. Friday lows in the pair were at 142.07.
- EUR/USD was last near 1.1350, little changed for the session (session lows rest at 1.1280, highs 1.1371). USD/CHF is still slightly higher for the session, last close to 0.8175/80. Earlier highs were at 0.8233.
- NZD/USD is challenging YTD highs at 0.5853. A clean break higher is likely to see 0.5900 targeted. Earlier data was softer, particularly in terms of card spending figures, but this hasn't impact FX sentiment.
- AUD/USD is little changed, last near 0.6290, unable to hold +0.6300 levels.
- US equity futures are off earlier highs, but still positive for the session. Eminis last +0.60%, Nasdaq futures +1.0%. Both US President Trump and Commerce Secretary Lutnick played down Friday tariff reprieve news. Trump stated that the whole electronics supply chain will be looked at in terms of a national security review.
- US Tsy yields are tracking lower, led by the front end, the 2yr last near 3.93%. Tsy futures had a volatile start to the session but now sit in positive territory, albeit close to flat for longer data tenors.
- Coming up we have China trade data, while later on japan final Feb IP prints.
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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
