FOREX: Yen and CNH Outperform, AUD/USD Back Sub 0.6200
Mar-04 04:56
The USD BBDXY index is little changed in the first part of Tuesday dealings, with the index last near 1293. This has masked some divergent trends, with yen and to a lesser extent CHF outperforming higher beta plays, particularly the AUD.
- USD/JPY got to lows 148.60, but sits back close to 149.10 in latest dealings. This is up in yen terms around 0.25%. We are close to 148.57, the Feb 25 low and bear trigger. Beyond that lies the Oct 9 low from last year at 148.01.
- Various Japan officials, including right up to the Prime Minister, have denied devaluing the yen. A comment that US President Trump made on Monday. We also various data prints, with capex softer than forecast for Q4, likely meaning downside Q4 GDP revisions.
- US yields continued lower in the first part of trade, before steadying. We were last slightly weaker for the 10yr at 4.14%. US-JP yield differentials are still arguing for more USD/JPY downside.
- AUD/USD is back under 0.6200, amid broader high beta FX weakness. The MXN is down 0.50%, last near 20.79. USD/CAD is up above 1.4500, although is sub recent highs. Tariffs on both Mexico and Canada look set to come into effect. Regional equity market sentiment is mostly weaker, although US futures are up a touch.
- For AUD/USD we are close to the Feb 28 low at 0.6193. NZD/USD is back near 0.5600. We had Australian data prints, ahead of Q4 GDP tomorrow, along with the RBA minutes. These outcomes didn't shift the AUD though. AUD/JPY is back under 92.40, fresh lows since early August last year.
- USD/CNH is back lower, last near 7.2830, testing 20 and 50-day EMA support. Like Japan, Trump accused China of devaluing its currency. To the extent a firmer yuan may be seen as helping prevent further trade escalation may be helping yuan today.
- Later the Fed’s Williams speaks and the euro area’s January unemployment rate prints.
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FED: Powell To Deliver Semi-Annual Testimony In Mid-Feb
Jan-31 21:48
The House Financial Services Committee's website confirms that Fed Chair Powell will deliver his semi-annual Monetary Policy Report on Wednesday Feb 12 at 1000ET.
- The Semi-annual testimony will be closely eyed as Powell's first scheduled appearance since the January FOMC - and the House testimony on the 12th is the same day as the release of January CPI (and the week after nonfarm payrolls and benchmark revisions) so will be of particular interest.
US OUTLOOK/OPINION: Nonfarm Payrolls, Revisions Highlight Next Week In US Macro
Jan-31 21:39
Friday’s nonfarm payrolls for January highlights the US macro week. It's a highly anticipated report that could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- The preliminary estimate for the benchmark revision pointed to the level of payrolls being some 818k lower than currently reported for back in March 2024. There’s a broad expectation from what we can gather that the hit seen next week won’t be as large but it could still be significant. We also watch the seasonal revisions closely, as whilst they should have a zero-sum impact over the calendar year, we’ve noted some particularly favorable seasonal factors in recent months that have biased seasonally adjusted jobs growth higher.
- With these considerations in mind, the early days of the Bloomberg consensus points to nonfarm payrolls growth of 150k after a solid three-month average of 170k. Note that the unemployment rate from the separate household survey won’t be affected by these revisions, having already seen its own seasonal factor revisions last month. A population control will complicate month-on-month changes in the levels of employment and unemployment but shouldn’t be significant for the rate, which is seen unchanged at 4.1% having surprised lower with 4.09% in December. The recent high is technically 4.23% in November having first popped to 4.22% back in July.
- Two other special mentions for the week are: 1) rare remarks from FOMC Vice Chair Jefferson speaking on the economic outlook and monetary policy late on Tuesday with both text and Q&A, having last spoke on Oct 9. 2) ISM services on Wednesday after its priced paid series jumped 5.9pts to 64.4 in December for the highest since Feb 2023.
- Away from macro but still material, the coming week brings the US Treasury's quarterly refunding process - our preview is here.
MACRO ANALYSIS: MNI US Macro Weekly: Uncertainty Vindicates Fed’s Patience
Jan-31 21:37
In a largely positive week for economic activity data, including in core durable goods and MNI Chicago PMI, the Q4 GDP accounts stood out by showing a very strong end to 2024 for the consumer.
- As we go to press, though, President Trump has confirmed that tariffs would be imposed on Canada, Mexico, and China beginning this weekend – while also threatening further action against the likes of the European Union and across various import categories.
- The combination of solid growth and policy uncertainty, along with stubborn “supercore” PCE inflation for December, seemingly vindicated the Federal Reserve’s “hawkish hold” at its January meeting.
- A March rate cut is still a possibility but the bar for such an outcome has been set high.
- That gets us to the first key release between now and then: Friday’s nonfarm payrolls for January is the highlight of the US macro week, and could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- Other highlights in the upcoming week include ISM Services and the Treasury’s quarterly Refunding announcement (Wednesday), while FOMC Vice Chair Jefferson delivers commentary on the economic outlook and monetary policy Tuesday.
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