Volatility on Trump Tariff Talks
AUD
Despite significant volatility yesterday, the Aussie Dollar opens flat against major currencies, having initially benefitted from President Trump’s apparent delay in tariffs, before weakening in the late morning as Trump hinted at 25% tariffs on Mexico and Canada to commence Feb 1. Asian equities ended the session upbeat across the board with the Nikkei +0.3%, Hang Seng +0.9% and Shenzhen +0.1%. The ASX performed strongly, +0.7%, as financials and materials dominated gains. Later this morning we’ll see the MI Leading Index m/m, a low tier, lagging indicator than attempts to predict the direction of the Australian economy. Overall, a quiet remainder of the week in terms of domestic data.
USD
AUDUSD kicks off the day flat at 0.6272, having stooped 1.3% from 0.6288 highs to 0.6208 lows yesterday on President Trump’s hints at 25% tariffs on Mexico and Canada, potentially commencing Feb 1. Another positive night on Wall St. saw the Dow Jones trading +1.1%, S&P 500 +0.8% and the Nasdaq +0.6%. Zero US economic data in yesterday’s session, with Trump’s first day in office dominating headlines. A quiet night ahead too, with only the CB Leading Index m/m. Like the MI Leading Index for Aus, this index is designed to predict the direction of the economy, although tends to have a muted impact as most of the indicators used in the calculation are released previously. The next foreseeable key event for the USD will be Trump’s talk at the World Economic Forum, at 3:00am AEDT on Friday.
EUR
AUDEUR opens flat at 0.6017, keeping a relatively tight range of 0.6011 to 0.6020 yesterday with little on the data calendar. The DAX gained +0.2% and the CAC gained +0.5% yesterday. Overnight, the German ZEW Economic Sentiment printed at 10.3 (prev. 15.2), where the second consecutive year of recession caused economic expectations in Germany to fall. A lack of private household spending and subdued demand in the construction sector continue to stall the German economy. Looking ahead, European Central Bank President Lagarde is due to participate in a panel discussion at the World Economic Forum, in Davos, this evening. Friday evening’s Flash PMIs are the only major Eurozone data this week.
GBP
AUDGBP also begins the day flat at 0.5078, falling from 0.5095 to 0.5067 when Trump hinted at tariffs on Mexico and Canada yesterday, with the pair keeping a tight range for the remainder of the day. The FTSE gained +0.3%. Labour data showed further signs of a weakening UK jobs market, with the Unemployment Rate increasing to 4.4%. Although wage growth picked up +5.6% in the three months through November, this was largely due to base effects. Overall, weaker demand and higher payroll costs are weighing on employment, causing wear and tear in the jobs market and reinforcing the odds of a third interest rate cut from the Bank of England in about two weeks. There’s no major UK data ahead of Flash PMIs on Frida evening.
NZD
AUDNZD opens flat at 1.1052 after this morning’s quarterly inflation report showed CPI on-expectations at +0.5%, slowing from the +0.6% three months ago. The largest contributors the increase in consumer prices were recreation, transport and housing, while food and clothing showed a mild contraction. Tomorrow morning will bring Visitor Arrivals figures for NZ.