Tentative Tariff Optimism Keeps USD Under Pressure

AUD

The Aussie Dollar opens mainly up against the majors as signs that US tariffs on China may not be as harsh or sudden as initially feared. Asian equities finished the day mixed with the NIIKEI 1.6%, SHANGHAI COMP -0.9% and locally the ASX 0.3%. Commodities were also mixed with Gold 0%, Silver 0.2%, Iron Ore 0.6%, and Copper -1%. There was no major data out of Australia or China yesterday and nothing in the calendar today. Next Wednesday will be the much-awaited quarterly CPI report for Australia. This will be the deciding factor on what the Reserve Bank of Australia decides to do with the Cash Rate in Feb. Currently, markets have 72.4% odds of a 0.25% cut priced in.
 

USD

The AUDUSD pair opens flat this morning at 0.6268 as the pair rose to a new monthly high just below 0.6300 last night. Trump's decision to not immediately implement tariffs has weakened the USD, allowing the AUD to gain some ground, although this could all change the moment that Trump's tariff plans become clear. US equities closed the day up with the DOW JONES 0.4%, NASDAQ 1.3% and the S&P 500 0.8%. There weren’t any big data events in the US calendar yesterday, however, all eyes are firmly placed on Trump and the uncertainties regarding future US trade policies. Tonight, we'll see Unemployment Claims as well as Trump tuning in to talk at the World Economic Forum. Looking ahead, investors await January’s flash US S&P Global PMI data on Friday night.
 

EUR

The AUDEUR pair opens up at 0.6022 this morning with Lagarde's talk overnight pointing to a rate cut from the European Central Bank next week as a no-brainer. ECB President Lagarde spoke overnight as she highlighted that they are not overly concerned about the export of inflation to Europe and is confident that Eurozone inflation will be at target over the course of 2025. Lagarde sees a path where they will continue to cut interest rates at a gradual pace. Markets are now pricing in further reductions to 2% by September (115 bps of cuts). European equities both closed the day in the green with DAX 1% and CAC 0.9%. Looking ahead, tomorrow the Euro Area has their Flash Consumer Confidence as well as Flash PMIs.
 

GBP

The AUDGBP pair opens up at 0.5091 this morning as markets expect the Bank of England to cut interest rates by 25 basis points in their February policy meeting. The FTSE ended the day flat. No data events in the UK yesterday, however, tonight we have CBI Business Optimism Index and CBI Industrial Trends Orders. Main events for the week will be on Friday as they have their Gfk Cosnumer Confidence as well as Flash S&P PMIs.
 

NZD

The AUDNZD pair opens up at 1.1066 this morning. Yesterday, NZ had their Inflation Rate Q/Q come out on expectations at 0.5% which was a 0.1% decrease from the previous quarter. Pricing pressures remain largely contained, reinforcing expectations for another jumbo rate cut of 50 basis points from the RBNZ in February. 90% odds currently priced in.