Greenback Firms Amid Fresh Tariff Threats
AUD
The Aussie Dollar opens mixed against the majors as economic uncertainty heightens due to Trump’s proposed tariffs on February 1. Asian equities closed slightly higher, with ASX +0.6%, Shanghai Comp -0.1% and Nikkei +0.3%. Commodities also followed suit, with key movers being Iron Ore +1.2% and Copper +0.8%. Yesterday, Australian Import Prices q/q were released much lower than expected at +0.2% vs. 1.5%, while China continues their break for the Lunar New Year. Monday will have monthly Australian Retail Sales, which the RBA will be considering ahead of the next interest rate decision in mid-Feb. This week's softer quarterly inflation report has upped market expectations of a 25bps cut from the RBA next month.
USD
The AUDUSD opens at 0.6205, touching highs of 0.6248 yesterday before sinking this morning as President Trump announced 25% tariffs on Mexico and Canada effective from February 1. Wall Street saw some growth yesterday, with Dow Jones and S&P 500 closing +0.5%, and Nasdaq closing +0.2%. The US saw poorer-than-expected economic data last night with Advance GDP q/q releasing at 2.3% (expected 2.7%), Pending Home Sales m/m -5.5% (expected flat) and Unemployment Claims at 207k (expected 224k). Tonight will also see US inflation data, the Fed's preferred Core PCE Price Index, expected at +0.2% m/m. However, the main driver of the AUDUSD movement was and will be the US trade policies that are rolling out. Other countries are expected to adjust their economic policies in reaction to the tariffs.
EUR
The AUDEUR opens flat at 0.5976, trading between 0.5960 and 0.5993 throughout the day, with little surprises after the European Central Bank lowered the key interest rate by 25bps to 2.9%. The markets had fully expected this, however, President Legarde mentioned that the ‘decision was unanimous’ and that the European economy was ‘set to remain weak in the short term.’ Another 75 basis points of cuts are expected to happen this year. A flurry of European low-level economic data also released last night, with mixed results. On equities, the DAX closed +0.4% and CAC +0.9%. Tonight will see German monthly inflation data, expected to release at +0.1%.
GBP
The AUDGBP opens flat at 04999, dropping from yesterday’s highs of 0.5017 and losing the 0.5000 handle at lows of 0.4995. British equities closed strong, up +1.0%. Monthly Mortgage Approvals and Bank Lending released higher than expected, hinting that the British economy was continuing to improve. There will not be much economic data out for England next week, however, their interest rate decision will occur on Thursday night. They are currently expected to drop interest rates by 25bps to 4.5%, further stimulating the economy.
NZD
The AUDNZD opens at 1.1021, trading sideways between 1.1012 and 1.1035. There’s been minimal news out of New Zealand except for ANZ Business Confidence releasing at 54.4, much lower than the previous reading of 62.3. New Zealand continues to be in a technical economic recession, and they are expected to announce policies to stimulate their economy.