USD Gains as Trump Threatens Reciprocal Tariffs
AUD
The Aussie Dollar opens mixed against the majors with little economic data released over the weekend. On Friday, Asian equities ended the day mixed with the Shanghai Comp 1%, NIKKEI -0.7%, and the ASX -0.1%. Commodities were also mixed with Gold +0.2%, Silver -1.1%, Iron Ore +0.9% and Copper up 3%. There was no news locally on Friday, however, on Sunday China had inflation prints. Consumer inflation accelerated for the first time since August, in what's likely a blip caused by increased spending around the Lunar New Year holiday as deflationary pressures persist. Headline CPI printed at +0.5% y/y and PPI (produce inflation) came in 0.2% under expectations at -2.3%. Locally, tomorrow we have the Westpac Consumer Confidence Index which was previously at 92.1.
USD
The AUDUSD pair opens down this morning at 0.6248 as Trump hit social media on Friday noting that he plans to execute widespread tariffs on most of the US trading allies as a means of addressing the US federal budget. He also said he would announce reciprocal tariffs on countries that tax imported US goods with them going into effect 'almost immediately'. That authority is highly questionable, particularly against countries with trade agreements with the US, although the announcement still saw the USD climb 30-50 pips on various crosses. US employment data came out mixed on Friday evening with Non-Farm Payrolls coming in 27k under expectations at 143k. Markets had a muted response to this as the Unemployment Rate tightened 0.1% to 4, suggesting the labour market remains strong. The Fed is expected to hold rates until Q3. Wall Street closed the day in the red, DOW JONES -1%, S&P 500 -0.9% and NASDAQ -1.4%. Looking ahead for the week, Fed Chair Jerome Powell is testifying to Congress on Wednesday, and Thursday the US has a range of inflation data.
EUR
The AUDEUR pair opens up this morning at 0.6067, touching two-month highs of 0.6076 over the weekend. No major data out of Europe on Friday. Equities were down with DAX -0.5% and CAC -0.4%. European Central Bank President Lagarde is speaking about the ECB Annual Report at the European Parliament overnight. There are growing concerns of economic uncertainty that have forced ECB officials to guide a dovish monetary policy outlook. There are also growing concerns around the uncertainty of the impact of higher tariffs that Trump has announced.
GBP
The AUDGBP pair opens flat at 0.5046 with no data released over the weekend, although Bank of England Governor Bailey guided a cautious and gradual rate cut approach. On Friday the UK had the Halifax House Price Index M/M which came in 0.5% above expectations at 0.7%. The FTSE closed the day down at -0.3%. On Tuesday, two Bank of England Members will be speaking, then looking ahead to Friday the UK has their GDP prints.
NZD
The AUDNZD pair opens flat at 1.1065 this morning with no data released over the weekend. There is no data out of NZ until Friday when they have their Business NZ PMI. Next Wednesday Feb 19, the RBNZ is expected to cut the Official Cash Rate. Markets are now pricing in a 92% chance of a 50-bps cut which will be their third consecutive cut of this size.