USD Corrects as Markets Accept Tariffs
AUD
The Aussie Dollar climbs across the board with global tariff threats starting to get priced in, despite this all commodities finished all in the red. Crude Oil was down 0.9%, Nat Gas down 1.6%, Gold down 1.6%, Silver down 0.5%, Iron Ore down 1.1% and Copper was crushed, down 2.8%. Asian equities finished slightly up, with the ASX closing 0.2% higher and the Shanghai Comp gaining 0.4%. Chinese New Loans came out way over expectations, reading 5130B, with expectations that it would decline from 990B to 770B. Chinese banks usually rush to lend at the beginning of the year as they compete for higher quality customers and win market share. Beijing is expected to maintain an economic growth target of 5% this year (in line with 2024), although there is still a large question mark over how quickly policymakers can revive sluggish domestic demand, even as US President Trump's punitive trade measures put more pressure on Chinese exporters. Today, Chinese Foreign Direct Investment ytd/y is set to be released, previously -27.1%. This week, all eyes are on the RBA interest rate decision, tomorrow afternoon, with futures markets pricing in a near-90% expectation that they will cut 25bps to 4.10%. With economists being less confident, citing the unemployment a 4% is too low for a decline in inflation down to a sustained level of the RBA target of 2.5%. This represents an opportunity for AUD volatility, depending on the central bank's ultimate decision and accompanying commentary.
USD
The AUDUSD climbs to 2-month highs off the back of a weakening US Dollar, with the pair briefly breaking through the 0.6370 barrier late on Saturday night, opening this morning at a rate of 0.6347. Wall Street finished the day mixed, with the DOW JONES down, 0.4%, S&P 500 was flat and the NASDAQ gained 0.4%. Friday night saw Retails Sales come in lower for the US, with both figures coming in 0.7% lower than expected, reading -0.4% for Core m/m and -0.9% for the headline m/m. These weak retail sales saw some revival of hopes for rate cuts in the nearer term. President Trump clarified the terms for his tariffs over the weekend, seeing the tariff premium in the US Dollar is being reduced as markets settle, seeing the DXY hit 2-month low. Today will be a bank Holiday for President’s Day, with a relatively quiet week ahead for the USD.
EUR
The AUDEUR sees small gains over the weekend, with the pair slowly climbing since Friday morning, opening this morning at a rate of 0.6053. European equities were mixed into the close, with the DAX closing down 0.4% and the CAC closing up 0.2%. Flash GDP q/q came out higher at 0.1% with expectations to remain flat. The Eurozone Trade Balance is set to come out 1.5B higher tonight, expected at 14.4B; with most of the news coming in the back end of the week, where we will see Flash PMI’s for many of the Eurozone’s key countries.
GBP
The AUDGBP sees steady gains since Friday, with the pair flirting with the 0.5050 barrier earlier this morning, opening at a rate of 0.5046. British Equities finished in the red, with the FTSE closing down 0.4%. There was no news released on Friday, with today only having the Rightmove HPI m/m, previously at 1.7%. Looking forward there is CPI y/y being released on Wednesday, looking to increase from 2.5% to 2.8%.
NZD
The AUDNZD has seen a small fall over the weekend, breaking through the 1.11 barrier, opening this morning at a rate of 1.1095. The BusinessNZ Services Index came out this morning at 50.4 from 48.1, and Visitor Arrivals m/m rose to 3.5% from 1.3%. Looking forward, Wednesday is the RBNZ’s Official Cash Rate, expected to cut 50bps, from 4.25% to 3.75%.