USD Firms as Trump Unveils Tariffs

AUD

The AUD opens mixed against the majors, experiencing overall weakness as Trump announced 10% tariffs on China over the weekend. Locally we saw PPI q/q come at 0.8%, which missed expectations of 1%. We also saw Private Sector Credit m/m come in at 0.6%, slightly above 0.5% expectations. Japan’s Nikkei finished the week +0.2% while China’s Shenzhen and Hang Seng enjoyed the last day of China’s New Year weeklong holiday. Locally the ASX wrapped up +0.5% as info tech and materials dominated gains. The biggest movers in commodities were Crude Oil +1.1% and Natural Gas +3.3%. Looking forward today we have Retail Sales m/m expected to drop from 0.8% to -0.7%, which will play a factor in the RBA’s rate decision this month. Most of the AUD risk this week is likely to come from further updates in the new global trade war.
 

USD

AUDUSD falls to 3-week lows of 0.6158, down about 1.7% from Saturday's 0.6262 highs off the back of Trump announcing 25% tariffs on Canada and Mexico, as well as 10% on China. Further comments from President Trump included that tariffs could not be averted, that Canada had treated the US very unfairly and that he would also put tariffs on the EU. The tariff war undermines the AUD against other currencies whilst simultaneously strengthening the U.S economy hence putting downward pressure on the pair. A soft session on Wall St. to end the week saw the Dow Jones close -0.8%, the S&P 500 -0.5%, and the Nasdaq -0.3%. Tomorrow we are set to see the ISM Manufacturing PMI expected to come in at 49.3 which is in line with the previous release. Furthermore, they have their Final Manufacturing PMI expected at 52.6 as well as the Final Manufacturing PMI forecasted at 50.1.
 

EUR

AUDEUR opens at 0.6007, up from last week by about 0.5% with both the Euro and Aussie Dollar weakening off Trump's tariffs announcement. Also, we saw German Prelim CPI m/m print at -0.2%, missing expectations of +0.1%. Furthermore, headline Eurozone inflation also dropped from 2.6% to 2.3%, giving some relief to both consumers and the ECB. Equities saw the DAX flat and the CAC up +0.1%. There are an abundance of data releases out of the Eurozone today with the ones to pay attention to being the Core CPI Flash Estimate y/y expected at 2.6% and the CPI Flash Estimate y/y expected at 2.4%. The remainder of the week is set for an abundance of lower tier data.
 

GBP

AUDGBP opens at 0.5000, up a little from Friday morning. Last week, the UK had their House Price Index miss forecasts of 0.3%, printing at 0.1%. The FSTE was up +0.3%. Today they have their Final Manufacturing PMI which is expected at 48.2. However, the main event markets will be looking at is the Bank of England rate decision set to release Thursday. As it stands markets are widely expecting a rate cut from 4.75% to 4.5%. Markets are currently pricing between 3 and 4 rate cuts over the year, where commentary this Thursday may drop hints as to what's to come.
 

NZD

The NZD opened at 1.1017, flat from last week. There has been no news since the last report. Tomorrow, we have Building Consents q/q which previously came in at 5.3%, although the key data release of the week is their employment data on Wednesday morning.