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US consumer confidence knowledge is launched at present and is anticipated to indicate additional deterioration. We’re barely extra pessimistic than consensus anticipating 93.0, and we principally see draw back dangers for the dollar at present. In different occasions at present, count on a press release by Russia and the US on Ukraine ceasefire talks, whereas Trump might unveil particulars of automobile tariffs
USD: Shopper Story to Deteriorate Additional
Yesterday’s PMIs shocked on the upside within the US whereas leaping lower than anticipated within the euro space, serving to the euro-heavy DXY index discover help into the 104.0-104.50 space. Nevertheless, the surveys highlighted a rising hole between the contracting manufacturing sector and the rebounding providers sector within the US. Markets are keenly awaiting clearer indicators on the place to position activity-related USD bets.
The Convention Board Shopper Confidence surveys printed at present are the most important launch for the week in FX. A substantial amount of the market’s pessimism on US macro has stemmed from comfortable shopper figures, and the 14.5-point drop within the Convention Board sentiment index between November and February contributed to the foremost rotation from US to European equities that underpinned the EUR/USD rally. Consensus is quite sparse, however broadly centred round one other substantial decline, from 98.3 to 94.0. Our economist expectation is 93.0.
Even when the drop is a bit much less pronounced than anticipated, markets might battle to see a lot silver lining for the greenback. We nonetheless assume the second half of the week can present extra broad-based greenback features as the two April tariff deadline approaches (automobile tariff particulars to be unveiled this week) and core PCE at 0.3% MoM (Friday) can maintain a cap on dovish Fed bets. However for at present we see principally draw back dangers for the buck.
The US calendar additionally contains new dwelling gross sales for February, that are anticipated to be fairly sturdy, and the Richmond Fed Manufacturing index, which can effectively fall again into damaging territory given the PMI indications.
EUR: Eyes on Ukraine-Russia Developments
Our unique working assumption for this week was that the euro may nonetheless squeeze some data-linked optimism from the German fiscal bazooka. However yesterday’s PMIs have been underwhelming contemplating earlier indications from the ZEW. The opposite facet of the coin is that markets will not be anticipating something too massive from the IFO surveys at present, leaving room for a constructive shock to raise the euro.
What might, nonetheless, be extra related for the euro is any headline coming from Saudi Arabia, the place a US delegation met with Russian counterparts yesterday following talks on Monday with Ukrainians. Russia and the US are reportedly as a result of subject a press release at present concerning the progress of negotiations. Indications that some settlement is constructing round a full ceasefire would help European sentiment and the euro. Barring that, fading optimism on a fast truce could make usually overvalued (within the close to time period) European currencies commerce on the comfortable facet.
EUR/USD traded again beneath 1.080 yesterday. We see upside dangers at present given the US shopper confidence danger occasion, however our desire stays for a depreciation to
AUD: February Inflation Tonight
Australia releases CPI data for February tonight, with consensus a 3rd consecutive 2.5% YoY headline print. The trimmed imply re-accelerated in January from 2.7% to 2.8%, inflicting new troubles for the RBA, which began easing final month.
We suspect the full-time-led drop in employment in February (-52k) must be matched with some new disinflationary indicators to persuade markets to totally value again a reduce by Might (April seems to be off the playing cards). Our name for the terminal price is 3.35%, so 75bp of easing, though the tempo and timing of additional cuts are extremely data-dependent and admittedly fairly unsure.
That mentioned, the RBA is a secondary driver for AUD in comparison with tariff information and international danger sentiment. AUD/USD is just not significantly low cost based mostly on short-term drivers (charges and equities), and we nonetheless count on some draw back dangers to 0.62 in April as tariff dangers intensify.
JPY: Yen Bulls Mull Positions
The large distinction between this 12 months’s decline in USD/JPY and that seen final July and August is positioning. Final 12 months’s yen rally was all concerning the quick masking of yen positions because the carry commerce was unwound. This 12 months’s decline in USD/JPY has been pushed by traders (primarily asset managers) actively taking a protracted place within the yen. Driving these funding choices might effectively have been diversification from the greenback and a view that the yen is likely one of the most undervalued currencies within the G10 area – a view with which we agree.
Nevertheless, speculative lengthy yen positioning has just lately develop into fairly stretched and the latest bounce in US equities and US yields have managed to shake out weak yen longs. Relying on the US knowledge, USD/JPY may appropriate via the 151.25/30 space to a best-case price of 152.50 this week. We wouldn’t chase USD/JPY an excessive amount of increased from there, although, given what might be a tough week for danger belongings subsequent week when US reciprocal tariffs are introduced. And we’re nonetheless sticking to our non-consensus view of a Financial institution of Japan (BoJ) hike in Might – which may additionally set off some unbiased yen power have been knowledge or BoJ-speak to show supportive.
Disclaimer: This publication has been ready by ING solely for data functions regardless of a specific consumer’s means, monetary scenario or funding goals. The knowledge doesn’t represent funding advice, and neither is it funding, authorized or tax recommendation or a proposal or solicitation to buy or promote any monetary instrument. Read more
