Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US stocks lower, but FX more muted
US stocks were down sharply on Friday, with the Dow Jones falling 1.7%, S&P 500 down 1.9% and Nasdaq down 2.7%. For the S&P 500 and Nasdaq, it was the worst week since mid-December.
Friday’s US PCE number – the Federal Reserve’s preferred measure of inflation – hit sentiment with an unexpected rise in inflation with core PCE up from 2.7% to 2.8% in annual terms in February. Worryingly, spending fell, signalling a double-whammy of bad news.
However, as we have seen over the last two weeks, FX markets were more restrained, with only moderate moves on Friday.
The AUD/USD fell 0.2% on Friday after trading in a tiny range between 0.6255 and 0.6330 all last week.
The NZD/USD lost 0.4% to drift back to the lowest level since 14 March.
In Asia, the USD/SGD gained 0.1% while USD/CNH lost 0.1%.
“Liberation Day” nears
Global markets will likely be on edge ahead of the next round of tariff announcements, due on 2 April, and dubbed “Liberation Day” by President Trump.
Over the weekend, reports in the Washington Post suggested President Trump is pushing his advisers to take a more aggressive approach.
Trump is supposedly mulling whether to impose a set amount on all imports into the US or focus on the so-called “Dirty 15” trading partners that include the EU, Japan China, Canada and Mexico amongst others. (Australia, NZ and Singapore are not on the list).
Historically, more aggressive US tariff action has caused trade-sensitive currencies like the Aussie, Canadian dollar and Chinese yuan to weaken. However, more recently, this correlation has faltered, as markets instead focus on the negative impact on US growth.
Over the longer term, we expect trade-sensitive currencies to again suffer from tariff news – it’s just a matter of when.
RBA, Eurozone CPI, US jobs due this week
Away from tariff news, the focus will be on this week’s Reserve Bank of Australia decision, EU inflation and US jobs report.
The RBA, due 2.30pm Tuesday AEDT, has seen a massive shift in expectations over the month of March – from a 13% probability of a 25bps cut on 3 March to 90% today (source: Bloomberg). However, questions remain whether the RBA is willing to cut interest rates in the middle of an election campaign.
Eurozone CPI, due at 8.00pm Tuesday, will be key ahead of the 17 April European Central Bank decision. The euro has recently eased after a surge higher in late February – a higher inflation read could reignite the euro rally.
Finally, the biggest and baddest economic release of them all – the US non-farm payrolls number – is due on Friday night. Financial markets are looking for 139k jobs to be added – the lowest market forecast since the October report.
Aussie, kiwi fall into torpor
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 31 March – 4 April
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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