Uncertainty over timing of Trump tariffs making life difficult

Good morning

It was mostly a fairly quiet day yesterday, but GBP strength through the late afternoon took GBPUSD up to new 2025 highs around 1.2715.  GBP also gained against EUR, reaching a couple of pips short of 1.2100, and other crosses such as GBPAUD, GBPNZD and GBPCAD reaching almost 2.0120, 2.2300 and 1.8225 respectively, the latter helped of course by CAD weakness ahead of a possible tariff announcement in the coming days. 

There did seem to be some USD weakness at the time but the move higher against EUR and other crosses suggested it was more a GBP move, although it wasn’t clear what was behind this.  Trump did have some tough words about the EU, saying it was created to harm America, which I guess in making it a more powerful trading partner I suppose he could be right.  He has threatened a 25% tariff on EU goods, the EU has responded with the threat of retaliation in tariffs are imposed.  Starmer is meeting Trump today but I can’t say I’m too confident that they’ll really hit it off.  For now GBP has backed off those highs, GBPUSD now 1.2670, although GBPEUR is holding just below that 1.2100 level.

It’s a pretty decent day data-wise today, with US GDP likely to be the key but I’ll be watching the initial jobless claims too for any sign of that weakness in the US jobs market that we’ve talked about, ahead of the US nonfarms next week.  A host of Fed officials will be speaking today, not sure we’ll get much other than the usual ‘rate cuts will be slow and gradual’ although perhaps that message could alter if the US data is on the weaker side.  We’ll keep an eye on Trump tariff talk as he’s recently given conflicting statements about Canada, Mexico and the EU, the White House suggest 4th March remains a deadline, Trump has indicated 2 April is more likely. 

Trump yesterday said that Zelensky will be signing a ‘big deal’ on Friday, whereby Trump insists the US will get the money back they have ploughed into saving Ukraine, and make a lot in the future.  There is something odd about this deal that involves Ukraine’s mineral reserves in that there doesn’t seem to be any concrete ongoing support for Ukraine as part of the deal.  Without US and European help, Ukraine will potentially fall to Russia which would mean both China and Russia controlling vast amounts of the world’s rare earth minerals, something the West surely doesn’t want.  I don’t know if Russia’s real reason for its invasion is for those reserves or just to rebuild the Soviet Union, but surely Zelensky cannot sign a deal unless there is a firm deal that prevents Russia invading further.  As it stands, Russia have seized some $350bn of resource reserves in Ukraine since its invasion, according to Ukraine.

BP has said it will focus on oil and gas production over renewables in a pretty big change of strategy following some disappointing results..  Its shares fell on the day but were off the lows at the close.  Now, I’m all for saving the planet but my domestic gas and electricity bills are going up again, the standing charge is much higher than it was a few years ago and energy firms are making substantial profits, paying large dividends to shareholders just as the water companies have done, while our bills remain at elevated levels.  Natural Gas prices are creeping higher again but are still considerably lower than they were a couple of years ago.  It must surely be time to order energy companies to reduce domestic bills, instead the Ofgem price cap is rising and is due to rise again.  Not happy.

Spurs lost to Man City last night, I did watch it and I have to say I wasn’t too disappointed.  OK, losing is never great but their second half performance was mildly encouraging.  Man Utd came from behind to secure three valuable points against Ipswich, Arsenal saw their title hopes dealt another blow as they could only manage a draw against Forest, while Liverpool extended their lead at the top to 13 points with a win over Newcastle.

In cricket, I warned that England’s match against Afghanistan would be difficult and indeed it proved to be, England losing by eight runs having failed to reach the Afghan target of 325 before being bowled out with the penultimate ball of the innings.  England are now out of the Champions Trophy, leaving New Zealand and India, and most likely South Africa and Australia, but possibly Afghanistan, in the semi-finals.

I’m out and about once again Friday so there will be no report tomorrow.  I’ve attached Friday’s calendar below, US core PCE certainly the main event but CAD watchers will be looking at Canadian GDP, USDCAD now 1.4345 and still waiting on a tariff update from Trump.   Still got the 1.4500 USDCAD Call from a couple of days ago that cost a mere 20 cad pips, its almost at the stage where we could close half of it out at a profit to make the remainder.

Next week could be a big one, with US ISM PMI’s and employment numbers including the nonfarm payrolls, EU inflation and ECB rate announcement, to name a few.  Not much UK data next week but BoEs Bailey will be appearing in front of the Treasury Select Committee Wednesday. 

We’ve had some dismal weather recently but a quick look ahead to the weekend and the coming week suggest we’re in for a lot of sunshine.  Don’t confuse that with warm temperatures, but I’ll take a bit of sunshine even if it means frosts overnight.  We’re really hoping for clear skies over the next couple of nights, it is the last time until 20240 that we’ll be able to see seven planets in the early evening sky.  Mercury, Venus, Jupiter and Mars should be visible with the naked eye, the remainder will require binoculars or a telescope and even then Saturn may be difficult to see as it’s the nearest to the sun.  Find somewhere dark and see if you can spot them.

That’s about all, have a great day and a great weekend as and when it comes.  It’ll be March when you get your next report, where is the time going?

-  10.00 EU consumer confidence, sentiment

-  12.30 ECB minutes

-  13.30 US GDP, durable goods, initial jobless claims

-  15.00 US pending home sales

-  15.00 Feds Barr speaks

-  16.45 Feds Bowmans speaks

-  18.00 Feds Barkin speaks

-  18.15 Feds Hammack speaks

-  20.15 Feds Harker speaks

-  23.30 Japan Tokyo CPI

-  23.50 Japan retail trade

Friday

-  07.00 German retail sales

-  07.00 BoEs Ramsden speaks

-  08.55 German unemployment

-  12.00 India GDP

-  13.00 German HICP

-  13.30 US core PCE, personal income/spending

-  13.30 CAD GDP

-  14.45 US Chicago PMI

US confidence dented as Trump looks for more tariffs

Good morning

We had GBPUSD up to 1.2675 and EURUSD to almost 1.0520, helped in no small part by a shocking US consumer confidence number that came in at 98.3, well below consensus (102.5) and even further below the previous reading of 105.3.  GBPUSD has actually tested that 1.2675 area several times since yesterday afternoon, each time it has failed and pulled back, this morning the pullback reached 1.2635 but as I type GBPUSD is 1.2655.  EURUSD has also failed to break the recent highs around 1.0525 which in turn is just a few points off the 2024 highs we saw back on 27th Jan.  GBPEUR holds around 1.2050. 

Plenty of attention on weak incoming US data, with growing concern over next weeks US employment numbers which could be dented by the layoffs in US public workers.  Quite when some of these layoffs appear in employment numbers isn’t exactly clear, tomorrows initial jobless claims numbers may reflect some but certainly not all of the job losses.  Equity prices have been hit with Nasdaq down 1.35% yesterday, S&P500 lost around 0.5%.  Attention turns to Nvidia who will release results this evening, their stock is down from a Feb high of $143.35 to $126.55.   

USDJPY traded down to 148.60 on the weaker USD yesterday, pretty much matching the lows seen in early Dec, and traded again to that level overnight before recovering to the 149.40 region.  Some talk that US have voiced unhappiness with the weak Yen and pressure could be growing for Japan to normalise interest rates, as such there is thinking that we could see USDJPY lower still, something in the low 146’s is a possible target.  As always with Yen, timing is everything given the forward points remain very much against us which makes holding yen longs or long yen options rather expensive.  A one month 146.00 USDJPY put costs around 90 yen pips.

USDCAD has pushed higher, bucking the weaker USD trend, now 1.4325, up from 1.4255 this time yesterday.  Too early to be excited about profits in this but the markets seem to be catching the idea that next week Trump may well look to introduce the tariffs he began to implement earlier this month.  USDMXN has remained interestingly stable mind you, now 20.45, bang in the middle of the recent 20.40-20.50 range, bar a couple of brief forays outside those levels. 

It looks as though Ukraine are very close to signing a deal with US for its rare earth minerals, with talk Trump may meet Ukraine’s Zelensky later this week.  Trump has mentioned the potential to lift sanctions on Russia, perhaps he is open to buying oil from Russia which would knock Canada’s oil sales to US.  Trump also has his eye on copper imports, suggesting all US industries should buy US made copper.  Tariffs on copper imports look likely.

In football, Chelsea reclaimed fourth spot in the premier league with a 4-0 win over Southampton.  Crystal Palace beat Aston Villa and Brighton beat Bournemouth who are starting to lose grip on those European places in the league.  Some big matches this evening, Spurs, desperate for another win host Man City, Arsenal travel to Notts Forest and Liverpool face Newcastle.  Meanwhile England’s cricketers are taking on Afghanistan in a must-win match, England are bowling first to avoid elimination in the tournament.   This won’t be as easy as you’d hope.

A pretty light calendar today, expect more dovish comments from BoEs Dhingra later, but attention must be on Trump, tariffs and Ukraine deals. 

Have a great day

-  14.00 Trump speaks

-  15.00 US new home sales

-  16.30 BoEs Dhingra speaks

-  17.00 Feds Bostic speaks

-  18.00 Feds Barkin speaks

US/Europe relations driven further apart despite Macron's best efforts

Good morning

A pretty quiet day in the world of currencies yesterday, for a while in the afternoon it looked as though the US dollar would make some gains, with GBPUSD and EURUSD dropping to around 1.2610 and 1.0450 respectively but the move was short-lived and by the London close GBPUSD was back up at 1.2640, EURUSD at 1.0475.  This morning GBP tested down at yesterdays lows, now just a few points higher at 1.2620 is a touch lower at 1.2620, while EURUSD is still holding around 1.0470, ignoring this mornings German GDP data.  As a result GBPEUR is a touch lower at 1.2060.  GBP weakness could be put down to comments from BoEs Dhingra who warned that gradual rate cuts will slow the economy, clearly wanting more cuts and sooner.  She is a known dove mind you. 

Trump spoke yesterday after his meeting with Macron, who told Trump he needs to be careful not to look weak in Putin’s eyes.  Macron seems to have done pretty well, Trump didn’t seem too upset at least.   I did see some news headlines suggesting Ukraine may actually make a deal with the US over its rare earth minerals, if that came with security assurances that would prevent Russia from invading again in the future.  But surely Russia will want a piece of those minerals as well, will they stop until they get some. 

There’s such a lot going on right now and I’m interested to see how this plays out but I do of course hope for an end to the invasion that has claimed so many lives and caused so much destruction.  But for Putin, if the war has done anything, it has driven a wedge between Europe and the US, a once powerful coalition that does seem to be crumbling before our eyes.  The latest UN security council communique did not even mention that Russia was to blame for the invasion, the US choosing to side with Russia and China on that point.   Perhaps it is all to get Putin to the peace table. 

In other news, Trump has suggested that tariffs on both Canada and Mexico could well be introduced next week.  You’ll remember both CAD and MXN weakened heavily on the original announcement of tariffs, which were then rescinded and the currencies returned to pre-announcement levels.  They are now trading at 1.4255 and 20.46 against the USD, having seen a high earlier this month of around 1.4900 and 21.29.  Surely worth a cheap upside option play just in case we see more of the same.  20 cad pips would buy the 6th march 1.4500 usdcad call. 

One reason I am not a fan of crypto is how easy it seems to be to lose vast sums of the virtual currencies in computer crime.  Now, hackers have stolen US$1.5bn worth of Ethereum from crypto firm Bybit, the largest theft by some margin.  Bybit claims to be solvent and that users would be reimbursed.  While crypto currency prices remain reasonably elevated, some crypto firms are seeing share prices fall sharply, such as Block Inc which traded down from Thursday’s close around $83 to a low today around $65. 

As companies and countries seek to harness quantum computing, surely it becomes easier to hack into crypto firms.  Microsoft recently unveiled their Majorana chip, a quantum chip that some think could transform computing.  OK, its early days for quantum computing and we are yet to really see it in mainstream operation but I have no doubt we’ll get there one day and when we do, surely doubts must be placed on all online security, including the likes of Bitcoin.

The top of the table clash in the Championship took place yesterday evening with Leeds (1st) taking on near neighbours Sheffield Utd (2nd).  Leeds went one goal down quite early on but found an equaliser with about twenty minutes to go.  They then scored two goals in the dying minutes to give Leeds the win.  They are now 5 points clear at the top with a terrific goal difference of +50.  Surely we’ll see them in the Premier League next season.  Mark will be happy. 

That’s all for now, have a great day

-  10.00 ECBs Nagel speaks

-  13.00 ECBs Schnabel speaks

-  14.00 US house price index

-  14.00 BoEs Pill speaks

-  15.00 US consumer confidence

-  16.45 Feds Barr speaks

-  21.15 Feds Logan speaks

-  00.30 AUS CPI