2 Mar: US stocks sharply lower. US$ sold late in the day. Thin day for data today but Italian election event-risk, Sunday.

By | March 2, 2018


The day has really been mostly about the stock markets, which have headed sharply lower after Donald Trump said that the US would impose import tariffs on of 25% on steel imports and 10% on aluminium, adding to fears of a tit-for-tat trade war on top of growing worries about higher interest rates. The DJI and S+P are closing at around -1.4%. Elsewhere the currency markets have been  choppy for much of the session although the US$ is ending on soft note, enduring a sharp sell-off late in the day  despite a whole slew of US data today suggesting that inflation is rising and that the Fed will be raising rates sooner rather than later.  The metals have been heavy as has oil although both recovered sharply from session lows in the last hour of trade, in line with a minor bounce in the stock markets.

The tariff news overshadowed the Senate testimony of Federal Reserve Chairman Jerome Powell and comments from New York Fed President William Dudley on interest rates. In a question and answer session, Powell told the Senate Banking Committee on Thursday there was no evidence the U.S. economy is overheating, and labor markets may still have room to improve. Dudley, meanwhile, seemed comfortable with four rate hikes in 2018, but said those increases would occur at a gradual pace.

In terms of data, the personal consumption expenditure (PCE) price index rose 0.4%, the biggest increase since September and followed a 0.1% gain in December although the annual increase was unchanged at 1.7% in January.  The weekly jobless claims saw the number of Americans filing for unemployment benefits fall to a 48-year low as the labor market tightens, declining by 10k to 210k, lower than expectation of 226k. The US ISM figures were also strong; Mfg PMI 60.8 vs exp 58.7, Prices Paid 74.2 vs exp 70.5). Earlier in the day, the EU PMIs were released and were generally solid, helping to underpin the Euro (UK February manufacturing PMI 55.2 vs 55.0 expected, EU Feb Mfg PMI 58.6 vs 58.5 exp, Germany Mfg PMI 60.6 vs 60.3 exp).

Friday is a bit thin for data although Cable could bounce around with speeches due both from UK PM, May and BOE Governor, Mark Carney. Before then, Asia kicks off with the NZ Building Permits while Australia gets the January New Home Sales and Japan has the January National/Tokyo CPI figures. The highlight in Europe will be a speech from the ECB’s Mersch, the German Retail Sales (Jan) and the EU PPI, while the US session will take guidance from the Michigan Consumer Sentiment Index and the ISM NY Index – Business Conditions. Note that the Italian election takes place over the weekend, causing a potential gap in the Euro on Monday.

EURUSD: 1.2264
Res  1.2275  1.2295  1.2315
Sup  1.2225  1.2200  1.2180
USDJPY: 106.22
Res  106.55  106.80  107.00
Sup  106.15  105.90  105.65
GBPUSD: 1.3778
Res  1.3790  1.3830  1.3855
Sup  1.3740  1.3710  1.3675
USDCHF: 0.9417
Res  0.9440  0.9465  0.9490
Sup  0.9410  0.9380  0.9355
AUDUSD: 0.7762
Res  0.7770  0.7790  0.7820
Sup  0.7750  0.7730  0.7710
NZDUSD: 0.7256
Res  0.7265  0.7290  0.7320
Sup  0.7230  0.7200  0.7175
S&P: 2675
Res  2695  2705  2720
Sup  2670  2660  2645
DJI: 24589
Res  24855  25025  25185
Sup  24570  24425  24280
ASX SPI: 5907
Res  5935  5950  5975
Sup  5905  5895  5885
XAUUSD: 1320
Res  1325  1330  1335
Sup  1310  1305  1300
XAGUSD: 16.53
Res  16.50  16.60  16.70
Sup  16.35  16.25  16.15
WTI: 61.33
Res  61.80  62.35  63.10
Sup  61.10  60.75  60.10