Daily Fundamental Analysis: Global stocks under pressure following hot inflation reading from the US
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Overview:
- USD: Breaking Down, Recession Risks Rise – Dollar weakens after breaking support; Summers warns of a 50% recession chance in 2025. Strong job data may delay Fed rate cuts.
- JPY: Stalling on the Premium Level, Momentum Fading – Yen struggles to maintain strength after a sharp rally. BOJ policy uncertainty and intervention risks could dictate the next move.
- AUD: Stuck in Consolidation, No Clear Direction – Aussie remains range-bound amid US tariff tensions. A break of key levels could signal direction.
- NZD: Holding Above Equilibrium, Upside Potential – Kiwi trades above the 50% range, with further gains likely if USD weakness continues.
- EUR: Strengthening on Fiscal Optimism – German spending talks lift the euro to a four-month high; investor confidence supports further upside.
- GBP: Slow but Steady, Potential Upside – Pound remains stable; a break above key resistance could trigger further gains.
- CAD: Weak vs USD, Tariff Tensions Weigh – Doubling of US tariffs on Canadian steel and aluminum pressures CAD, keeping USDCAD above equilibrium; impending rate cut.
- CHF: Strengthens as Safe-Haven Demand Rises – Swiss franc gains as market uncertainty persists; USDCHF continues its bearish breakdown.
On A Brink Of Recession?
Lawrence Summers, Former U.S. Treasury Secretary, warns of a 50% chance of recession in 2025, stating, "We've got a real uncertainty problem and a serious 50% prospect of recession." He cites significant economic instability and mounting downside risks.
Trump Shrugs Off Recession Concern
As tariffs continue to wreak havoc on the U.S. and its neighboring economies, former President Donald Trump remains steadfast in his trade policies. He commented, "We have to rebuild our country. It’s all about taxing policy and incentives. I don’t see it at all. I can do it the easy way or the hard way. The hard way is exactly what I’m doing, but the results will be 20 times greater."
Trump’s approach signals a commitment to economic restructuring through aggressive trade measures, despite growing concerns over their broader impact.
Job Openings Increased
Despite ongoing concerns over tariff pressures, JOLTS data revealed job openings exceeded both forecasts and the previous count in the latest release. The higher-than-expected JOLTS job openings suggest that the U.S. labor market remains resilient despite concerns over tariff pressures and potential economic slowdown
This could imply:
- Strong Labor Demand – Employers are still hiring, indicating confidence in business conditions despite trade tensions.
- Fed Policy Implications – If the labor market remains strong, the Federal Reserve may hold off on rate cuts or even consider tightening policy further to control inflation.
- Mixed Economic Signals – While recession risks (e.g., from tariffs) persist, a robust job market could delay or mitigate a downturn.
Fears Slowing Down
The VIX is currently consolidating on the 4-hour timeframe. A break below the range low could signal easing market fears, potentially paving the way for a gradual shift toward risk-on sentiment.
Dollar New Low After Breakdown
Daily
4-Hour
The Dollar has broken below its range. For bearish continuation, a follow-through with another bearish candle is needed. However, if U.S. market turmoil begins to ease, the Dollar’s decline could slow or reverse. Otherwise, further downside remains in play.
Key Catalyst for Dollar
The overall inflation forecast indicates a potential decline in February. Meanwhile, the non-farm payroll count rose from 125K to 151K, which, although below the 160K forecast. Despite tariff concerns, numbers, still, reflects positive job growth.
If further downside prevails, 103.00 could be a target for potential rebound level.
JPY: Stalling on the Premium Level
BOJ at Ease on Policy
The Bank of Japan is considering a rate hike in May as wages and food costs drive inflation past 4%, double its target. With Japan’s largest labor union pushing for a 6.09% wage increase, policymakers see growing price pressures. However, uncertainty over Trump’s trade policies and global risks could delay action. Whether BOJ will move forward or hold off, data will be the basis.
Daily
As uncertainty on the rate policy looms, Yen slows down.
Yen indexes not gaining any traction for the upside move.
A weak dollar and a ranging to strong yen will not benefit USDJPY for upside move.
AUD: Micro Consolidation inside a Macro Consolidation
Australia on US Tariffs: Unjust, No Exemption
“Tariffs and escalating trade tensions are a form of economic self-harm and a recipe for a slower growth and higher inflation. They are paid by the consumers. This is why, Australia will not be imposing reciprocal tariffs on the United States. Such a course of action would only push up prices for Australian consumers and increase inflation.” - Prime Minister Anthony Albanese
Daily
The Aussie is still in a consolidation phase, with no clear signs of moving in any particular direction.
4-Hour
Scenarios:
- Bullish Scenario
- Break of the 50% range of the current box inside the macro box.
- Bearish Scenario
- Consolidate below the 50% range of the box.
- Break of 0.62586 level.
NZD: Trading Above Equilibrium, Upside Potential
Daily
In contrast to the Aussie, the New Zealand Dollar is above the 50% range, a key level with the potential to break, provided the US Dollar continues to decline.
4-Hour
A break above the 50% level of the micro range, followed by consolidation within a larger range, could initiate a test of the resistance levels.
EUR: Remains Steadfast as European Assets Become Attractive
Germany’s Greens are open to negotiating a €500 billion defense and infrastructure package proposed by prospective chancellor Friedrich Merz. While initially opposed, they seek stricter spending rules and more Ukraine support. With constitutional changes required, their backing is crucial, and both sides see room for a last-minute deal before the new parliament convenes on March 25.
Key Effects on the Euro:
- Stronger Fiscal Spending → Economic Growth:
- Higher government spending can stimulate the economy, making the euro more attractive.
- The prospect of long-term investment in defense and infrastructure supports investor confidence.
- Market Reactions:
- The euro hit a four-month high, climbing 0.8% to $1.0921 as optimism grew.
- Germany’s 10-year bond yield rose to 2.89%, signaling expectations of increased borrowing and spending.
- Uncertainty Risks:
- If negotiations stall or the Greens withdraw support, uncertainty could weaken the euro.
- A failure to secure the deal before March 25 could delay fiscal stimulus, dampening euro gains.
Overall: The euro is strengthening due to expectations of higher fiscal spending, but political uncertainty could limit further gains.
Daily
Euro has established a new high after breaking above the 1.09372 level.
Strength is evident as the price remains above the three moving averages, with a significant gap between them, indicating strong momentum.
4-Hour
Scenarios:
- Bullish Scenario
- Break of 1.09470
- Pullback at 1.08796 - 1.08613 range and bounce to break 1.09470
2. Bearish Scenario
- Break of 1.08796 - 1.08613
- Break of 1.07665
GBP: Slow But Steady, Potential Draw on 1.30478
Daily
Pound is steady on the current range. We are looking for an upside follow-through for bullish continuation.
4-Hour
A break of of 1.29658 could trigger an upside continuation for the Pound.
EURGBP signals a stronger buy on EUR vs GBP as EURGBP continues to trend to the upside.
Downside or Upside Catalyst - GDP Incoming
A lower print than the actual and forecast could weaken the Pound vs Euro.
CAD: Weak vs the Greenback
Aluminum, Steel Tariffs in Play
Tariffs on Canadian aluminum and steel are now in effect, not at 25% but doubled.
Ford Backs Off Amidst Trump Double Levy Threat on Aluminum, Steel
Doug Ford made a surprise announcement on Tuesday, just hours after telling U.S. networks that he was prepared to halt all electricity exports unless President Donald Trump withdrew his threat to impose tariffs on Canadian imports. Unfazed, Trump threatens to double tariffs on steel and aluminum to 50% from the original 25% as Ford retaliates.
In response to Trump’s counter, Ford agreed to suspend the surcharge and meet with U.S. Commerce Secretary Howard Lutnick in Washington on Thursday.
Daily
This threat and subsequent retreat heightened uncertainty for the CAD.
The loonie is trading above equilibrium, indicating weakness in the Canadian dollar.
4-Hour
As long as USDCAD remains above equilibrium, a potential test of the 1.45428 resistance is likely. With Trump unfazed by Canadian retaliation, USD continues to strengthen.
Rate Cut Priced-In
A 25-bps rate cut could deepen the Canadian dollar’s slump against the US dollar.
CHF: Swissie Rebounding
Daily
The Swissie continues its breakdown as the dollar weakens against it. Additionally, the Swiss franc gains strength as a safe-haven asset amid lingering uncertainties surrounding the dollar.
4-Hour
Scenarios:
- Bullish Scenario
- Break of the 0.88416 - 0.88558 range.
2. Bearish Scenario
- Resistance at 0.88416 - 0.88558 Fair Value Gap
- Break of 0.87579 could trigger further downside.
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