AUD

• US tariffs. Markets rattled by President-elect Trump’s announcement tariffs would be imposed on Mexico, Canada & China on his first day.• USD firmer. The move supported the USD & weighed on cyclical currencies like AUD & NZD. Negative risk sentiment saw the JPY outperform.• Data flow. Today, the monthly AU CPI is due. RBNZ also expected to cut rates again with a 50bp reduction predicted by analysts. Markets were rattled yesterday after President-elect Trump fired a few shots in his post-election trade war. Via social media Trump stated that to curb the inflow of drugs and migrants he would...

• Holding on. Despite Russia/Ukraine developments a ‘risk on’ vibe prevailed in markets. Equities higher, oil rose, & the AUD ticked up.• European struggles. EUR & GBP weaker. Steady stream of ECB rate cuts anticipated as Eurozone economy navigates downside risks.• AUD trends. AUD outperforms on the crosses. We think this can continue given diverging policy trends between the RBA & others. Geopolitical risks intensified overnight after Russia launched a ‘new’ kind of ballistic missile for the first time in its war with Ukraine, a clear signal to the Western world that it is unlikely to take recent provocations lying...

• Market jitters. Geopolitics & ‘hawkish’ macro signals dampened sentiment & supported the USD overnight. AUD unwound yesterday’s uptick.• USD trends. The pricing in & enacting of the Trump policy agenda, coupled with geopolitical uncertainty, is a recipe for lingering USD strength.• Central banks. Odds of another near-term rate cut by the BoE & US Fed were pared back. Markets only fully discounting a RBA move by July. A few market jitters returned overnight with the rebound in risk sentiment late in the previous days trade fading. Concerns about an escalation in the Russia/Ukraine conflict is a factor keeping traders...