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Markets await more Trump tariff threats and Powell
Updated Updated Mon, 2025 February 10 10:10
- Dollar edges higher, stocks higher as latest tariffs swirl
- Gold trades at record high on haven demand and US revaluation speculation
- Markets await Fed Chair Powell and US CPI data
- Oil prices advance despite concern over more US tariffs
FX: USD had a relatively quiet day to kick off the week, with small buying through the US session. Tariff news was taken in its stride telling us perhaps that there is a little bit of fatigue around Trump headlines on trade wars. That said, the underlying bid to the dollar should continue, in no small part due to the very solid, if distorted, NFP data from Friday. Eyes are on Wednesday’s US CPI release and today’s Fed Chair Powell’s testimony.
EUR dipped at the end of last week and now nears 1.03. The next downside level is 1.0209. Tariffs on autos seem to be the ‘elephant in the room’ regarding the eurozone and Trump. Steel is in the firing line currently, though the EU did offer concessions on autos late last week.
GBP peaked above 1.25 again last week with bears targeting 1.23 and below. The ‘dovish’ BoE rate cut last week may not have been so dovish – certainly the bank said afterwards that policy needs to remain restrictive. We hear from hawk-turned-dove Mann today, concerning Britain’s economic prospects, while a text release is expected from Governor Bailey.
USD/JPY upside appears capped by the 100-day and 200-day SMAs around 152.68/70. The yen did underperform on the steel tariff news. Optimistic commentary from Japanese PM Ishiba on avoiding higher tariffs from the US failed to support the yen.
AUD outperformed but there’s a resistance zone around 0.63. USD/CAD seems trapped in the longer-term range again, aside from the crazy volatile price action from last Monday. News of reciprocal tariffs on imported steel and aluminium to the US saw the loonie soften. Canada is one of the US’ top suppliers.
US stocks: The benchmark S&P 500 closed in the green, up 0.67% at 6,066. The tech-laden Nasdaq settled higher, up 1.24% at 21,756. The Dow Jones finished up 0.38% at 44,47o. Tech led some of the gains again while defensives lagged. Semiconductor strength was notable with Nvidia up 3.6% and Broadcom rising 4.5%. Energy was actually the best performing sector amid firmer crude prices.
Asian stocks: Futures are mixed. Stocks tracked mixed as traders digested more tariffs and the decent NPF US jobs data. The ASX 200 suffered as miners got hit on the tariff threat. The Nikkei 225 saw two-way price action as PM Ishiba said Japan could avoid higher US tariffs. The Hang Seng and Shanghai Comp were positive with Hong Kong outperforming on tech and telecom strength.
Gold made a fresh record peak through $2,900 at $2911. Bullion is already up more than 10% year-to-date, having hit a series of consecutive record highs along the way. Tariff concerns that risk higher inflation and slower economic growth are spurring demand for safe haven assets like gold. Stories around the US revaluing their holdings might also be helping spur demand. China has also allowed insurance companies to hold gold on their balance sheets.
Day Ahead – Fed Chair Powell semi-annual testimony
Fed Chair Powel; will appear before Congress on Tuesday and Wednesday. He will likely highlight significant economic uncertainty relating to Trump’s policy mix. With data still resilient, there is little chance of an imminent rate cut, while there is roughly a 50:50 chance of the next reduction being at the June FOMC meeting.
This all means there is no reason for him to leave the wait-and-see, higher for longer bias intact. One slightly overlooked piece of data from Friday was the inflation expectations part of the Michigan consumer confidence figures. The numbers reaccelerated with especially the one-year metric jumping sharply from 3.3% to 4.3%.
Chart of the Day – Nasdaq nears record highs
US big tech has been the notable laggard in recent weeks. The usual drivers have been in play: yields edging higher due to a double whammy of rising wage inflation and household inflation expectations late last week. These were coupled with disappointing guidance from Amazon (currency related) on top of massive capex plans. But the Mag 7, among them, do represent a colossal weighting in indices which continues to help indices. The mid-December record top sits at 22,133 with near-term resistance around 21,943/5. The 21-day SMA is at 21,399.
