The resignation of chief economic advisor Gary Cohen (6 March) after disagreeing with steel and aluminum tariffs has led to a rise in influence of trade hawks in the White House, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.

Key Quotes

“The firing of Secretary of State Tliierson (13-Mar), Resignation of National Security Advisor McMasters (23 Mar) both replaced with foreign policy hawks (State: Pompeo; NSA: Bolton).”

“The 20pt swing against the Republican Party and upset Democrat victory in the Pennsylvania special election (14-Mar).”

“A rise in calls for gun control since Marjory Stoneman Douglas High School Shooting in Parkland Florida on 14-Feb.”

“Former Russian spy poisoned by a nerve agent in London (4 Mar). UK expels 23 Russian diplomats (14 Mar). 20 other countries expel Russian diplomats, including the USA (26 Mar).  Trump calls to congratulate Putin on Russian Presidential election win (21 Mar).”

“Former FBI Director McCabe fired two days before his retirement (16 Mar); Trump sends out many tweets attacking Mueller investigation, claiming a deep state conspiracy.  Trump’s lawyer leading the contact with the Mueller investigation, Dowd, calls for Mueller investigation to be closed.  Dowd resigns, (22-Mar). Trump is reported to be finding it difficult to find a replacement.”

“Trump steel and aluminum tariff news (1 Mar), the response is widespread criticism from Republicans in Congress, US business and other countries.  Cohen resigns (6 Mar). Trump orders tariffs, but winds these back to exclude Canada and Mexico (8 Mar).  Further exemptions are provided to Argentian, Australia, Brazil, Canada, Mexico, EU and South Korea (21 Mar).”

“Rumours increase during March that the US plan wide-ranging tariffs against China.  Trump orders tariffs to apply to $50bn of Chinese imports, and restrictions on Chinese investment in US companies (22 Mar). China announces retaliatory tariffs on $3bn of US imports. Fears of a trade war cause a sharp fall in US and global equities after the 21/22 China Tariff news.”

“US strikes a new trade deal with South Korea (27 Mar) where US gains some concessions on auto trade.”

 

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In the week of Mar 26 – 29, Brazilian assets swung to the tune of global market volatility, but in the end, the BRL tracked an external decompression, posting a better-than-peer weekly performance with small gain of 0.4% (reaching back around 3.30/USD), points out the research team at Rabobank.

Key Quotes

“The belly of the (DI) yield curve kept rallying (for the week, down 12-13bps at 2020s/2021s) as the Copom minutes and Q1 inflation report confirmed the BCB’s flight plan to cut rate in May, with a likely pause in June. The market (ourselves included) continue to perceive odds skewed to the downside when it comes to medium-term inflation and Selic rate forecasts.”

“The reports on real activity out in recent days reaffirm a gradual but consistent recovery.”

“For the coming week, the macro calendar features February industrial production (Tue). The results will provide more colour on the pace of the economic recovery in Q1.”

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   •  Builds on overnight rebound from fresh YTD lows amid subdued USD demand.
   •  Strong follow-through buying needed to confirm near-term bottom formation.
   •  Next week’s important releases and RBA decision would determine the next direction.

The AUD/USD pair finally broke out of its Asian session consolidation phase and is now looking to build on the momentum beyond the 0.7700 handle.

The pair caught some fresh bids on Friday and traded with a positive bias for the second consecutive session. A subdued US Dollar demand was seen as one of the key factors assisting the pair to build on overnight rebound from fresh YTD lows. 

In absence of any fresh fundamental trigger, holiday-thinned liquidity conditions seems have prompted some short-covering move and further collaborated to the pair’s goodish rebound back to the 0.7700 handle.

It, however, remains to be seen if the up-move is backed by any genuine buying or is solely led by some short-covering move. Hence, it would be prudent to wait for a strong follow-through buying interest before confirming the pair might have bottomed out in the near-term.

Moving ahead, next week’s important macro releases, scheduled at the start of a new month and the latest RBA monetary policy update, will now be looked upon for some fresh directional impetus.

Technical levels to watch

Any subsequent up-move now seems to get extended towards the 0.7745-50 supply zone, above which the pair is likely to dart back towards reclaiming the 0.7800 handle. On the flip side, weakness back below 0.7675 immediate support might negate prospects for any further up-move and drag the pair back towards 0.7640 intermediate support en-route the 0.7600 handle.
 

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The News swirling around Trump and his administration in March has kept heads spinning trying to keep up, according to Greg Gibbs, Analyst at Amplifying Global FX Capital. 

Key Quotes

“This includes, among other issues: firings and resignations from his administration; a rise in influence of trade and foreign policy hawks; trade tariff announcements; firing of ex-FBI Director McCabe; pressure on the Muller investigation to be closed; Trump’s head lawyer resigning; a deepening and widening Mueller investigation; mixed messages on Russia; sex scandals; a big swing against a Trump-endorsed candidate in the Pennsylvania Special election.”

“There is little reason to expect a respite in the White House drama.  Ex-FBI Director Comey is set to release his tell-all book and give a TV interview in April.  Trump is trying to hire more lawyers.  There is talk of a Summit with the Russian leader, despite the suspicions of collusion, Facebook is likely to face more scrutiny over its role in Russian election meddling, Mueller is not going away and in fact, will loom larger.  The approaching mid-term elections are likely to heighten fears of erratic behaviour.  If Democrats take control of one or both houses, the focus on the Mueller investigation is likely to increase, raising the odds of impeachment proceedings.”

“Political uncertainty at times appears to have weakened the USD, although it has appeared to shake-off such developments in recent weeks.  We continue to see the approach of mid-term elections heightening risk potentially undermining the USD.”

 

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   •  JPY underpinned by slightly better Japanese unemployment rate.
   •  Subdued USD demand fails to lend any support and stall the downfall.
   •  Investors look forward to next week’s key releases for fresh impetus.

The USD/JPY pair extended its rejection slide from the 107.00 handle and continued losing ground for the second consecutive session on Friday.

The pair met with some fresh supply following the release of a slightly better-than-expected Japanese unemployment rate, which to a larger extent offset softer Tokyo Core CPI and prelim Japanese industrial production figures.

This coupled with a subdued US Dollar demand, amid holiday thinned liquidity conditions, did little to lend any support and stall the pair’s slide to the 106.20-15 band. 

With most major global markets shut to celebrate the Easter long weekend, the pair now seems more likely to enter a consolidation phase ahead of next week’s important macro releases, including the keenly watched NFP, scheduled at the start of a new month. 

Technical levels to watch

Bulls might try and defend the 106.00 handle, below which the pair could drop back towards retesting the 105.40 horizontal support. On the upside, 106.60 level now seems to act as an immediate resistance, which if cleared could assist the pair to make a fresh attempt towards conquering the 107.00 handle.
 

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