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The real world is changing and so is the world of FX.

There was a time when if you had a 1.4% drop in the S&P 500, the US dollar would be much higher against everything but the yen and Swiss franc. That’s not the case today as it’s lower against the euro/pound and only marginally higher against the commodity currencies.

What’s changed?

Tariff headlines in Trumps first term and earlier this year boosted the dollar but now they don’t. I believe this is largely about signaling. In the past, the market was confident that Trump’s top priorities were boosting the stock market and GDP. That faith is broken.

Instead, the White House has increasingly signaled that it’s willing to ‘detox’ or take short term pain to reach long term goals like decreased government spending or re-shoring manufacturing. The market doesn’t like it and sees to result as a weakened US economy relative to the world.

This isn’t historically unique. The US dollar also suffered early in the housing/financial crisis and slumped after 9/11 and the dot com bust.

This article was written by Adam Button at www.forexlive.com.

A report from Bloomberg was out about an hour ago and highlights the state of play between the US and Europe in the tariff war, citing sources:

• EU officials expect 10-25% tariff rate on all or most goods
• European Union is identifying concessions it’s willing to make in a term sheet
• They were told there is no way to avoid tariffs next week
• Areas for negotiations on the punitive trade measures, including lowering its own duties, mutual investments with the US as well as easing certain regulations and standards
• Non-tariff issues such as the VAT, digital taxes and several EU regulations and food standards featured prominently during the talks in Washington
• The EU may be eyeing US services imports in retaliation

Speaking of services tariffs, this is a good point.

The US dollar is broadly lower today and that’s helped to life the euro by 29 pips.

This article was written by Adam Button at www.forexlive.com.

I have been waiting for this update in light of yesterday’s trade data and it’s not good.

It pegs Q1 GDP growth at -2.8% from -1.8%. If there’s any good news it’s that the gold adjusted model is only a -0.5% decline.

“After recent releases from the US Census Bureau and the US Bureau of
Economic Analysis, the nowcast of the contribution of net exports to
first-quarter real GDP growth declined from -3.95 percentage points to
-4.79 percentage points in the standard model and from -1.92 percentage
points to -2.53 percentage points in the alternative model”

This article was written by Adam Button at www.forexlive.com.

• Prelim was 57.9
• Prior was 64.7
• Current conditions 63.8 vs 63.5 prelim
• Expectations 52.6 vs 54.2 prelim
• 1-year inflation 5.0% vs 4.9 prelim
• 5-year 4.1% vs 3.9% prelim
• two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009

This report has turned highly political but the rising inflation expectations numbers are going to be hard for the Fed to ignore with the five-year at a 32-year high.

Sentiment is also worsening

“This month’s decline reflects a clear consensus across all demographic and political affiliations,” UMich survey says.

It’s not just Democrats who are seeing ‘expectations’ decline anymore.

This article was written by Adam Button at www.forexlive.com.

I have been dogging the UMich consumer sentiment survey and its political skews for 15 years. Now all the sudden the rest of the world seems to have caught on and the report is seen as filler.

Still, I’m curious to see the direction of sentiment as this one tanked early and presumably could start to bottom first. The consensus today on the final reading is 57.9, which is no change from the prelim data.

One update I will be watching for is the latest Atlanta Fed GDPNow reading. It’s currently at -1.8% but removing gold from trade boosts that by 2 percentage points. This update includes yesterday’s advance trade numbers and today’s PCE report.

This article was written by Adam Button at www.forexlive.com.

S&P 500 futures are down 8 points, which isn’t bad given all the angst in the world. I tend to think some of the quarter-end rebalancing flows are at work in the past couple days but time will tell.

Another trend that’s unfolding is a re-think on who will be the big winners in the AI race. I believe there is a shift now going from the benefits going to the people who make the platforms (it’s being commoditized) to the people who use AI (it’s harder to game out the winners).

In that context, data center company CoreWeave is launching an IPO today and early indications are poor, as pricing and size have been lowered. Nvidia also had to step in with a big order. It’s priced at $40/share, keep an eye on how it trades (it will likely take a few hours to open).

This article was written by Adam Button at www.forexlive.com.

In early March, Hong Kong industrial conglomerate CK Hutchison agreed in principle to a deal to sell 45 ports globally to Blackrock with the deal set to be signed April 2.

Now, that deal won’t happen as China’s market regulator will ‘review’ the deal, halting it, or at least the two ports in Panama won’t be sold.

There were rumours that Chinese leadership was furious with the deal as they viewed it as leverage in any broader deal with the United States.

On the other side, NBC reported recently that Trump directed the US military to draw up options to increase the American troop presence in Panama … [including] the less likely option of U.S. troops’ seizing the Panama Canal by force.”

This is an interesting one but Xi does seem to grasp the transactional nature of the Trump admin and the importance of leverage.

This article was written by Adam Button at www.forexlive.com.

Radio-Canada reports that Canadian PM and US President will speak at some point this morning.

Carney is low solidly leading in the polls ahead of the April 28 election (still a long ways away) and this will be the first phone call between them. If we get some fresh ’51st State’ rhetoric from Trump, then all bets are off.

Carney’s comments touched a nerve yesterday.

“The old relationship we had with the United States based on deepening
integration of our economies and tight security and military cooperation
is over,” he said. “It’s clear the US is no longer a reliable partner.”

This article was written by Adam Button at www.forexlive.com.

Core PCE (excluding food & energy):

• Prior was +2.6% (revised to +2.7%)
• Core m/m +0.4% vs +0.3% exp
• Unrounded core PCE +0.38% vs +0.285% m/m prior
• PCE excluding food, energy and housing % m/m vs +0.3% m/m prior
• Supercore (services ex-shelter) % m/m and % y/y
• Services inflation +0.375% m/m

Headline PCE

• Headline PCE +2.5% y/y vs +2.5% expected
• Deflator +0.3% m/m vs +0.3% expected
• Unrounded headline +0.34% vs +0.325% m/m prior

Consumer spending and income for February:

• Personal income +0.8% vs +0.4% expected. Prior month +0.9% (revised to +0.7%)
• Personal spending +0.4% vs +0.5% expected. Prior month -0.2% (revised to -0.3%)
• Real personal spending +0.1% vs -0.5% prior (revised to -0.6%)
• Savings rate 4.6% vs 4.6% prior

Treasury yields are lower on this despite slightly higher yields. The dollar was little change initially but is now slipping. I suspect the market is a bit more focused on the spending numbers than the inflation data, given tariff worries.

This article was written by Adam Button at www.forexlive.com.

• Prior month 0.2%
• Canada GDP For January 0.4% vs 0.3% estimate
• Advanced estimate for February 0.0% MoM

Details:

• Real GDP grew 0.4% in January, following a 0.3% rise in December

• 13 of 20 sectors saw growth in January

• Goods-producing industries led the increase, up 1.1%—the largest gain since October 2021

• All industrial sectors within goods production expanded

• Mining, quarrying, oil and gas extraction, and manufacturing were the main drivers

More details:

• Services-producing industries rose modestly by 0.1%

• The mining, quarrying, and oil and gas extraction sector grew 1.8% in January, with all three subsectors expanding in the month. This was the second consecutive month of growth for the sector.

• The manufacturing sector rose 0.8% in January, following two consecutive monthly declines, as the durable-goods manufacturing aggregate (+2.0%) rebounded from the decline recorded in the previous month, with 8 of 10 subsectors rising in January.

• The utilities sector was among the top contributors to growth for a second consecutive month, expanding 2.7% in January, following a 5.0% increase in December.

• Construction rose 0.7% in January as most types of construction activity were up

• Retail trade was the largest detractor to growth in January, after being the largest contributor to growth in December, contracting 0.9% in January as activity in 6 of 12 subsectors decreased..

This article was written by Greg Michalowski at www.forexlive.com.

I posted during the Asia timezone on the range of expectations for the imminent PCE data:

US inflation (PCE) data due Friday – critical ranges to watch – clustered around +0.3% m/m

Check out that post for the full thing, but if you just want the numbers:

Core PCE Price Index m/m

• 0.1% to +0.3%
• of the 54 forecasters (Reuters poll)
  • 6 are at +0.2%,
  • 35 are at +0.3%,
  • and 13 are at 0.4%

and for the y/y

• 2.4% to 2.8%
• of the 39 respondents for the y/y projection
  • 1 is at 2.4%
  • 2 are at 2.5%
  • 3 are at 2.6%
  • 18 are at 2.7%
  • 15 are at 2.8%

The data is due at 0830 US Eastern time / 1230 GMT:

This article was written by Eamonn Sheridan at www.forexlive.com.

• Kremlin says Putin did not raise idea of Ukraine being put under temporary administration with Trump.
• Says Ukrainian army is out of control and not heeding orders from Ukraine’s leadership.
• Says armed nationalist forces in Ukraine are gaining strength which is why Putin mentioned idea of temporary external administration.
• Says Ukraine is continuing to strike Russian energy targets despite moratorium on attacks.
• Says Russia reserves right to pull out of the moratorium on energy strikes if Kiev violates accord.
• Says Russia is respecting the agreement for now and is not striking Ukrainian energy targets.
• Says it would be however illogical to stand by and watch Ukraine strike Russian energy targets ‘every night’.

It still looks like a long way to go before seeing the war in Ukraine ending.

This article was written by Giuseppe Dellamotta at www.forexlive.com.