Daily Global Macro Update
It? still remains to be seen as to whether Tariff threats by the Trump administration would act as transactional tool or create a challenging backdrop - As of now , this continued? uncertainty? over tariffs is a key driver after Trump said he is planning to hit goods made in the EU with tariffs of 25%.
On the real economy , While? data hasn’t really changed much, the imbalance is still obvious with all of the strength coming from upper income spenders, AI Capex & govt. Softness has been seen elsewhere.
This K shaped economy gets further bolstered? as the? House passed a budget blueprint bill ( close vote of 217 to 215) to pave the way for around $4tr of tax cuts – at the cost of? $2tr reduction probably? in Medicaid & food stamps.
The consensus spots the shift in priorities of Trump administration- stock markets?no longer appear to be their yardstick to measure success - ?Bond yields are their new North Star - appears? Bessent could continue to talk down the yields - so long he sounds credible, market might respect - but you cant run this gargantuan? deficit and hope for lower yields (10 year yield? has traded between 4.17 % and 4.79 % since election day)
US New home sales fell to? 657K vs 680K - lofty inventory-to-sales means builders will be cautious as they navigate? moderating macroeconomic environment.
These tariffs could hit as much as €28bn of EU's? exports. EU vowed to respond “firmly and? immediately” to “unjustified” trade barriers -it stands ready to retaliate swiftly .Resilient 1.0534 2025 top - EUR appears less reactive to macro & newer? geopolitical realities -Range1.0430 - 1.0480
Despite the wave of optimism in this Tech boom,? China? continues its caution about USDCNY - multifold scrutiny of overseas investments by domestic companies. Europe - China Axis opens up as EU trade chief Maros Sefcovic plans China trip .
Turbulence for Starmer before meeting - Trump appeared to pour cold water on the prospect of a US military backstop for Ukraine as part of any peace deal - key UK & European demand UK services firms report falling profits and morale, higher costs - CBI.This week's 1.2607 low & last week's 1.2564 base are vulnerable .
Japan's new births fell again in 2024 for a ninth straight year - fell below the 1 million mark for the first time in 2016 - has been falling further since.The number of deaths hit a record high of 1.62 million in 2024. This demographic sword is adequate to push USDJPY higher .Short-term bounce with ability to hold? 149.30 gives hope.
Yesterday's? high should? be the first layer of resistance-?