Global Macro Update
Very rarely, markets react to foreign policy developments - however at this stage, they are responding as markets are perplexed with flurry of moves in Geopolitics .
Trump world could look more like the one envisioned by Charles Lindbergh in? 1930s - he argued U.S. should completely avoid involvement in Europe? -At that? time, US rejected? Lindbergh-ism? and? since then markets used to take? US- Europe axis of Democracies for granted - all on a sudden, thats being negated with Trump viewing? alliances as dependencies to be exploited by extracting benefits and the frightening? prospect of US joining? Axis of Autocracies.
After two record high closes,equities ran into a red rollback sign- Divergence in the performance between? stocks of Europe & US since inauguration -Thursday slide in? USD Index? below 100 dma for? first time since Oct - hint markets dont like what they see in US - air of post Trump euphoria is turning out to be a despair ?
Germany’s elections on Sunday will take place against a backdrop of economic, societal and political turmoil.?Friedrich Merz (CDU/CSU) is the frontrunner to be the next chancellor - could signal a shift in fiscal policy, ?improving Germany’s weak growth outlook?and offering?some support for the EUR.
Increased EU military spending - Higher bond yields -compounded by hawkish comments from the ECB.?Will spending be undertaken at the European level? Or will a failure to reach any collective agreement put pressure back on local & national budgets.Zelenskiy says talks with US envoy Kellog 'gives hope'. Kallas warns against Ukraine talks giving in to Russian aggression.Resistance strong 1.0506 -34 Ranged into Election outcome
Following its macroprudential work conference for 2025, PBoC said it would enhance the yuan’s functions in cross-border payments - normally such? internationalisation measures stemming from overconfidence precede currency crisis.GfK’s consumer index improved from -22 in Jan to -20 in Feb. UK retail sales, Flash PMIs today.- all about USD vulnerabilities on account of extraneous reasons. No need to fight this upmove - 1.2616 holds for 1.2734
USD/JPY extended its decline leading into Japan’s inflation data , but rebounded sharply -a classic “buy the fact” reaction-? Ueda signaled potential bond market intervention as well -strong concerns? over fiscal strain resurface- 149.30 151.30.
Dollar move not to have impact as Feb Policy error has its echo with battles being waged in multiple fronts - tiny down-move yesterday drew loud cheers - indicating how short the market is - vicious cycle of intervention &? liquidity moves- OMOs in this QT world won't be passed off easily as they were in QE world.86.55 86.85 .?