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Daily Pivots: (S1) 0.8823; (P) 0.8844; (R1) 0.8871; More…

Intraday bias in USD/CHF remains neutral and consolidations would continue above 0.8757. Upside of recovery should be limited by 0.8911 support turned resistance. On the downside, break of 0.8757 will resume the fall from 0.9200 to 61.8% retracement of 0.8374 to 0.9200 at 0.8690. Sustained break there will pave the way back to 0.8374 support.

In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption.

Daily Pivots: (S1) 1.4323; (P) 1.4399; (R1) 1.4442; More...

Intraday bias in USD/CAD remains neutral as range trading continues. Price actions from 1.4150 are seen as the second leg of the corrective pattern from 1.4791 high. On the upside, break of 1.4541 will target 100% projection of 1.4150 to 1.4541 from 1.4238 at 1.4629. On the downside, however, break of 1.4238 support will argue that the third leg has already started. Intraday bias will be back on the downside for 1.4150 and below.

In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.

The past month has seen an abrupt turn in sentiment towards the US economy and the US dollar. Whereas a month ago, the market seemed convinced the US dollar would move higher from its already historically-elevated level of 108 on a DXY basis. Now debate surrounds whether the US dollar can even hold onto its current, lower level of 103.8.

What’s changed? We certainly have not seen an end to uncertainty around US trade policy. The initial month-long grace given to Canada and Mexico was followed by another partial reprieve to April 2, but the second deferral was paired with a promise that this would be the last.

Tariffs for steel and aluminium were subsequently brought forward from April 2 to March 12 with no exemptions. China was also hit with another 10% tariff increase and Europe warned it would soon face additional measures above those for steel and aluminium, which it has retaliated against.

With the US facing entrenched capacity constraints as well as tariffs, the outlook for US inflation remains troubling, keeping interest rate risks skewed to the upside, which is supportive of term interest rates and the US dollar. What has flipped the market’s view on the US dollar is instead the growth outlook, both in absolute and relative terms.

On an absolute basis, as detailed on page 17 of our March Market Outlook, incoming data for early-2025 is materially weaker than experienced through 2023 and 2024. GDP is forecast to decline in Q1 by the Atlanta Federal Reserve’s GDPNow nowcast but, as this outcome is the consequence of a one-off pull-forward of imports to get ahead of tariffs, the truer signal is the halving of domestic demand growth to a pace well below trend.

Business surveys also point to downside risks to the currently balanced state of the labour market. This is before we see any hit to job creation from DOGE’s initiatives and a pull-back by state and local governments, let alone if activity in the housing market and consumer demand continues to soften.

The reversal in growth expectations has been as acute for the Euro Area, but in the opposite direction. A potential loss of US military support for Ukraine has this month triggered an expectation that the Continent’s governments will materially increase defence spending. Mooted plans to also increase infrastructure expenditure in Germany was also well received. Other sectors of the economy remain under considerable pressure and at risk of shocks, but still Euro Area growth is likely to return to around trend in 2026 and remain there, in contrast to the below-trend outcomes of 2023 and 2024.

Broadly, we agree with the market’s take on recent data and expectations going forward. So, in light of participants’ change of heart, we expect further weakness in the US dollar through 2025 and 2026. Q2 is likely to be an exception however, with fear over the implementation of tariffs and consequent inflation, plus evidence the US is not entering recession, to see a partial reversal in favour of the US dollar.

From spot at 103.8, we therefore see the US dollar DXY index rising briefly to 105.7 at June, then back to the current level at September and 102.6 come December. A continued gradual decline in the DXY index is then expected through 2026, to 98.9 at December 2026 and 97.8 at June 2027. Underlying the dollar view are broad-based gains for Euro, Sterling and Yen as well as CAD – in time.

However, it is important to recognise that the forecast gains for each of these currencies sees them back near average levels – at best. If the US economy deteriorates to a greater extent than we anticipate, i.e. the economy stalls or recession ensues, there is plenty of downside risk for the US dollar and blue sky for the other side of each bilateral rate.

Arguably, these risks are likely to be most prominent in the coming three-to-six months as US tariffs are implemented, retaliated against and the consequences are progressively felt. This is also the time when the effect of changes to US immigration will also begin to be seen – a negative for growth and an additional source of inflation.

While not immediately relevant to the DXY outlook, the resilience of the Asian growth and investment story has the potential to create an environment conducive to a weaker US dollar.

Chinese authorities have made it clear they will support domestic growth as much as necessary and that they are also committed to aiding economic development across the Asian region. Much of the region is also aware of the risks US tariffs pose and intent on preserving their growth pulses. As they prove able to do so, they incentivise capital transfers from the ‘safe-harbour’ of the US dollar.

While we suspect it will take time, the countries of Asia therefore have the greatest capacity to outperform the DXY trend. China’s Renminbi, which we expect to fall from CNY7.24 to CNY6.80 at June 2027 against the dollar, and India’s Rupee, from INR 87.0 today to INR79.0, are best positioned, but countries like Indonesia and Thailand also have the capacity to leverage windfalls from manufacturing and services – tourism in particular. South Korea, Taiwan and Japan are more likely to get caught up in geopolitical and trade uncertainty, and have less flexibility domestically to offset.

This analysis first appeared in Westpac Economics’ March Market Outlook. The full detail of our FX, interest rate and economic forecasts for the world can be found on pages 23–30 of the publication.

Daily Pivots: (S1) 0.6292; (P) 0.6312; (R1) 0.6345; More...

Intraday bias in AUD/USD remains neutral first as range trading continues. On the downside, break of 0.6186 will target 0.6087 support first. Firm break there will resume whole decline from 0.6941. On the upside, sustained break of 0.6407 will resume the rebound from 0.6087 to 100% projection of 0.6087 to 0.6407 from 0.6186 at 0.6506, even still as a corrective move.

In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6482) holds.

Asian markets opened the week on a positive note, buoyed by stronger-than-expected economic data from China and optimism surrounding Beijing’s latest efforts to boost domestic consumption. Investors welcomed China’s “special action plan” aimed at stimulating household spending, which aligns with Premier Li Qiang’s government report last week that named consumption growth as a top priority. The latest measures also follow commitments from financial regulators to ease consumer credit quotas and loan terms, signaling a broad push to inject liquidity into the economy and support consumer demand.

While the plan does not appear to introduce any groundbreaking new policies, its classification as an “action plan” suggests that concrete steps at the local level will soon follow. Given past challenges in reviving domestic demand, this structured approach offers hope that implementation will be more effective than previous, less-defined efforts. Investors appear to be cautiously optimistic that China’s stimulus measures will help stabilize growth, particularly amid continued weakness in real estate and private investment.

Meanwhile, US futures are trending lower, reflecting growing fears of an impending economic slowdown. Treasury Secretary Scott Bessent’s remarks over the weekend did little to reassure investors, as he acknowledged that there are "no guarantees" the US will avoid a recession. While Bessent emphasized the need to transition away from excessive government spending, his comments about market corrections being “healthy” and his dismissal of recent stock market losses failed to inspire confidence. His focus on tax policy, deregulation, and energy security was seen as a long-term strategy rather than an immediate remedy for economic concerns.

On the currency front, New Zealand Dollar is currently the strongest performer this month, despite today’s weaker services data. Swiss Franc follows behind, while Australian Dollar takes the third spot. On the weaker side, Canadian Dollar sits at the bottom, trailed by Dollar and British Pound. Meanwhile, Euro and Yen are positioned in the middle.

Technically, while Hong Kong’s HSI gains today, the broader picture suggests upside momentum is fading, as seen in D MACD. Current rally from 18671.49 may extend higher, but strong resistance is expected around the 25K psychological level, which coincides with 100% projection of 16964.28 to 23241.74 from 18671.49 at 24948.95. Break of 23198.13 support will argue that the a near term correction has already started back to 55 D EMA (now at 21988), or 22k in short.

In Asia, at the time of writing, Nikkei is up 1.21%. Hong Kong HSI is up 1.37%. China Shanghai SSE is up 0.28%. Singapore Strait Times is up 0.84%. Japan 10-year JGB yield is down -0.011 at 1.517.

NZ BNZ services falls to 49.1, slips back into contraction

New Zealand’s BusinessNZ Performance of Services Index fell back into contraction territory in February, dropping from 50.4 to 49.1. The index remains well below its long-term average of 53.0.

Key components of the survey also showed deterioration, with Activity/Sales slipping from 53.8 to 49.2, New Orders/Business falling from 50.0 to 49.4, and Stocks/Inventories declining from 50.0 to 48.0. While Employment showed a slight improvement, rising from 47.4 to 48.9, it remains in contraction.

Despite the sector’s renewed contraction, negative sentiment among businesses showed a modest improvement, with 57.8% of comments in February expressing pessimism, down from 61.9% in January. Most firms cited the challenging economic climate as their primary concern.

BNZ’s Senior Economist Doug Steel said that “while one might have hoped that the PSI would move higher again, we know that economic turning points can be messy. The brief foray above 50 in January remains the only month in the last year the PSI hasn’t been in contraction”.

China’s data shows resilient start in 2025, government unveils plan to boost consumption

China’s economy got off to a stronger-than-expected start in the first two months of the year. Industrial production grew 5.9% yoy, beating market expectations of 5.3% yoy. Retail sales also exceeded forecasts, rising 4.0% yoy compared to an expected 3.8% yoy, reflecting improving consumer demand.

Meanwhile, fixed asset investment increased by 4.1% yoy, surpassing projections of 3.2% yoy, but ongoing weaknesses in the real estate sector persisted, with property investment falling -9.8% yoy. Additionally, private investment remained flat, signaling that confidence among smaller businesses and private enterprises was subdued.

China’s National Bureau of Statistics noted that existing and new policies aimed at stimulating growth have begun to take effect, leading to steady expansion in the industrial and services sectors, improved investment, and stable employment conditions. Officials highlighted “new quality productive forces” as key drivers of momentum.

To further bolster domestic demand, China’s State Council unveiled a “special action plan” over the weekend, aiming to increase household incomes, introduce childcare subsidies, and reduce financial burdens to encourage consumption.

While the plan was widely circulated across local governments, it lacked concrete details on financial support for implementation, leaving uncertainties about its immediate impact.

ECB’s de Guindos: Trade and geopolitical risks make uncertainty worse than pandemic time

ECB Vice President Luis de Guindos expressed confidence that inflation is on track to reach the 2% target “the end of this year or the beginning of next." He added that “all indicators for services and underlying inflation are moving in the right direction.”

However, he warned that uncertainty in the global economy is "even higher than it was during the pandemic", with mounting geopolitical risks and shifting trade policies. A key concern is the more protectionist stance of the new US. administration, which de Guindos sees as a major departure from multilateral cooperation. "This is a very important change, and a big source of uncertainty," he warned.

Despite improving conditions—real wages rising, inflation easing, and financing conditions loosening—consumption in the Eurozone remains weak. De Guindos attributed this sluggish demand to consumer sentiment, noting that households are hesitant to spend due to fears about the medium-term economic outlook. "The possibility of a trade war or wider geopolitical conflict has an impact on consumer confidence," he noted.

On the fiscal front, de Guindos acknowledged the massive defense spending plans by European governments as "certainly a decision in the right direction”. Nevertheless, he cautioned that it’s too early to determine the full economic impact. While increased defense investment is likely to support growth, he believes it will have only a limited effect on inflation.

Four central banks take center stage amid global data deluge

Central bank policy decisions will dominate market attention this week, as Fed, BoJ, BoE and SNB each convene to set monetary policy. The announcements come against a backdrop of critical data releases, including inflation figures from Canada and Japan, employment reports from the UK and Australia, retail sales updates from the US and Canada, as well as GDP from New Zealand.

Fed is widely expected to hold rates steady at 4.25-4.50%, with virtually no chance of a surprise move. While markets anticipate no immediate change, there remains keen interest in the new economic projections. Back in December, the median forecast called for just two rate cuts by year-end, bringing the rate down to 3.75–4.00%. Any downward revision to this path would solidify expectations for a June cut, making it in line with Fed fund futures pricing. Additionally, by the end of 2027, Fed sees rates back at 3.00–3.25%, marginally above the longer-run neutral estimate at 3.00%. Markets will also watch whether Fed's new projections suggest faster pace of reaching neutral, which would in turn indicate a dovish turn on the economic outlook.

BoJ is also expected to hold rates steady at 0.50%, with 61 of 62 economists in a recent Reuters poll forecasting no change this week. poll. However, expectations are growing for a rate hike later this year, with 18 of 61 economists predicting a move to 0.75% in Q2, while 40 of 57 see it happening in Q3. The timing will largely depend on wage negotiations, which has so far been strong. Many of Japan’s largest corporations already met union demands for significant pay raises. This raises the possibility of an earlier-than-expected hike, and markets will be looking for any guidance from BoJ Governor Kazuo Ueda regarding the bank’s next steps.

BoE will also hold rates steady at 4.50%, maintaining its measured approach of one 25bps cut per quarter. Inflation expectations remain sticky, with the latest BoE survey showing that five-year inflation expectations rose to 3.6% in February, up from 3.4% in November—the highest level since 2019. This could keep the majority of the MPC hesitant to ease policy further prematurely. The key question at this meeting will be whether more members join Catherine Mann and Swati Dhingra in voting for a more aggressive loosening of monetary policy.

In contrast, SNB is forecast to cut its key policy rate by another 25bps, bringing it down to 0.25%. Swiss inflation dropped to just 0.3% in February, the lowest since April 2021, which strengthens the argument for another rate cut. With inflation now sitting at the lower end of the 0-2% target range, policymakers are likely to lower rates further to prevent a deflationary environment. Market expectations suggest that there is already a 20% probability that SNB will cut rates again in June, bringing interest rates down to 0%.

Here are some highlights for the week:

• Monday: New Zealand BNZ services; China industrial production, retail sales, fixed asset investment; Canada housing starts; US retail sales, Empire State manufacturing, business inventories, NAHB housing index.
• Tuesday: Japan tertiary industry index; Germany ZEW economic sentiment; Eurozone trade balance; Canada CPI; US housing starts and building permits, industrial production.
• Wednesday: New Zealand current account; Japan BoJ rate decision, trade balance, machine orders; Eurozone CPI final; Fed rate decision.
• Thursday: New Zealand GDP; Australia employment; SNB rate decision, Swiss trade balance; Germany PPI; BoE rate decision, UK employment; Canada IPPI and RMPI; US jobless claims, Philly Fed survey, current account, existing home sales.
• Friday: New Zealand trade balance; Japan CPI; UK Gfk consumer confidence; Eurozone current account; Canada retail sales, new housing price index.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6292; (P) 0.6312; (R1) 0.6345; More...

Intraday bias in AUD/USD remains neutral first as range trading continues. On the downside, break of 0.6186 will target 0.6087 support first. Firm break there will resume whole decline from 0.6941. On the upside, sustained break of 0.6407 will resume the rebound from 0.6087 to 100% projection of 0.6087 to 0.6407 from 0.6186 at 0.6506, even still as a corrective move.

In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6482) holds.

Key Highlights

• EUR/USD started a fresh increase above the 1.0800 resistance.
• It traded below a short-term bullish trend line with support at 1.0880 on the 4-hour chart.
• GBP/USD is consolidating gains above the 1.2800 resistance zone.
• Gold surged to a record high and tested the $3,000 zone.

EUR/USD Technical Analysis

The Euro remained strong above 1.0750 against the US Dollar. EUR/USD formed a base and climbed above the 1.0800 resistance zone.

Looking at the 4-hour chart, the pair settled above the 1.0800 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair even tested the 1.0950 zone before it started a consolidation phase.

There was a move below the 1.0900 level. Besides, the pair traded below a short-term bullish trend line with support at 1.0880 on the same chart.

On the upside, the pair is facing resistance near the 1.0945 level. The next major resistance is near the 1.0965 level. The main resistance is now forming near the 1.0980 zone. A close above the 1.0980 level could set the tone for another increase. In the stated case, the pair could even clear the 1.1100 resistance.

On the downside, immediate support sits near the 1.0820 level. The next key support sits near the 1.0800 level. Any more losses could send the pair toward the 1.0765 level. The main support could be 1.0750.

Looking at GBP/USD, the pair remained stable and might soon now aim for a move toward the 1.3000 resistance.

Upcoming Economic Events:

• US Retail Sales for Feb 2025 (MoM) – Forecast +0.7%, versus -0.9% previous.

China’s economy got off to a stronger-than-expected start in the first two months of the year. Industrial production grew 5.9% yoy, beating market expectations of 5.3% yoy. Retail sales also exceeded forecasts, rising 4.0% yoy compared to an expected 3.8% yoy, reflecting improving consumer demand.

Meanwhile, fixed asset investment increased by 4.1% yoy, surpassing projections of 3.2% yoy, but ongoing weaknesses in the real estate sector persisted, with property investment falling -9.8% yoy. Additionally, private investment remained flat, signaling that confidence among smaller businesses and private enterprises was subdued.

China’s National Bureau of Statistics noted that existing and new policies aimed at stimulating growth have begun to take effect, leading to steady expansion in the industrial and services sectors, improved investment, and stable employment conditions. Officials highlighted “new quality productive forces” as key drivers of momentum.

To further bolster domestic demand, China’s State Council unveiled a “special action plan” over the weekend, aiming to increase household incomes, introduce childcare subsidies, and reduce financial burdens to encourage consumption.

While the plan was widely circulated across local governments, it lacked concrete details on financial support for implementation, leaving uncertainties about its immediate impact.

New Zealand’s BusinessNZ Performance of Services Index fell back into contraction territory in February, dropping from 50.4 to 49.1. The index remains well below its long-term average of 53.0.

Key components of the survey also showed deterioration, with Activity/Sales slipping from 53.8 to 49.2, New Orders/Business falling from 50.0 to 49.4, and Stocks/Inventories declining from 50.0 to 48.0. While Employment showed a slight improvement, rising from 47.4 to 48.9, it remains in contraction.

Despite the sector’s renewed contraction, negative sentiment among businesses showed a modest improvement, with 57.8% of comments in February expressing pessimism, down from 61.9% in January. Most firms cited the challenging economic climate as their primary concern.

BNZ’s Senior Economist Doug Steel said that “while one might have hoped that the PSI would move higher again, we know that economic turning points can be messy. The brief foray above 50 in January remains the only month in the last year the PSI hasn’t been in contraction”.

Full NZ BNZ PSI release here.

ECB Vice President Luis de Guindos expressed confidence that inflation is on track to reach the 2% target “the end of this year or the beginning of next." He added that “all indicators for services and underlying inflation are moving in the right direction.”

However, he warned that uncertainty in the global economy is "even higher than it was during the pandemic", with mounting geopolitical risks and shifting trade policies. A key concern is the more protectionist stance of the new US. administration, which de Guindos sees as a major departure from multilateral cooperation. "This is a very important change, and a big source of uncertainty," he warned.

Despite improving conditions—real wages rising, inflation easing, and financing conditions loosening—consumption in the Eurozone remains weak. De Guindos attributed this sluggish demand to consumer sentiment, noting that households are hesitant to spend due to fears about the medium-term economic outlook. "The possibility of a trade war or wider geopolitical conflict has an impact on consumer confidence," he noted.

On the fiscal front, de Guindos acknowledged the massive defense spending plans by European governments as "certainly a decision in the right direction”. Nevertheless, he cautioned that it’s too early to determine the full economic impact. While increased defense investment is likely to support growth, he believes it will have only a limited effect on inflation.

The new week will be packed with economic data and decisions from key central banks.

On Monday, US retail sales for February are expected to show a rebound after a disappointing January.

Early on Wednesday, the Bank of Japan’s key interest rate will be in focus. The consensus forecast is for it to remain at 0.5%. However, be prepared for unexpected decisions and sharp comments that could affect the Yen.

The focus will shift to the US at the end of Wednesday. The Fed is not expected to make any policy changes, but the investment world will be watching closely to see when the next easing will take place.

On Thursday morning, the Swiss Central Bank will release its quarterly interest rate decision. On average, analysts are predicting a 25-point cut to 0.25%, which would be a three-year low.

On Thursday afternoon, the Bank of England will release its interest rate decision. Following February’s cut, it is expected to be unchanged this time. However, Friday’s batch of weak macroeconomic data could strengthen the position of the doves on the committee.