The major assets were all over the place on Wednesday as traders priced in top-tier economic data releases, shifting central bank expectations, and new tariff threats from the U.S.
How did the most closely-watched assets trade in the last trading sessions?
Let’s take a closer look:
Headlines:
- RBNZ cut its rates by 50bps to 3.75% as expected, Board sees rates at 3.0% by year end
- RBNZ Gov. Orr: “We are looking at lowering the official cash rate a little bit quicker than what we projected back in November”
- U.K. CPI for January: 3.0% y/y (2.8% forecast, 2.5% previous); Core CPI accelerated from 3.2% to 3.7% as expected
- U.K. PPI Input for January: 0.8% m/m (0.7% forecast, 0.2% previous); PPI Output at 0.5% m/m (0.2% forecast, -0.2% previous)
- Euro Area current account surplus rose from €25.18B to €38.4B (€30.2B forecast) in December
- U.K. house price index for December: 4.6% y/y (3.2% forecast, 3.9% previous)
- U.S. building permits for January: 1.48M (1.46M forecast, 1.48M previous); Housing starts eased from 1.50M to 1.37M (1.39M forecast)
- Trump announced plans to impose 25% tariffs on autos, chips and pharmaceuticals
- FOMC meeting minutes noted a “high degree of uncertainty” that requires members to “take a careful approach” to further rate cuts
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Trump shook the markets on Wednesday when he announced a potential 25% tariff threat on automobiles, semiconductors, and pharmaceuticals. While the announcement initially rattled traders, U.S. stocks showed some serious resilience. The S&P 500 even notched a new record close, though European markets didn’t fare as well. The German DAX led the declines, with trade-sensitive sectors taking the brunt of the selling.
Gold pulled back from its fresh record high of $2,946 but stayed relatively steady amid ongoing geopolitical tensions and the latest Russia-Ukraine peace talks. Meanwhile, bitcoin kept up its incredible run, climbing to new highs under $97,000 as crypto markets seemed unfazed by broader market jitters.
Oil continued to find support from Russia’s reduced flows through the Caspian Pipeline, with cold weather disruptions in North Dakota and talks of OPEC+ delaying planned output increases adding to supply concerns.
The U.S. 10-year Treasury yield bounced around before settling near 4.535%, as Fed minutes underscored not just the need for more progress on inflation before rate cuts but also growing worries about how emerging trade policies could hit price stability.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The major currencies saw increased volatility as central bank speculation, economic data, and geopolitical headlines kept traders on their toes.
The Asian session kicked off with the RBNZ delivering its third straight 50bp rate cut, but NZD showed resilience and bounced back from its early losses. Sentiment stayed cautious in the region as traders dissected mixed signals from the Russia-Ukraine peace talks in Riyadh, where officials held over four hours of discussions without Ukraine at the table.
In Europe, GBP got a quick boost from hotter-than-expected UK CPI data (3.0% vs. 2.8% forecast), but a stronger dollar eventually put a lid on those gains. Risk appetite took a hit after Trump floated the idea of 25% tariffs on European automobiles, pushing EUR/USD to a six-day low of 1.0424 as trade worries grew.
The dollar’s moves turned choppy during the U.S. session as markets braced for the FOMC minutes. The release highlighted officials’ growing concerns about inflation risks tied to trade policies and reinforced the need for more progress on price stability before rate cuts are on the table.
The Japanese yen ended up as the day’s top performer, defying higher U.S. yields, while the Canadian dollar struggled, held back by oil price volatility despite crude’s modest gains.
Upcoming Potential Catalysts on the Economic Calendar:
- U.K. CBI industrial order expectations at 11:00 am GMT
- Canada Industrial Product Price Index at 1:30 pm GMT
- U.S. initial jobless claims at 1:30 pm GMT
- U.S. Philly Fed manufacturing index at 1:30 pm GMT
- FOMC member Goolsbee to give a speech at 2:35 pm GMT
- Euro Area consumer confidence at 3:00 pm GMT
- Euro Area CB leading index at 3:00 pm GMT
- Bundesbank President Nagel to give a speech at 4:00 pm GMT
- U.S. crude oil inventories at 5:00 pm GMT
- FOMC member Musalem to give a speech at 5:05 pm GMT
- FOMC member Barr to give a speech at 7:30 pm GMT
- New Zealand trade balance at 9:45 pm GMT
- Australia flash PMI reports at 10:00 pm GMT
- FOMC member Kugler to give a speech at 10:05 pm GMT
- RBA governor Bullock to give a speech at 10:30 pm GMT
- Japan national core CPI at 11:30 pm GMT
Traders are in for another busy couple of trading sessions as the Euro Area prints its consumer confidence data while the U.S. drops key mid-tier reports and FOMC members take center stage.
On top of these reports, keep close tabs on geopolitical and global policy headlines that may influence overall risk sentiment!
Don’t forget to check out our brand new Forex Correlation Calculator when taking any trades!