The US index complained about the gains after Trump's victory, and Trump reiterated whether the "American Dream" can rekindle the attractiveness of the US dollar?

Asian Market Review

On Tuesday, the US dollar index continued to decline and fell to around the 105 mark. As of now, the US dollar is quoted at 105.54.

Trump: Canada's retaliatory tariffs on the United States will immediately trigger the United States to "increase the same amount of reciprocal tariffs"; US Secretary of avatradescn.commerce: If countries can prove that they can prevent the flow of fentanyl, the tariffs can be cancelled; the EU strongly condemns the United States for imposing additional tariffs on Canada and Mexico; the Secretary of avatradescn.commerce said after 5 a.m. today that he believes that Trump will avatradescn.compromise with Canada and Mexico on tariffs, or announce a reduction tomorrow.

Mega counterattacks Trump's tariff policy. Mexican President: Countermeasures against US tariffs will be announced at 12 noon on the 9th. The Canadian president said it would impose a 25% tariff on CAD 155 billion (about $107 billion) of U.S. goods. Ontario, Canada will impose a 25% export tax on electricity from the United States and remove U.S. products from liquor stores.

U.S. Treasury Secretary Becent: We are determined to lower interest rates.

New York Fed Chairman Williams: Begin to consider the impact of Trump's tariffs on prices. He expects tariffs to have a certain impact on inflation, but he stressed that there is still great uncertainty in the impact of tariffs. There is no need to adjust monetary policy at present. Fed meeting minutes discussions on balance sheets did not change the ultimate goal.

As the economic and trade prospects are facingUncertainty, the interest rate futures market is fully priced. The Federal Reserve will cut interest rates three times in 2025, with the probability of a rate cut in May exceeding 50%; the probability of the Bank of Canada cutting interest rates this month is expected to be 95%.

German CDU President Mertz: Germany will establish a 500 billion euro special defense fund.

The European avatradescn.commission proposes a financing plan worth 800 billion euros, aiming to enhance the defense capabilities of European countries and strengthen arms support for Ukraine.

Summary of institutional views

Dutch International Bank: Even if Europe and the United States break through this resistance, it will doubt its sustainability

Europe and the United States experienced a good rise yesterday as investors focused on the explosive rise of European defense stocks. There is no doubt that Europe now needs to significantly increase its defense spending. The question is, what does this mean for the forex market? Can European defense spending drive European economic growth and reduce the ECB's easing cycle?

We are skeptical that defense spending will have a significant impact on the outlook for European economic growth. After all, after the Russian-Ukraine conflict, Germany's 100 billion euro special defense fund established in 2022 has only spent about a quarter so far. We certainly don’t want to hinder the rise of European defence stocks, nor do we stifle the steepening of the European government bond yield curve, but we do have skepticism about buying the euro based on this narrative.

In fact, Europe and the United States rose mainly because of weak US economic data and the repricing of the Federal Reserve's expectations. At present, it is difficult to judge the trend of Europe and the United States, but the upcoming tariffs pose a real threat to open economies like the euro zone. Moreover, if Europe and the United States break through the resistance level of 1.0535/1.0550 for some reason, we doubt whether such an increase can continue.

Rabobank: The rebound momentum of the yen has stagnated, the problem is...

In the past few years, speculators have shorted the yen against the US dollar due to widening interest rate spreads, and people have developed a strong interest in yen arbitrage trading. However, this situation has been changing all the time. The Bank of Japan is the only G10 central bank to maintain a tightening tendency, so the yen is the best performing G10 currency so far this year.

Recently, a better-than-expected round of Japanese economic data has stimulated the view that Bank of Japan policymakers are preparing for another rate hike, probably around the middle of the year. This has inspired interest in the yen. The problem, however, is that the industry has become crowded. avatradescn.compared to the net short positions held last year, the latest CFTC speculator data shows that the net long levels of the yen have reached the highest ever.

In this case, it is not surprising that a round of profit-taking is being taken as the market is waiting for new incentives to update itThe yen is long. The yen's rebound has indeed stagnated in the past few trading days. However, Trump's remarks seem to provide impetus for rekindling interest in the yen bulls. We maintain our forecast of USD/JPY 145 by the end of the year, and there is a downside risk.

Goldman Sachs looks forward to the US February non-agricultural data: the weather impact is roughly neutral, and the pace of employment creation is steady

Non-agricultural population: 170,000; unemployment rate: 4.0%; hourly wage monthly rate: 0.3%

We estimate that the number of non-agricultural employment increased by 170,000 in February. On the positive side, big data indicators show that the pace of employment creation is steady. Furthermore, we expect catch-up recruitment and the recent surge in immigration will continue to contribute higher than the trend (although moderated). On the negative side, we expect the federal government’s layoffs (including layoffs, recruitment freezes and delayed resignation plans) to bring a limited drag, which we assume is 10,000. According to the strike report, strike workers will generate a net drag of 5,000. We expect the net effect of winter weather on employment growth (cold in February than in January but less seasonally adjusted snowfall) to be roughly neutral. We estimate that the unemployment rate remains unchanged at 4.0% on the basis of rounding, and the participation rate remains unchanged at 62.6%. We estimate that the average hourly wage has risen by 0.3% (monthly month-on-month, seasonally adjusted), reflecting a weakened wage pressure but a positive calendar effect.

Barclays looks forward to US non-farm data for February: The impact of government layoffs is moderate, and the private sector has downside risks

Non-farm population: 150,000; unemployment rate: 4.0%; hourly wage monthly rate: 0.3%

In the February employment report released next week, we expect the impact of government layoffs to be moderate at best. We expect non-farm employment to increase by 150,000, which is close to the 143,000 increase in January, while private sector employment will increase by 130,000, slightly faster than January’s 113,000 increase. We believe that the risks of these forecasts are balanced, with some models suggesting upside risks, while policy-related uncertainties suggesting downside risks for private sector recruitment.

In terms of household surveys, we expect the unemployment rate to remain unchanged at 4.0%. Just like non-farm employment, DOGE-related layoffs occurred too late to affect the unemployment rate. While the unemployment rate may fluctuate due to government layoffs, we still believe that the unemployment trend is downward, and a significant slowdown in immigration speed this year will gradually put pressure on the growth of labor supply. The monthly rate of hourly wages will grow steadily by 0.3% and annually by 0.4%. In addition, we expect the working week to increase slightly to 34.2 hours.

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