The global trade war has expanded and concerns about the US recession have intensified!

Asian Market Review

On Thursday, after Trump's latest threat to impose tariffs on European imports, the US dollar index surged and fell above the 104 mark. As of now, the US dollar price is 103.98,

The US PPI monthly rate in February recorded 0%, lower than the expected 0.3%, the smallest increase since July 2024. U.S. short-term interest rate futures still show that the Federal Reserve will cut interest rates in June after the initial request and PPI data were released.

Trump: If the EU does not cancel the spirits tax, it plans to impose a 200% retaliatory tariff on wine and champagne;

Correspondent: Canada's retaliatory tariffs have become threatening. Trump will always respond with greater strength and stronger means;

Treasury Secretary: Tariff negotiations can be held in all areas except metals and cars;

British media: Tesla warned the Trump administration that tariffs may lead to an increase in its automobile production costs in the United States.

Kegong: The proposal for a 30-day ceasefire is too hasty and needs to be updated according to Russia's interests.

Russian and US leaders have not confirmed that they will make a call;

Putin: Agree to the ceasefire proposal, but it must aim to achieve long-term peace and resolve the root causes of the conflict, and may discuss implementation with Trump. If Russia and the United States reach an agreement on energy cooperation, they can provide natural gas supply to Europe;

Trump: Willing to meet or talk with Putin.

US media: The United States proposes to Israel and Hamas to extend the ceasefire time.

US media: The United States will impose more sanctions on Russia's oil, gas and banking industries. The U.S. Treasury Department announced sanctions on Iranian Oil Minister Parkernejad.

Summary of institutional views

Westpac: The Australian dollar is becoming increasingly stalemate, and the weakening of the US particularity is good for the Australian dollar

The Australian dollar against the US dollar AUD/USD is in between two opposing forces: chaotic US policies are increasingly damaging the risk of US dollar growth, while global markets are facing pressure to deleverage. The Australian dollar is becoming increasingly stalemate, lacking a clear direction, and being sandwiched between avatradescn.competing narratives.

On the upside is that the accumulation of growth risks in the United States and the long-term policy uncertainty weakens the advantage of the US dollar's yield, and the medium-term outlook for the Australian dollar is obviously more constructive. Tariffs should have brought more serious downside risks to growth in non-US regions, but frequent policy repetition, chaotic implementation and avatradescn.communication have more obviously disrupted the prospects of the United States. Despite the decline in U.S. stocks, the Australian dollar showed resilience. The momentum of this view is growing as the uncertainty shock of US policy weakens the particularity of the United States.

The reciprocal tariffs on April 2 may trigger a strategic sell-off of the Australian dollar/USD. The medium- and long-term outlook shows that the US dollar may now be structurally weak, but the degree of impact of each currency is differentiated.

Goldman Sachs: The latest inflation data shows that the core PCE in the United States in February may be higher than expected...

The US February CPI released last night was lower than market expectations, but the changes in the sub-item showed structural differentiation: air ticket prices and auto insurance prices fluctuated sharply, from the main "contributors" in January to "drag bottles" in February, but these two indicators are not the data sources of core PCE, so they cannot have any impact on the inflation indicators that the Federal Reserve most favored. In housing prices, the actual rent and owner equivalent rent (OER) slowed down simultaneously, with the monthly rate narrowing to 0.28%, but the central level is still higher than before the epidemic.

Based on data calculations from CPI sub-item changes, we believe that the monthly rate of core PCE in the United States in February may reach 0.29%, which is higher than our previous 0.25% expectation, pushing the annual rate back to around 2.7%. For the overall PCE, the monthly rate is expected to be 0.27%, and the annual rate reading is 2.46%. It is worth noting that the monthly rate of market-oriented core PCE with higher market attention may be 0.3%.

TSLombard: There are abnormal data fluctuations in the February CPI report, and the Fed has a major misjudgment on the direction of inflation change?

In our opinion, the inflation data released overnight will not push the Fed to start cutting interest rates in the near future, and the U.S. stock market is not a problem that the Fed needs to solve at present.The overall and core CPI annual rate in February fell by 0.2% avatradescn.compared with January, but the abnormal fluctuations in the sub-item data make any judgment on trend formation need to be cautious. The trend change that the market really warns of is the price of core avatradescn.commodities after eliminating food and energy. After seasonal adjustment, although the annualized rate in February fell sharply from 3.5% to 2.7%, after 15 consecutive months of decline, the index has turned to a rebound trend since September last year, and the time node of the trend changes is exactly consistent with the acceleration period of employment growth. If we look back at historical data, the median annual rate of this indicator was -0.3% from 2013 to 2019, which is also the key reason why the core CPI was able to continue to remain below the 2% target that year. However, in the foreseeable future, this category will become the main transmission area for the first round of tariff policy impacts.

Service inflation (excluding housing) continues to form the main driving force with a month-on-month growth rate of more than 4%. The expansion of the employment market has formed a closed-loop effect with inflation stickiness. Historical data shows that the unemployment rate needs to break the 4.5% threshold to break the cycle. Although the annual rate of housing prices has declined, its huge amount, which accounts for more than 30% of the CPI weight, still constitutes a long-term pressure source. Although hotel and air ticket prices have fallen in February, this is mainly due to seasonal weather disturbances and has not changed the deep trend of the service price center moving upward. It is worth noting that the degree of diffusion of the CPI sub-item shows that the price system has a wide range of re-inflation characteristics, which is significantly diverged from the Fed's presupposed gradual inflation decline path.

RBC: The Bank of England may "stay in March" and maintain a gradual rate cut

RBC analysts said in a report that the Bank of England is expected to keep interest rates unchanged at 4.50% in its March 20 resolution. According to LSEG data, the market expects the Bank of England to keep interest rates unchanged in March at 94%. Analysts say the Bank of England may maintain a gradual pace of rate cuts in the avatradescn.coming months, with three more rates cuts in 2025.

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