Market Briefing: Get set for Trump 2.0
Read the 2025 Currency Outlook from Corpay Currency Research
Positive tone. US equities, bond yields, & the USD rose at the end of last week. US data remains positive. Markets also positioning for Trump 2.0.
US policy. Pres. Trump will be in the drivers seat. Will he announce a range of measures after coming into power or is too much expected?
Event Radar. US Pres. Inauguration (Tues), NZ CPI (Weds), BoJ & MAS meetings (Fri), & global PMIs (Fri) in focus this week.
Global Trends
Global equities ended last week on a positive note ahead of today’s US holiday and the US Presidential Inauguration (Tues 4am AEDT). A positive China data batch which showed a pickup in growth momentum over Q4 2024 on the back of improvement in areas such as industrial activity as stimulus measures gained traction, and reports of a “very good” call between President’s Trump and Xi underpinned sentiment. Also helpful were further signs the US economy is in a healthy state with housing starts, building permits, and industrial production all exceeding expectations.
In terms of the numbers US equities rose with the NASDAQ (+1.5%) outperforming the broader S&P500 (+1%). As a result, the S&P500 recorded its best weekly performance (+2.9%) since early November. US bond yields also edged up with a relatively bigger lift at the front-end (US 2yr +5bps to 4.28%) flattening the curve a bit (US 10yr +2bps to 4.63%). That said, after being inverted from mid-2022 to Q3 2024, the US 2s10s yield curve has steepened sharply over recent months (now +34bps). A larger sell-off at the long-end has been the driving force as a ‘higher for longer’ interest rate backdrop and re-emerging inflation challenges are discounted.
In FX, the USD was a little volatile during Friday’s trade, but on net it pushed higher to be tracking where it was earlier in the week. EUR continues to struggle (now ~$1.0287), with GBP’s underperformance also continuing (now ~$1.2168, the bottom-end of its multi-quarter range). Ahead of this Friday’s Bank of Japan meeting, where we believe another rate hike is a strong chance due to Japan’s underlying inflation trends and with policy still in ‘accommodative’ territory USD/JPY rebounded a little (now ~156.26). Elsewhere, NZD remains near its cyclical lows (now ~$0.5588) with Q4 NZ CPI (Weds AEDT) looming, and the AUD oscillated around ~$0.62.
US President Trump formerly comes to power once again tomorrow, and he has repeatedly stressed he will hit the ground running, especially when it comes to tariffs and immigration. Markets will no doubt be braced for a potential raft of Executive Orders from the White House in the hours after the inauguration (Tues 4am AEDT). We believe there is potential for renewed bouts of volatility over the near-term based on what does or doesn’t happen. A forceful start to Trump’s new term could rattle nerves and give the USD more support. By contrast, based on what already looks baked in we think a more measured approach may ease fears and see the USD lose ground (as it did after Trump took charge in 2017).
Global event radar: US Pres. Inauguration (Tues), BoJ Meeting (Fri), Global PMIs (Fri/Sat), China PMIs (27th Jan), BoC Meeting (30th Jan), US Fed Meeting (30th Jan), EZ GDP (30th Jan), ECB Meeting (31st Jan), US GDP (31st Jan)
Trans-Tasman Zone
The uptick in the USD at the end of last week exerted a little renewed downward pressure on the AUD (now ~$0.6197) and kept the NZD on the backfoot (now ~$0.5590). That said, the AUD has held up well on the crosses. Outside of a dip against CNH (-0.4%), which was buoyed by reports of a productive call between President’s Trump and Xi the AUD has generally ticked up with gains of ~0.1-0.4% recorded against the JPY, GBP, NZD and CAD. AUD/EUR consolidated just above ~0.60. As our chart shows, outside of the JPY the AUD has actually been performed better against the other major currencies so far in 2025.
It is a quiet week in Australia with no major data or RBA events scheduled. The next major AU-centric release is Q4 CPI inflation (29 January). This will be a major input into whether the RBA kicks off its interest rate cutting cycle on 18 February. Markets are assigning it a ~67% chance it does. We aren’t as sure on the timing given the ongoing resilience in the labour market, though we do expect some easing to occur by May. Near-term, what happens in the hours and days after the US Presidential Inauguration (Tues 4am AEDT) will influence the AUD. As discussed above, markets are likely to be sensitive to what is (or isn’t) announced by President Trump. If Trump delivers on its pledges to act decisively on areas like trade tariffs and immigration, we expect any resultant market volatility to be USD supportive, which in turn might weigh on the AUD. By contrast, more drawn out and less forceful steps may see the USD soften helping the AUD (which are models are suggesting is currently ~3-4 cents undervalued) claw back lost ground.
Across the Tasman we think downside NZD risks remain. In addition to the events in the US, Q4 NZ CPI is also due (Weds). Various leading indicators point to a further moderation in NZ inflation pressures. If realised, this coupled with the weakness in NZ economic activity and widening cracks in the NZ labour market could reinforce the case for the RBNZ to deliver another 50bp rate cut when it meets on 19 February. The downshift in NZ interest rates over 2025 should be a lingering NZD headwind, in our view, with the relative economic and policy trends projected to help AUD/NZD edge higher over coming months.
AUD event radar: US Pres. Inauguration (Tues), NZ CPI (Weds), BoJ Meeting (Fri), Global PMIs (Fri/Sat), China PMIs (27th Jan), NZ CPI (29th Jan), BoC Meeting (30th Jan), US Fed Meeting (30th Jan), EZ GDP (30th Jan), ECB Meeting (31st Jan), US GDP (31st Jan)
AUD levels to watch (support / resistance): 0.6130, 0.6160 / 0.6250, 0.6290
NZD levels to watch (support / resistance): 0.5510, 0.5560 / 0.5630, 0.5680
SGD Corner
The continued upswing in US bond yields and firm USD over early-2025 on the back of US economic strength and factoring in of the Trump policy agenda has propelled USD/SGD (now ~1.3675) to levels last traded in Q3/early-Q4 2023. On the crosses, the relative weakness in the EUR has exerted downward pressure on EUR/SGD which is lingering towards the bottom of its cyclical range (now ~1.4064). SGD/JPY (now ~114.26) is near the middle of its wide ~1-year range.
This week USD/SGD could endure some volatility with the US Presidential Inauguration (Tues morning), BoJ meeting (Fri), and Monetary Authority of Singapore decision (Fri) due. As discussed, the USD reaction will be driven by what President Trump does (or doesn’t) announce after coming back into power. A wide range of tariffs could see the USD (and USD/SGD) rise, while limited policy moves may see the USD (and USD/SGD) fall back. Outside of that we think the SGD may also come under some pressure via the MAS. We believe that macro trends have opened the door to the MAS shifting away from its ‘restrictive’ stance by reducing the slope of its currency appreciation path.
SGD event radar: US Pres. Inauguration (Tues), MAS Meeting (Fri), BoJ Meeting (Fri), Global PMIs (Fri/Sat), China PMIs (27th Jan), US Fed Meeting (30th Jan), ECB Meeting (31st Jan), US GDP (31st Jan) SGD levels to watch (support / resistance): 1.3580, 1.3620 / 1.3730, 1.3790
Market Moves
Peter Dragicevich
Currency Strategist - APAC
Upcoming Events
MONDAY (20th January)
No major data or events scheduled
TUESDAY (21st January)
CAD BoC Outlook Survey (Q4) (2:30am)
USD Presidential Inauguration (4am)
NZD Card Spending (Dec) (8:45am)
GBP Jobs Report (Nov/Dec) (6pm)
EUR Germany ZEW Survey (Jan) (9pm)
EUR ECB’s Centeno Speaks (10pm)
WEDNESDAY (22nd January)
CAD CPI Inflation (Dec) (12:30am)
NZD CPI (Q4) (8:45am)
EUR ECB’s Villeroy Speaks (8:15pm)
EUR ECB’s Knot Speaks (9:30pm)
THURSDAY (23rd January)
USD Leading Index (Dec) (2am)
EUR ECB President Lagarde Speaks (2:05am)
SGD CPI Inflation (Dec) (4pm)
FRIDAY (24th January)
USD Initial Jobless Claims (12:30am)
CAD Retail Sales (Nov) (12:30am)
JPY BoJ Meeting (no set time)
AUD PMIs (Jan P) (9am)
JPY CPI Inflation (Dec) (10:30am)
SGD MAS Decision (11am)
EUR France PMIs (Jan P) (7:15pm)
EUR Germany PMIs (Jan P) (7:30pm)
EUR PMIs (Jan P) (8pm)
GBP PMIs (Jan P) (8:30pm)
EUR ECB President Lagarde Speaks (9pm)
SATURDAY (25th January)
USD PMIs (Jan P) (1:45am)
*Note, all times/dates provided are AEDT
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