Analysts at Westpac noted the day's events and offered a market wrap.
"President Trump met with steel and aluminium industry leaders and previewed plans to formally announce a 25% tariff on imported steel and a 10% tariff on aluminium.
European equities had fallen sharply while US losses were only mild until the president’s declaration on tariffs. Losses then accelerated, with industrial stocks weakest.
Hope that the tariffs would not be announced after all saw bond yields and USD/JPY probe higher mid-NY trade, only to reverse. 10yr treasury yields pushed up to 2.86% then slid to 2.81%, while 2yr yields fell from 2.26% to 2.21%. USD/JPY tested 107.20 then rolled over to below 106.40. Canada is an obvious target of the tariffs, with its officials protesting Trump’s announcement and USD/CAD bouncing from 1.2815 to 1.2895.
European Commission president Juncker said the EU will “bring forward in the next few days a proposal for WTO-compatible countermeasures against the US.” EUR/USD bounced off 1.2155 to 1.2235. GBP/USD was choppy at times with the 1.37 handle but little changed overall.
Australia’s Q4 business investment data prompted some downgrades of GDP forecasts, driving most of AUD/USD’s decline in Sydney trade. This extended slightly to a 2018 low of 0.7713 in London, followed by whippy trade in the mid-low 0.77s. NZD outperformed, bouncing off 0.7186 to 0.7250, perhaps helped by strong terms of trade data released earlier in the day. AUD/NZD thus extended the day’s decline to 1.0690.
US data was strong across the board. Feb manufacturing ISM rose from 59.1 to 60.8, fourteen year highs; new orders slipped 1.2pts but remain elevated (64.2), employment jumped +5.5pts, rising back to cycle highs, while prices paid hit their highest levels since mid-2011 (74.2). Jobless claims fell 10k to a 48-year low of 210k last week, personal incomes rose more than expected, +0.4%, boosted by tax cuts and the core PCE deflator rose 0.3%, matching expectations for a slightly above monthly trend pace, though the annual rate remains subdued at 1.5%.
Fed chairman Powell’s Senate appearance reiterated key themes from Tuesday’s House testimony. The Q&A session revealed a more even-handed assessment of wage and inflation risks compared to Tuesday’s testimony, Powell saying that he sees no strong evidence of a decisive move up in wages and that more strengthening of the labour market can occur without stoking inflation. NY Fed’s Dudley was upbeat too, “greater confidence the US will grow above trend,” though he added it would be hard to tighten aggressively with inflation low and that four hikes in 2018 would still be gradual."
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