Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Aussie turns on tariff worries
The Australian dollar fell after another attempt towards the two-month highs on Monday after US president Donald Trump warned that he still plans to impose new tariffs on Mexico and Canada.
President Trump announced the tariffs in late January but then postponed introduction for one month. Overnight, Trump said he still intends to impose tariffs, saying: “The tariffs are going forward on time, on schedule.”
Trade-exposed FX fell on the news with the Canadian dollar and Mexican peso the hardest hit.
The USD/CAD gained 0.3% while USD/MXN gained 0.2% with both markets jumping from earlier losses.
The AUD/USD gave up earlier gains to fall 0.1%. The pair again reversed near the key resistance mark of 0.6400.
The NZD/USD also fell from recent highs to lose 0.2%.
The USD/SGD also jumped from three-month lows to gain 0.2% while USD/CNH also reversed from three-month lows to gain 0.1%.
US data key for greenback this week
The US dollar was higher on the back of President Trump’s tariff comments ahead of key data this week, including December-quarter GDP and personal consumption numbers on Friday.
Also this week, US unemployment claims will be made public. This week, both new and ongoing claims increased somewhat.
Layoffs in the public and commercial sectors that were recently reported may increase claims in the upcoming months.
Medium term, we remain more positive on the US dollar. The USD index dropped to near its lowest level, last seen since on Dec 10 near 106 handle, but rebounded overnight.
Short-term price action suggests the next key support for the dollar index is at 105.62, at its 200-day EMA.
BOK cut signals KRW slide
Today, the Bank of Korea will make its rate announcement – we anticipate that the BOK will issue a neutral 25bp cut.
We anticipate that everyone will agree to lower rates in the face of more serious worries about the GDP prospects.
Given the challenges posed by US trade policy, we anticipate that the BOK will reduce its 2025 GDP growth estimate from the present 1.9% to 1.6%.
The BOK is expected to reduce its core inflation prediction to 1.8% (from 1.9%) due to weaker demand, which implies that inflation will stay under control, while increasing its 2025 projection to 2.0% (from 1.9%) due to the impact of the weaker currency.
We believe there is a greater likelihood of a more expansionary budget given the recent political developments, the possibility of US tariffs, and the worse GDP forecast.
USDKRW is currently at two-month low.
The pair has recently broken its 50-day EMA support of 1439.10.
The next key support for USDKRW at its 200-day EMA of 1398.25, which may be attractive to USD buyers.
Aussie falls back toward the lower end of range
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 24 February – 1 March
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
