Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Trader Strategy
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The week ends on a sour note for commodities after US president Donald Trump signed off on his controversial tariffs on steel and aluminium, allowing them take effect in 15 days' time. Although Canada and Mexico have won temporary exemptions (while NAFTA negotiations continue), industrial metals are taking a beating and prices are down more than 10% on the week, says Ole Hansen, Saxo's head of commodity strategy.
"The trade talks and global tensions have really had an impact on commodities, especially industrial metals, which have dropped to their lowest since September," he says. Crude oil, gold, and copper are all suffering too for various reasons and are looking for support as the week draws to a close.
But the big focus today for commodities as well as virtually every other asset is the US nonfarm payrolls update for February and specifically, the data for average hourly earnings. "Today's US data is really important for seeing if the current USD uptick can sustain," says John J Hardy, Saxo's head of FX strategy. The consensus expectation is for a gain of 0.2% month-on-month and a 2.8% rise year-on-year. "A disappointment in either direction could be significant," Hardy says.
Peter Garnry, Saxo's head of equity strategy, says that ADP data have already indicated that the February payrolls numbers will be strong. "The deep link in the market right now – whether it's true or not – is the way investors are linking the interest rate trajectory to the wage numbers," he says.
And what of the pictures of Trump and Kim Jong Un that are dominating the front pages of the world's newspapers this morning? Well, Saxo's Hardy calls the planned meeting between the two leaders as "really unprecedented stuff" and "pretty high stakes" but points out that "the market effect is questionable even though the immediate response is risk-off". While the North Korean offer to meet could give Trump his "Nixon in China moment" there's much potential for things to unravel even before they begin...
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