(Feb 19): London copper eased on Wednesday as US President Donald Trump's threat to impose 25% tariffs on automobiles and semiconductor chips raised concerns of about metal demand.

Three-month copper on the London Metal Exchange (LME) CMCU3 eased 0.6% to US$9,418 a metric ton by 0423 GMT.

Trump said on Tuesday he intends to impose auto tariffs "in the neighbourhood of 25%" and similar duties on semiconductors and pharmaceutical imports, the latest in a series of measures threatening to upend international trade.

He said sectoral tariffs on pharmaceuticals and semiconductor chips would also start at "25% or higher", rising substantially over the course of a year.

"Trump is actually considering implementing further tariffs on auto... which could lead to a slowdown in global growth and may result in disruptions to the global supply chain. Such disruptions could cause copper to experience some weakness going forward," said Kelvin Wong, OANDA's senior market analyst, Asia Pacific.

Citi said Trump is more motivated to impose tariffs on copper in his second term because of the metal's growing importance to key emerging global competitive industries like energy transition and artificial intelligence.

On the geopolitical front, Trump's administration said on Tuesday it had agreed to hold more talks with Russia on ending the war in Ukraine after an initial meeting that excluded Kyiv, a departure from Washington's previous approach that rallied US allies to isolate Russian President Vladimir Putin.

Source: Theedgemarkets

New Zealand Dollar initially weakened following RBNZ’s 50bps rate cut today, but quickly regained ground as Governor Adrian Orr indicated that the pace of easing will slow in the coming months. Orr suggested that the central bank is likely to implement just more 25bps cuts, in April and May, provided that economic conditions unfold as expected. However, the Kiwi’s upside remains limited, as RBNZ revised its terminal rate forecast downward to 3.1% by year-end, slightly below November’s projection of 3.2%.

Technically, we’d maintain the view that AUD/NZD’s choppy rise from 1.0940 is a corrective move. So upside should be limited by 1.1177 resistance to bring near term reversal. Break of 1.1071 support will argue that the pattern from 1.1177 has started the third leg, and should decline towards 1.0940 support next.

Outside of NZD-driven moves, the broader forex market remains subdued, with a lack of major catalysts. Dollar is the weakest performer of the day so far, as the momentum from this week’s recovery has faded. Traders are now looking ahead to FOMC minutes, though they are unlikely to provide new insights, instead reaffirming that Fed remains cautious and in no hurry to cut rates again.

British Pound is also under pressure, ranking as the second weakest currency, as investors await the release of UK CPI data. A hot inflation print could diminish expectations for a consecutive BoE rate cut in March, potentially offering some relief to the currency. Swiss franc rounds out the three weakest performers, showing broad softness.

On the stronger side, New Zealand Dollar leads the market. Yen follows, benefiting from continued speculation over future BoJ policy hikes, while the Australian Dollar also holds firm. Euro and Canadian Dollar are positioning in the middle.

In Asia, at the time of writing, Nikkei is down -0.38%. Hong Kong HSI is down -0.28%. China Shanghai SSE is up 0.54%. Singapore Strait Times is up 0.11%. Japan 10-year JGB yield is up 0.002 at 1.439. Overnight, DOW rose 0.02%. S&P 500 rose 0.24%. NASDAQ rose 0.07%. 10-year yield rose 0.072 to 4.544.

RBNZ cuts by 50bps, signals further easing through 2025

RBNZ cut the Official Cash Rate (OCR) by 50bps to 3.75%, as widely expected, while maintaining a clear easing bias.

The central bank stated that “if economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” According to the latest projections, the OCR is expected to decline to 3.1% by year-end and remain at that level until early 2028.

RBNZ acknowledged that economic activity remains subdued, though it expects growth to recover in 2025, driven by lower interest rates encouraging spending. However, elevated global economic uncertainty is likely to weigh on business investment. The bank also noted that inflation is expected to be volatile in the near term, influenced by a weaker exchange rate and higher petrol prices.

Regarding global risks, the RBNZ flagged concerns and warned that higher global tariffs could slow growth in key trading partners, dampening demand for New Zealand exports and weakening domestic economic momentum over the medium term.

However, the impact on inflation is “ambiguous”, depending on factors such as trade diversion, supply-chain adjustments, and financial market reactions.

Australian wages growth slow 0.7% qoq, pressures easing

Australia’s wage price index rose 0.7% qoq in Q4, marking a slowdown from 0.9% qoq and missing expectations of 0.8% qoq. This matches the lowest quarterly growth since March 2022, reinforcing signs that wage pressures are easing, albeit still elevated.

On an annual basis, wages increased 3.2% yoy, making it the slowest pace since Q3 2022. Private sector wage growth came in at 3.3% yoy, the weakest since Q2 2022. Public sector wages rose 2.8% yoy, falling below 3% for the first time since Q2 2023.

BoJ’s Takata: Gradual policy shifts should continue beyond January hike

BoJ Board Member Hajime Takata emphasized the need for the central bank to continue to “implement gear shifts gradually, even after the additional rate hike decided in January 2025”, to mitigate the risk of rising prices and financial market overheating.

Takata noted in a speech today that as “positive corporate behavior” persists, BoJ should consider a “further gear shift” in policy.

He highlighted three key risks that could drive prices above BoJ’s baseline scenario: a stronger wage-price cycle, inflationary pressures from domestic factors, and market volatility, especially in the exchange rates, stemming from a recovery in the US economy.

Nevertheless, due to uncertainties surrounding the US economy and the challenge of identifying the neutral interest rate, Takata advocated for a “vigilant approach”.

Japan’s trade deficit widens as imports surge, exports to China drop

Japan’s trade deficit expanded sharply in January, reaching JPY -2.759T, the largest shortfall in two years, as imports surged 16.7% yoy, far exceeding the expected 9.3% yoy gain.

Meanwhile, exports rose 7.2% yoy, falling slightly short of the 7.7% yoy forecast, with strong shipments to the U.S. (+18.1% yoy) offset by a -6.2% yoy decline in exports to China.

On a seasonally adjusted basis, exports declined -2.0% mom to JPY 9.253T, while imports climbed 4.7% mom to JPY 10.109T, leading to a JPY -857B trade deficit.

Looking ahead

UK CPI is the main focus in European session. EUrozone will release current account. Later in the day, main focus is on FOMC minutes while US will also publish building permits and housing starts.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6335; (P) 0.6352; (R1) 0.6368;

Intraday bias in AUD/USD stays neutral for consolidations below 0.6373 temporary top. Rebound from 0.6087 is seen as a correction to the fall from 0.6941. In case of another rise, upside should be limited by 38.2% retracement of 0.6941 to 0.6087 at 0.6413. On the downside, break of 0.6234 support will suggest that the rebound has completed as a correction, and turn bias back to the downside for retesting 0.6087 low. Nevertheless, sustained break of 0.6413, will pave the way back to 61.8% retracement at 0.6615.

In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6504) holds.

Economic Indicators Update

Source: ACTIONFOREX

Oil prices edged higher on Wednesday amid oil supply disruptions in the US and Russia and as markets awaited clarity on the Ukraine peace talks.

Brent crude futures LCOc1 gained 20 cents, or 0.3% at US$76.04 a barrel at 0146 GMT, climbing for a third day.

US West Texas Intermediate crude futures CLc1 for March rose 23 cents, or 0.3%, to US$72.08 a barrel, up 1.7% from the close on Friday after not settling on Monday because of the Presidents' Day public holiday. The March contract expires on Thursday and the more active April contract gained 0.3% to US$72.04.

Russia said oil flows through the Caspian Pipeline Consortium (CPC), a major route for crude exports from Kazakhstan, were reduced by 30%-40% on Tuesday after a Ukrainian drone attack on a pumping station. A 30% cut would equate to the loss of 380,000 barrels per day of supply to the market, according to Reuters calculations.

Meanwhile, cold weather threatened US oil supply, with the North Dakota Pipeline Authority estimating that production in the country's No 3 producing state would be down by as much as 150,000 bpd because of the cold.

US President Donald Trump's administration said on Tuesday it had agreed to hold more talks with Russia on ending the war in Ukraine. A deal could ease or help remove sanctions that have disrupted the flows of Russian oil shipments.

Israel and Hamas will also begin indirect negotiations on a second stage of the Gaza ceasefire deal, officials said on Tuesday.

However, Trump said on Tuesday he intends to impose auto tariffs "in the neighbourhood of 25%" and similar duties on semiconductors and pharmaceutical imports. Tariffs could raise prices for consumer products, weaken the economy and reduce demand for fuel.

Source: Theedgemarkets

The US dollar held firm on Wednesday on the back of tariff concerns and tense Russia-Ukraine negotiations, while the New Zealand dollar slid after the central bank delivered a super-sized interest rate cut.

The Reserve Bank of New Zealand reduced its benchmark rate by 50 basis points to 3.75% on Wednesday as widely expected. The central bank has now cut rates by 175 basis points since August as the central bank races to boost a sluggish economy and curb rising unemployment.

The kiwi was last down 0.3% at US$0.5687 following the decision and bank commentary that suggested more cuts were likely.

In the broader market, investors sized up the latest note in US President Donald Trump's tariff crescendo and uncertainty after initial Russia-Ukraine peace talks finished without Kyiv or Europe at the table.

A majority of economists polled by Reuters this month expect another 50-basis-point cut in April.

Ukraine President Volodymyr Zelenskiy said no peace deal could be made behind his back. He postponed his visit to Saudi Arabia planned for Wednesday until March 10 to avoid giving "legitimacy" to the US-Russia talks.

Russia hardened its demands, notably insisting it would not tolerate the Nato alliance granting membership to Kyiv.

The Trump administration said on Tuesday it agreed to hold more talks with Russia on ending the war in Ukraine.

Hopes of a peace agreement buoyed the euro to a two-week high last week, but the EU bloc currency has slid in recent days. It was last 0.03% lower at US$1.0442.

"The euro (is) a little unsettled by the clear divisions between the US and Europe regarding the war in Ukraine," said Sean Callow, senior FX analyst at InTouch Capital Markets.

The greenback shot up on Tuesday, helped by euro softness, but remains not far off a two-month low of 106.56 touched on Friday despite more tariff pledges.

Trump said on Tuesday he intends to impose auto tariffs "in the neighborhood of 25%" and similar duties on semiconductors and pharmaceutical imports.

"So long as Trump is viewed as the boy who cried wolf on tariffs, chunky USD long positions will come under pressure," Callow said.

Trump has unleashed a steady crush of levies and tariff threats in the first month of his presidency, fuelling uncertainty about the impact both abroad and domestically.

Investors were awaiting the release of minutes of the Federal Reserve's January meeting due later in the day for clues on how policymakers are weighing the risk of a global trade war.

Markets have priced in about 35 basis points of cuts for 2025.

The dollar index =USD, which measures the greenback against a basket of rivals, rose 0.04% to 107.04.

The yen strengthened 0.05% to 152 per dollar. Japan's solid October-December GDP data on Monday, coupled with recent strong inflation, has bolstered rate hike bets.

Prospects of a rate hike at the Bank of Japan's July meeting are growing but questions remain about the pace and extent of continued tightening.

The spotlight will be on board member Hajime Takata, who is scheduled to give remarks on Wednesday, and national CPI data released on Friday.

Sterling was flat at US$1.2613 after brushing a two-month high of US$1.2641 in early trade on Wednesday. An inflation reading for the UK is scheduled later on Wednesday, following Tuesday's data showing accelerating British wage growth.

The Australian dollar ticked down 0.07% to US$0.63495 after data showed domestic wages rose at the slowest annual pace in more than two years in the fourth quarter.

The Reserve Bank of Australia cut rates as expected on Tuesday but cautioned on further easing.

Source: Theedgemarkets

Key Highlights

Bitcoin price is consolidating above the $94,000 support zone.

BTC is facing hurdles near a key bearish trend line with resistance at $97,250 on the 4-hour chart.

Ethereum price is struggling to gain pace for a move above $2,850 and $3,000.

GBP/USD aims for a move above the 1.2630 and 1.2650 levels.

Bitcoin Price Technical Analysis

Bitcoin price made a couple of attempts to settle above $100,000 against the US Dollar. However, BTC bears remained active and prevented a steady increase.

Looking at the 4-hour chart, the price remained stable above the 76.4% Fib retracement level of the upward move from the $91,352 swing low to the $102,295 high, but it is also below the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour).

On the upside, the price could face resistance near the $97,500 level and the 100 simple moving average (red, 4-hour). There is also a key bearish trend line forming with resistance at $97,250 on the same chart.

The next key resistance is $100,000 and the 200 simple moving average (green, 4-hour). A successful close above $100,000 might start another steady increase. In the stated case, the price may perhaps rise toward the $105,000 level.

Immediate support is near the $95,500 level. The next key support sits at $94,000. A downside break below $94,000 might send Bitcoin toward the $92,000 support. Any more losses might send the price toward the $91,200 support zone.

Looking at Ethereum, there was a recovery wave above $2,650 but the bears remained active near the $2,850 resistance zone.

Today’s Economic Releases

US Housing Starts for Jan 2025 (MoM) – Forecast 1.40M, versus 1.499M previous.

US Building Permits for Jan 2025 (MoM) – Forecast 1.460M, versus 1.482M previous.

Source: ACTIONFOREX

China's new home prices stalled month-on-month in January, official data showed on Wednesday, suggesting the crisis-hit property sector is struggling to stabilise despite continued government efforts to prop up the market.

Prices were unchanged for the second straight month, according to Reuters calculations based on National Bureau of Statistics data. On a year-on-year basis, new home prices fell 5%, narrowing a 5.3% drop the previous month.

Official data from January showed unsold new homes totalled 390.88 million square metres in 2024, marking a 16.2% increase from the previous year. Furthermore, new construction starts, measured by floor area, plummeted 23% annually last year.

Key indicators suggest a sustainable recovery in the property market remains uncertain, according to a research note from Moody's Ratings this week.

"We would expect a more sustainable recovery in property sales should there be positive income expectations, stable or rising property price expectations and lower inventory levels that indicate disciplined supply management," said Moody's Ratings.

Policymakers in the second half of last year ramped up efforts to support China's property market, which fell into a slump in 2021.

The crisis in the sector, triggered by a government-led campaign to rein in property developers' leverage, left many unable to repay debt and complete presold housing units. Home sales have tumbled and confidence sagged.

In the central bank's monetary policy implementation report released last week, the property sector joined the list of key areas marked for more credit support.

Source: Theedgemarkets