Daily Market Update

Overview

In focus this morning is domestic politics as the Super Tuesday primaries and caucuses kick off, choosing the Republican nominee for president in 15 states. Former President Donald Trump is all but guaranteed to clinch the Republican party’s nomination today, setting the stage for a rematch of 2020’s contentious election. Trump also won a crucial victory yesterday, as Supreme Court justices declined to disqualify him from the Colorado ballot ahead of today’s primary. Volatility from tonight’s results is likely to – once again – be quite muted, as markets have already come to expect this outcome. US elections will likely figure into FX pricing more in the second half of this year as the proposed international relations and trade policies of the two candidates come back into focus.

Later this morning we do see the release of the US PMIs for February, set to show continued slight growth in the production economy even though durable goods orders likely contracted quite a bit. The European release of this data set this morning didn’t rock the boat at all. Essentially flat for February. Germany’s troubles, however, are clearly far from over, as the Eurozone’s largest economy posted yet another set of negative readings. While Fed Chair Powell is set to testify to Congress tomorrow and Thursday, any real movement from the EURUSD pair is likely to come from our counterparts overseas, facing a European Central Bank decision Thursday and the release of Q4 GDP Friday morning. The Bank of Canada also meets tomorrow, set to kick off this round of central bank decisions. The question remains as to who will cut interest rates first and when that will happen.

What to Watch Today…

MXN ⇑

Mexican Peso is one of few movers this morning, appreciating slightly against the Dollar as Fed expectations continue to have an outsized impact on our neighbors to the South. Market expectations of a hawkish Fed through this year, while depressing global risk sentiment as a whole, are boosting MXN. As the US’ largest trade partner, MXN continues to reap the benefits of a strong US economy even as China’s economic woes continue to raise questions for the rest of the world. Mexico also faces a general election this year, so dynamics for USDMXN are questionable in the latter half of 2024.

AUD ⇓

The Australian and New Zealand Dollars are losing a bit of ground in tandem today after China’s growth targets for this year both underwhelmed markets and put pressure on the Chinese government for more aggressive economic stimulus. Setting their annual target around 5%, the same as last year, is once again quite an ambitious goal. Though China did report it met this growth target last year, the integrity of such data has been called into question by numerous economists, and the road to meeting this target in 2024 is full of bumps.