Global Forex and Fixed Income Roundup: Market Talk

The Singapore dollar is steady against its U.S. counterpart in the Asian session as traders digest mixed signals. President Trump has floated 25% tariffs on semiconductors, automobiles and pharmaceutical products. which is weighing on sentiment in Asia, Maybank analysts say in a forex research & strategy report. However, regarding a Ukraine peace deal, the U.S. and Russia have sent positive signals, the analysts note. "It's in both U.S. and Russian interests to make any deal initially appear amenable to all sides," the analysts say. This, in turn, could support risk sentiment, they add. USD/SGD is little changed at 1.3421. (ronnie.harui@wsj.com)

Asian currencies consolidate against the dollar in the morning session ahead of the FOMC meeting's minutes due later today. The minutes will be monitored for any remarks about the effects of increased U.S. tariffs on inflation and spending, CBA's Carol Kong says in a research report. CBA continues to expect three 25bps rate cuts by the Fed this year. The FOMC is likely to 'look through' the positive price effect of increases in tariffs and focus on the negative impact on spending, the economist and currency strategist says. USD/KRW is little changed at 1,442.14; USD/SGD is steady at 1.3422; AUD/USD is flat at 0.6353. (ronnie.harui@wsj.com)

0413 GMT - The Singapore dollar weakens slightly against its U.S. counterpart, weighed by higher Treasury yields that increase the appeal of U.S. fixed-income assets and demand for the greenback. However, further downside for the USD Index is possible if certain developments turn out more favorable, Maybank analysts say in a forex research and strategy report. First, the U.S. is seeking a peace deal for Ukraine, the analyst note. The U.S. has asked European countries to clarify security guarantees for Ukraine, while EU leaders have been discussing a response to the U.S. peace push in Paris, the analysts say. Second, Chinese President Xi Jinping met with business leaders on Monday, the analysts add. USD/SGD is 0.1% higher at 1.3432. (ronnie.harui@wsj.com)

0353 GMT - Despite money markets betting that the RBA would emphatically lower the official cash rate at its policy meeting this week, it turned out the central bank was far more hesitant as it delivered its first reduction in four years. The RBA cut the OCR 25 bps to 4.10%, but it stressed that it remains highly uncertain about the inflation outlook, saying that if it cuts too quickly, it might well stall progress toward disinflation. All up, it could be a long wait before the RBA gathers the nerve to cut again. (james.glynn@wsj.com ; @JamesGlynnWSJ)

0337 GMT - India's trade deficit widened in January but remains manageable, Barclays economists say in a note. The trade deficit was higher than consensus estimates, with exports dropping more than expected, dragged by oil, while imports were driven by gold, they note. Imports will likely remain elevated in the next fiscal year, with uncertainty around Trump's administration suggesting that export demand, particularly for non-oil and non-gold products, may slow, they add. Given that gold imports have gone through a correction and have brought the trade deficit to more "normal ranges" compared with fiscal 2Q and 3Q, Barclays sees India's current account deficit for FY 2024-25 at 1.1% of GDP, down from 1.4% previously. (kimberley.kao@wsj.com)

0322 GMT - Thailand's latest GDP print showed little sign of a revival in growth as the fiscal boost from a government handout program proved limited, Nomura analysts say. They continue to see 2025 growth at a below-consensus 2.6%, with little impetus from the next phases of the cash handout. Thailand is also more exposed to external shocks than peers and at risk from policy uncertainty under Trump 2.0, especially if reciprocal tariffs are implemented, Charnon Boonnuch and Euben Paracuelles say. They stick to their call for 50 bps rate cuts this year, but think BOT will hold next week to preserve policy space as it monitors the impact of Trump's policies. That said, they assign 40% probability to a February cut after comments from the BOT's governor flagging downside risks to its growth view. (fabiana.negrinochoa@wsj.com)

0317 GMT - Singapore's non-oil domestic exports could be impacted by uncertainties surrounding U.S. tariffs, according to CGS International economists. Growth should still be supported by businesses frontloading their goods, but this is expected to be limited to 1Q rather than extending into 1H, they write. The U.S. has announced tariffs on several countries, including the implementation of reciprocal tariffs, they say. There could be supply chain disruptions, due to retaliatory tariffs imposed by various countries in response to U.S. trade policies, they add. "We think there are indications that President Trump is leveraging tariff policies as a negotiation tool for broader issues, including immigration, and that the ultimate impact of these measures may be less severe than initially anticipated," they say.(amanda.lee@wsj.com)

0316 GMT - A weaker Japanese yen and higher JGB yields are likely this year, two BofA Global Research strategists say in a note. Among the drivers of a weaker yen are quickening outflows from Japan and a still-low real JGB yield after two more BOJ rate increases, the strategists say. Factors for higher JGB yields include a weaker yen to support more BOJ rate increases and rising domestic inflation expectations, they add. BofA raises its end-2025 USD/JPY forecast to 165.00 from 160.00 and 10-year JGB yield projection to 1.65% from 1.40%. USD/JPY is 0.2% higher at 151.87; the 10-year JGB yield is up 0.5 bps at 1.390%. (ronnie.harui@wsj.com)

0304 GMT - Indonesia's trade balance performance may remain volatile due to uncertainties surrounding the U.S. trade war, UOB economists Enrico Tanuwidjaja and Vincentius Ming Shen say in a note. Imports could be affected by the trade conflict and signs of weakening domestic demand since mid-2024, they flag. However, with government spending rising and robust foreign direct investment inflows, imports are likely to gradually increase due to higher domestic consumption and investment, they say. UOB expects Indonesia's trade surplus to reach approximately $38 billion this year, versus $31 billion last year, but notes downside risks to its forecast. (yingxian.wong@wsj.com)

0256 GMT - Singapore's trade performance this year could be dented by uncertainties around U.S. trade policy and potential escalation of trade tensions, says RHB Bank's Barnabas Gan. Singapore may be less vulnerable to direct U.S. tariff risks as it is the only Asean economy with a trade deficit with the U.S., Gan writes in a note. However, Singapore's small and open economy may not be shielded from the global trade environment's negative shocks, especially if trade tensions escalate, he adds. The Singapore economy is expected to benefit from rising demand for electronics, electrical equipment and more trade activity, Gan says. (amanda.lee@wsj.com)

0215 GMT - The Bank of Thailand may cut its policy rate next week on economic considerations, CIMB analysts write in a note. On-year growth for 4Q edged up to 3.2%, but on a seasonally adjusted quarterly basis, growth slowed to 0.4% during the quarter from 3Q's 1.2% expansion, they note. Full-year growth was 2.5%, which fell short of the BOT's 2.7% forecast, they say. "Looking ahead, Thailand's export sector will be expected to navigate the choppy water of U.S. President Trump's protectionist policies and tariff measures," CIMB says. Some headwinds that would undermine Thailand's manufacturing sector and economic recovery include import flooding and trade spillovers from emerging markets and China, CIMB adds. (amanda.lee@wsj.com)

0212 GMT - Japan's economy might finally transition to a "normal economy" as price hikes, wage hikes and rate hikes become entrenched, Nomura analysts say. They raise growth forecasts for the country in the wake of preliminary estimates for 4Q 2024, expecting a gradual recovery centered on private-sector domestic demand. They think the economy and inflation are likely to become more "Japan-centered," with the main economic driver shifting from exports to domestic demand, inflation from import prices to wages, and the BOJ having more room to conduct policy independent of other central banks. Nomura sees real GDP growth at 0.8% for FY 2024, 1.0% for FY 2025 and 0.7% for FY 2026. It expects inflation to remain around 2% on an underlying basis and assumes 25bp rate increases in July 2025 and January 2026. (fabiana.negrinochoa@wsj.com)

0206 GMT - Most Asian currencies weaken against dollar in the morning session, facing pressure from largely higher Treasury yields, which usually increases the allure of U.S. fixed-income assets and demand for the greenback. It also remains to be seen whether there'll be any concrete measures to boost China's private sector, says MUFG Bank's Michael Wan, noting Chinese President Xi's meeting key business leaders on Monday. Key catalysts to follow will likely be China's 'government work report' and the National People's Congress meeting heading into March, the senior currency analyst adds. USD/KRW edges 0.1% higher to 1,444.08; USD/SGD is up 0.1% at 1.3431; AUD/USD falls 0.2% to 0.6341. (ronnie.harui@wsj.com)

0152 GMT - Malaysia's exports growth likely remained strong in January, though the pace is expected to have slowed on month, according to the median estimate from a Wall Street Journal poll of six economists. Exports are estimated to have risen 6.1% on year, while imports likely increased 3.2%, leading to a trade surplus of 14.1 billion ringgit. Exports grew 16.9% in December. Outbound shipments likely maintained their strong pace in January, supported by continued front-loading demand as Trump's tariff threats linger, says Kenanga IB economist Muhammad Saifuddin Sapuan. However, seasonal factors, including the Lunar New Year holidays, may dampen the near-term outlook, he adds. The trade data are due Thursday. (yingxian.wong@wsj.com)

The Singapore dollar strengthens slightly against its U.S. counterpart in the Asian session, supported by positive spillover effects from China's yuan. There is better risk sentiment toward Chinese assets, MUFG Bank's Michael Wan says in a research report. China's January credit data released Friday were stronger than expected, the senior currency analyst notes. The data suggest that stronger government financing activity and a pick-up in corporate loans helped to offset negative household mortgage-loan activity, Wan says. USD/SGD is 0.1% lower at 1.3387; USD/CNY is down 0.1% at 7.2468; USD/CNH falls 0.2% to 7.2467. (ronnie.harui@wsj.com)

The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

1931 ET - Asian currencies consolidate against the dollar in the morning session as traders digest mixed developments. The U.S. January CPI was stronger than expected, CBA's Kristina Clifton says, noting the USD Index has traded in a wide range. However, there's also been news that President Trump and Russian President Putin have agreed to begin negotiating an end to the war in Ukraine, the senior economist and currency strategist adds. USD/KRW edges 0.1% higher to 1,453.60; USD/SGD is 0.1% lower at 1.3525; AUD/USD is little changed at 0.6282. (ronnie.harui@wsj.com)

1914 ET - JGBs fall in the morning Tokyo session, tracking overnight price declines in U.S. Treasurys. While the Bank of Japan is slated to buy a wide range of JGBs today, the operation's support to the Japanese government bond market could be limited by the sharp rise in U.S. long-dated yields, strategists at Mitsubishi UFJ Morgan Stanley Securities say. The 5-year JGB yield rises 2bps to 1.020%, its highest intraday level since October 2010; the 10-year yield rises 3bps to 1.370%, the highest intraday level since April 2010. (ronnie.harui@wsj.com)

1903 ET - The USD index is currently trading just below 108 points, roughly where it was just over 24 hours ago. It initially rose sharply because the U.S. CPI for January was stronger than expected on both the headline and core measures. However, USD unwound its increase later in the session helped by news that U.S. President Trump and Russian President Putin have agreed to start negotiating an end to the war in Ukraine, says Kristina Clifton, economist at CBA. Markets have pushed out the timing of the next FOMC interest-rate cut even further to December, compared to September before the CPI release, she notes. (james.glynn@wsj.com; @JamesGlynnWSJ)

1855 ET - The Aussie dollar-U.S. dollar pair is near 0.6280, after trading in a wide 70 point range in the U.S. trading session. The 0.6290 level is proving to be firm Fibonacci-related technical resistance for AUD/USD, says Krisitina Clifton, currency strategist at CBA. AUD/USD will likely follow the USD trend until the Reserve Bank of Australia's interest rate announcement on Tuesday, she adds. A 25 basis point cash rate cut, if delivered, will be the first since the Covid pandemic. Clifton says that if the RBA does not cut next week it would be a shock to the currency market and AUD/USD could lift by around 1 U.S. cent. (james.glynn@wsj.com ; @JamesGlynnWSJ)

1843 ET - Japanese stocks may rise as a weaker yen raises hopes for earnings growth. Nikkei futures are up 0.6% at 39210 on the SGX. USD/JPY is at 154.41, up from 153.64 as of Wednesday's Tokyo stock market close. Investors are focusing on earnings as well as U.S. trade policies. Daiwa House Industry and Sumitomo Forestry are scheduled to announce their results later in the day. The Nikkei Stock Average rose 0.4% to 38963.70 on Wednesday. (kosaku.narioka@wsj.com)

1824 ET - It's highly likely that the Reserve Bank of New Zealand will cut the official cash rate by 50 basis points to 3.75% at its policy meeting next week but project a slower pace of easing after February, says Westpac economist Kelly Eckhold. Still, there's also an outside chance the RBNZ cuts the OCR by more to try and bring the OCR to neutral more quickly, he says. There's potential for the RBNZ to outline a dovish scenario that signals its intention to move the OCR to neutral more quickly by signalling a 3% OCR by mid-2025. This would signal a high chance of a further 50 basis point cut at the April review, Eckhold says. (james.glynn@wsj.com; @JamesGlynnWSJ)

1819 ET - Consumer inflation came in hotter than expected, but Goldman Sachs economists think the data still point to a decline in the 12-month readings of the Fed's preferred inflation gauge, the personal consumption expenditures price index. Based on the CPI, Goldman thinks that headline PCE inflation was up 0.38% in January, with core PCE rising 0.45% month over month. That is still an elevated rate but would bring the 12-month increase in headline PCE down to 2.5%, from 2.6% in December, and the 12-month core PCE inflation rate down to 2.6%, from 2.8% in December, Goldman says. Analysts will be able to estimate PCE inflation with more certainty after January PPI figures land Thursday morning. PCE inflation data are due Feb. 28. (matt.grossman@wsj.com, @mattgrossman)

1654 ET - Cryptocurrency drove nearly half of Robinhood's transaction-based revenue in 4Q, the online brokerage says. Crypto volumes expanded four-fold and higher crypto valuations boosted total assets under custody. The digital currency's power in Robinhood's financials is something to watch as the regulatory environment eases under the Trump administration and the company continues to make investments in the sector. It added seven new crypto assets in the U.S. last year and agreed to buy the crypto exchange Bitstamp, which is set to be finalized in the first half of 2025. Shares up 13% to $62.99 in after hours trading. (katherine.hamilton@wsj.com)

1534 ET - Treasury yields hold on to their gains as markets brace for a long period of unchanged interest rates. January CPI was higher than expected, although seasonal factors might have been at play. Markets are now pricing 30% odds that there will be no rate cuts this year, up from 20% yesterday, according to CME. Odds of only one cut are 40%. On Thursday, weekly jobless claims are expected to decline to 215,000 from 219,000, according to a Wall Street Journal survey. PPI inflation is forecast to accelerate. The 10-year yield gains a tenth of a percentage point, to 4.636%, its largest one-day rise since December. The two-year gains 0.075 p.p., to 4.365%. (paulo.trevisani@wsj.com; @ptrevisani)

1526 ET - Chip-card technology was supposed to cut down on fraud when it was rolled out in the mid-2010s. But roughly a decade of evidence shows that the tech has only enabled limited progress on fighting fraud, economist Fumiko Hayashi of the Kansas City Fed finds. Fraud rates on dual-message payment networks (such as Visa, Mastercard and Discover) have in general failed to decline, or have even increased, despite broad adoption of chip debit cards. (The research excludes prepaid debit cards.) Fraud trends are a bit better for single-message payment networks, which require the user to enter a PIN at the point of sale in addition to inserting the chip. Understanding why this has happened will require more research, Hayashi writes. (matt.grossman@wsj.com, @mattgrossman)

1500 ET - Deutsche Bank's U.S. economists maintain their call that the Fed will not choose to cut rates in 2025 after the hot January CPI data. In their base case, the DB team now thinks that the March Fed dot plot will show less inclination to cut rates this year, and that the June dot plot will erase the penciled-in cuts from the current 4.25% to 4.5% target. Rate hikes aren't out of the question but "the bar is likely to be high," the DB team writes. Hikes would likely require that, first, "downside risks to the labor market need to be extinguished," and, second, "core PCE inflation would need to accelerate towards or above 3% in year-over-year terms." Core PCE was up by 2.8% in the 12 months through December. (matt.grossman@wsj.com, @mattgrossman)

1417 ET - The uptick on core inflation last month "is less alarming than it first appears," and a Fed cut this summer remains possible, Pantheon's Sam Tombs writes. He says seasonal factors make it more complicated to extrapolate one month's data. He says the February data will give a better sense of how the underlying trend is evolving. Tombs expects the PCE gauge, to be released later this month, to edge down to 2.7% in January, from 2.8% in December. "If as we expect, the trend continues to slow over the coming months, we still think the FOMC will ease policy again in June." (paulo.trevisani@wsj.com)

Asian currencies consolidate against the dollar in the morning session as traders digest mixed developments. The U.S. January CPI was stronger than expected, CBA's Kristina Clifton says, noting the USD Index has traded in a wide range. However, there's also been news that President Trump and Russian President Putin have agreed to begin negotiating an end to the war in Ukraine, the senior economist and currency strategist adds. USD/KRW edges 0.1% higher to 1,453.60; USD/SGD is 0.1% lower at 1.3525; AUD/USD is little changed at 0.6282. (ronnie.harui@wsj.com)