Global Forex and Fixed Income Roundup: Market Talk

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

0856 ET - Central and Eastern European currencies face a hit if optimism over Ukraine peace deal unwinds further after Friday's collapse in negotiations between the Ukraine and U.S., ING analyst Frantisek Taborsky says in a note. The Polish Zloty and Hungarian forint look particularly exposed due to positioning, he says. Following initial falls after the talks, CEE currencies could stabilize at weaker levels for now while waiting for further developments. "What is clear, though, is that it will be more of a bumpy road for FX from this point onwards." EUR/PLN falls 0.6% to 4.1592 after reaching a three-week high of 4.2092 earlier, according to FactSet. EUR/HUF drops 0.6% to 400.240 after hitting a two-and-a-half-week high of 407.080 Friday. (renae.dyer@wsj.com)

0854 ET - A $31 billion January month-over-month increase in the U.S.'s trade deficit in goods shocked economists when the initial estimate landed Friday. Many assumed that importers were trying to get ahead of tariffs. The number sent the 1Q GDPNow forecast from the Atlanta Fed plummeting, because net imports subtract from GDP. Goldman Sachs offers a more benign explanation. The investment bank thinks that physical gold imports to the U.S. rose to around $25 billion last month--a huge surge, indeed intended to front-run tariffs. But gold imports don't factor into the GDP calculation, Goldman says. If Goldman is right, the 1Q GDP impact of the soaring January goods deficit might not be nearly as bad as initially feared. (matt.grossman@wsj.com, @mattgrossman)

0850 ET - Supply of new euro covered bonds is expected to rise in March, surpassing February's supply of nearly 16 billion euros ($16.6 billion), ING's Marine Leleux says in a note. New euro covered bonds issuance increased by 1 billion euros in February, compared to the same period a year ago, Leleux says. Even with the higher supply, euro covered bonds redemptions exceeded new bonds supply, she says. "Indeed, the high redemptions level at nearly 18 billion euros brought the net covered bond issuances at [minus] 2 billion euros," Leleux says. (miriam.mukuru@wsj.com)

0826 ET - The Canadian dollar and Mexican peso look vulnerable given market optimism of a further delay to U.S. tariffs against Canada and Mexico, ING analyst Francesco Pesole says in a note. U.S. Commerce Secretary Howard Lutnick confirmed Sunday the tariffs would take effect Tuesday after an initial one-month delay, although President Trump would determine whether to implement the planned 25% level. The market is still leaning towards another delay so there appears to be "more downside risks than upside risks" for the Canadian dollar and peso, Pesole says. "We'll be looking for moves above [USD/CAD] 1.460 and [USD/MXN] 21.0 as key indicators of a pessimistic shift in sentiment." USD/CAD falls 0.1% to 1.4433. USD/MXN drops 0.3% to 20.4795. (renae.dyer@wsj.com)

0821 ET - The euro could rise briefly if the European Central Bank signals it could pause interest-rate cuts after a highly anticipated 25 basis-point cut Thursday, Rabobank forex strategist Jane Foley says in a note. The ECB could it indicate that it will pause policy easing until June, she says. This would provide the euro with some short-term relief. "This, however, could be blown away if President Trump is forthcoming with a tariff announcement with respect to the EU." For this reason, Rabobank continues to see the risk of the euro falling to parity against the dollar by mid-year. The euro rises 0.7% to $1.0473. (renae.dyer@wsj.com)

0750 ET - Bitcoin could rally to levels above $100,000 following the U.S. announcement on a cryptocurrency strategic reserve, AJ Bell's Russ Mould says in a note. "The long-awaited confirmation of a U.S. cryptocurrency strategic reserve helped to stop the rot in the crypto market and put a new rocket underneath the likes of bitcoin," he says. The announcement implies that the U.S. government could "buy cryptocurrencies at regular intervals," driving the bitcoin rally, he says. "Investors will be spying the record levels above $100,000." Bitcoin rises 10% on the day to 93,077.56, recovering from Friday's three-and-a-half-month low of $78,273, LSEG data show. It reached an all-time high of $109,071 on January 20. (miriam.mukuru@wsj.com)

0737 ET - President Trump announcing the creation of a U.S. strategic crypto reserve could be a major boost for crypto currencies and suggests that the selloffs in recent weeks are "inconsequential," says Jean Rausis at trading platform SmarDex. "When he [Trump] says he wants to make the U.S. the crypto capital of the world, he means it," he says. "In this context, the minor selloffs that we have just witnessed are entirely inconsequential and simply an opportunity to buy more at lower prices." The prospect of a crypto reserve is far more important for crypto traders than concerns about tariffs hurting appetite for risky assets, he says. Bitcoin rises 10% to $93,051, according to LSEG. (jessica.fleetham@wsj.com)

0713 ET - Two executive orders from Trump over the weekend could severely hamper Canadian lumber, making the looming 25% tariffs worse for a weakened industry. Scotiabank's Ben Isaacson says that classifying lumber as a national security issue is the first that will be solved by laxer regulations, opening up federal land to harvest, as well as potential surgical tariffs on the industry. Isaacson says this has the potential to 'stack' on the looming 25% tariffs on Canadian imports. "If all of these taxes move forward, it's hard to see how parts of the Canadian Paper & Forestry Products sector aren't ravaged," he says. (adriano.marchese@wsj.com)

0711 ET - A drop in eurozone inflation points to weak demand among consumers, ING economist Bert Colijn writes in a note to investors. Headline and core inflation both eased in the 20-member currency area last month, to 2.4% and 2.6% on year respectively, according to figures released Monday. That suggests eurozone businesses aren't passing on increased input costs to customers, whose spending drive remains muted despite that lower inflation and continued cuts to interest rates, Colijn says. Consumer demand should begin to increase over the months ahead, but plenty of pot-holes remain on the economic path, he says.(joshua.kirby@wsj.com; @joshualeokirby)

0710 ET - The euro area's inflation rate could settle above the European Central Bank's target, though that won't stop the bank's rate-cutting course, Commerzbank economist Vincent Stamer says in a note. Food inflation rose to 2.7% in February from 2.3% in January, and due to pressures there, overall inflation could stay above 2%, he says. But more striking in February was the drop in services inflation--to 3.7% from 3.9%--having hovered around 4% for more than a year. Service providers are increasingly finding it difficult to pass on price rises to consumers at a time of economic weakness, Stamer says. Still, falling core inflation is enough to confirm the ECB's course. "Nothing should stand in the way of an interest rate cut this week." (edward.frankl@wsj.com)

0656 ET - As the European Central Bank is turning more cautious about the rate path, a key question is whether it still considers its policy to be restrictive, ING's rates strategists say. "A key word to watch is 'restrictive' as removing this term from the statement could mean that the ECB sees itself already in neutral territory," they say in a note. The ECB is widely expected to cut interest rates by 25 basis points at Thursday's meeting. Given the risks of inflation rising, however, the meeting is likely to offer little forward guidance, the strategists say. (emese.bartha@wsj.com)

0652 ET - U.K. mortgage approvals could fall in the coming months as changes in stamp duty take effect in April, Pantheon Macroeconomics chief U.K. economist Rob Wood says in a note. U.K. mortgage approvals declined in January to 66,189 from 66,505 in December, Bank of England money and credit data show. U.K. mortgage approvals likely peaked in December as buyers rushed to avoid the changes in U.K. stamp duty, Wood says. "We expect monthly mortgage approvals for house purchase to fall to 63,000 after April," he says. (miriam.mukuru@wsj.com)