Trump cuts aid to Ukraine following last week's disastrous meeting with Zelensky

Good morning

An interesting day yesterday which saw USD lower against the likes of GBP and EUR which reached 1.2715 and 1.0500 respectively.  Of the two it was GBP that just made the larger gains, with GBPEUR up to 1.2120, although overnight that has drifted back a few points to 1.2100.  Lower than expected US manufacturing ISM yesterday did little to help USD,

Trump announced that the 25% Canadian and Mexican tariffs would be imposed as of today, USDCAD did trade up to 1.4540 on the announcement yesterday evening, now back at 1.4500, while USDMXN hit almost 20.90 this morning, up from 20.52 yesterday.  Both pairs are still well below the highs seen in early Feb when tariffs were first announced, when USDCAD reached almost 1.41800 and USDMXN reached close to 21.30, although this time it is against a background of a generally weaker USD.  It was US stocks that came off worse, with Nasdaq down over 2.5%, and DJIA and S&P500 down 1.5% and 1.75% respectively.  Trump also announced further tariffs on China.  Canada and China have retaliated as you’d expect with tariffs of their own.

The Ukraine invasion remains at the top of the headlines, with Trump announcing an end to US aid to the country, including equipment that is currently making its way to Ukraine, now in Poland.  Trump says Zelensky doesn’t want peace and likely cannot survive without US help.  Europe has confirmed its ongoing support to Ukraine and has made it clear that a mineral deal alone for the US would not be enough to guarantee security.  US have made it clear that they see the best way to peace is for US to have an economic interest in Ukraine’s future. 

I do wonder what Trump would say if Zelensky just said ‘OK, enough is enough, we want to preserve life so we’ll give up the fight concede all of Ukraine to Russia’.  Russia then controls the minerals Trump seems to be keen on.  To be clear, I don’t think this is likely, but it would put US and Europe on a weaker footing.  I do expect Russia to now step up attacks on Ukraine in order to secure more territory. Meanwhile, UK and France are looking to propose a joint deal with Ukraine for a ceasefire which would open the door for peace negotiations.

USDJPY is lower, partly due to Trump referencing Yen when talking about countries with weak currencies.   USDJPY slipped to 148.60 overnight, matching the late-Feb lows and thereby creating a very clear level to watch.  It has since recovered a little to 149.30, but still well off yesterday’s highs which came in around 151.30.  It is reported that Japan assured US they were not looking for Yen depreciation when they met recently.  The stronger yen also comes as LDP’s Tamaki gave a pretty clear indication that wage growth of 4.5% would give reason t normalise rates, this is lower than the 5.3% trigger level last year.  Whether Ishiba’s cabinet or BoJ agree, 4.5% has come something of a line in the sand for an additional BoJ rate rise. 

Oil is trading at lower levels after OPEC+ talked about production increases.  WTI hit $67.50 this morning, its lowest level for 2025, while Brent made it down to $70.55, its lowest since Oct 2024.  We are a touch off those lows now, technical traders are watching this area for support, Brent has tested $70 a few times since late 2024 and WTI has only $1.00 or so below current levels since late 2024.  There has been a bit of talk about US looking to remove Russia sanctions and open up Russian energy again but I do think this is still some way off, unless either we see a Ukraine peace deal or if Trump decides to act unilaterally. 

In sport, good luck to Aston Villa and Arsenal as they represent English interests in the last 16 of the Champions League.  Liverpool will play tomorrow evening.  In cricket, India are taking on Australia in the semi-final of the Champions Trophy, the winner will face either South Africa or New Zealand, to be decided tomorrow.  Could be some decent matches there,  

Not the biggest day data-wise, but we have enough going on with tariffs and invasions to keep us on our toes.

Have a great day….

-  10.00 EU unemployment

-  18.00 Feds Barkin speaks

-  19.20 Feds Williams speaks

-  00.30 AUS GDP

-  00.30 BoJs Ueda speaks

-  01.45 China caixin services PMI

World waits to see true impact of Trump/Zelensky fall out

Good morning

What a weekend, sun was shining, bringing wonderful warmth if you’re out of the shade, of course the clear skies meant quite terrific frosts each morning but it’s such a joy to see some proper daylight compared to the dull and dreary conditions we seem to have since the turn of the year.

Dull and dreary were not words to describe Trump’s meeting with Zelensky on Friday.  Neither individual are particularly good statesmen, their arguments should take place behind closed doors. I do see both sides to this, Zelensky should know how to play Trump better, but I understand why he is hugely displeased with Trump’s almost U-turn on support for Ukraine, even to the extent he looks more friendly with Putin and blames Ukraine for being invaded.  Now, perhaps there is some truth that the invasion could have been avoided had Ukraine just given up large swathes of land, or even the entire country, to Russia at the outset.  But that does not mean Ukraine are to blame for being invaded.

Also a lot is made of how much Zelensky is earning out of the aid provided, something I read suggested he earned some $11m/month and owned huge properties in the US.  Who is to say whether that is true or not, I certainly cannot claim to have the facts.  But regardless, I am pleased to some extent that Zelensky has not signed a deal with US to give away the mineral reserves in Ukraine.  Trump is now in the unfortunate position where he has almost guaranteed peace in Ukraine without achieving anything close to peace.  He will not look strong in Putin’s eyes, having failed to cajole Ukraine into surrendering, and also having had a leader of a country have a shouting match in the White House.  Bad form all round.

Where this takes us remains to be seen.  Has Putin, through the Ukraine war, managed to drive a wedge between Europe and the US, something that really weakens both sides and therefore can only benefit Russia.  Can Ukraine survive with just European support, could there ever be a peace deal without a guarantee that Russia won’t invade again, and how would such a security blanket even come into effect?  European troops on the ground?  I cannot see an easy path to peace.

Anyway I am certainly not educated enough in either Eastern Europe or general politics to write any more on the subject here.  Instead I’ll turn attention to the currency markets which have actually been pretty stable.  GBPUSD is currently holding just under 1.26, EURUSD is just below 1.04, which takes GBPEUR a touch above 1.21.   USDJPY is back above 150 having spent some time in the mid-148’s last week.  GBPJPY is 189.00, GBP looking well bid in other crosses with GBP at 2.0250, 2.2470 and 1.8175 against AUD, NZD and CAD respectively.  USDCAD is 1.4440, USDMXN 20.52, the lack of tariff talk for now means neither pair has yet seen the spikes we saw at the start of February.

A busy week this week in terms of economic data from the US and EU, not so much for the UK.  We have EU inflation this morning, retail sales Thursday and also the latest ECB rate meeting where a 25bps cut to 2.65% is expected, while on Friday we have EU GDP numbers.  From the US, ISM PMIs today and Wednesday, with employment numbers including ADP, Challenger and then the main event, the nonfarm payrolls on Friday. 

In other news of note, a word of warning.  I received in the post over the weekend a letter from Hertfordshire Police, a speedwatch letter which claims they had caught me on camera travelling over the speed limit.  The letter went on to say that had a police officer been present I could have been prosecuted.  Which means that the equipment used must have been operated by non-Police, ie other citizens.  Now, I have seen people speeding and thought how I’d love them to get caught, but please don’t let our country turn into one where our own neighbours are spying on us.  However, i do know of course that it’s not clever to break the speed limit.

That’s about all from me this morning.  Have a great day….

-  10.00 EU HICP

-  14.30 CAD S&P manufacturing PMI

-  15.00 US ISM manufacturing PMI

-  18.00 Feds Barkin speaks

-  21.45 NZ building permits

-  23.30 Japan unemployment

-  00.30 RBA minutes

-  00.30 AUS retail sales

Uncertainty over timing of Trump tariffs making life difficult

Good morning

It was mostly a fairly quiet day yesterday, but GBP strength through the late afternoon took GBPUSD up to new 2025 highs around 1.2715.  GBP also gained against EUR, reaching a couple of pips short of 1.2100, and other crosses such as GBPAUD, GBPNZD and GBPCAD reaching almost 2.0120, 2.2300 and 1.8225 respectively, the latter helped of course by CAD weakness ahead of a possible tariff announcement in the coming days. 

There did seem to be some USD weakness at the time but the move higher against EUR and other crosses suggested it was more a GBP move, although it wasn’t clear what was behind this.  Trump did have some tough words about the EU, saying it was created to harm America, which I guess in making it a more powerful trading partner I suppose he could be right.  He has threatened a 25% tariff on EU goods, the EU has responded with the threat of retaliation in tariffs are imposed.  Starmer is meeting Trump today but I can’t say I’m too confident that they’ll really hit it off.  For now GBP has backed off those highs, GBPUSD now 1.2670, although GBPEUR is holding just below that 1.2100 level.

It’s a pretty decent day data-wise today, with US GDP likely to be the key but I’ll be watching the initial jobless claims too for any sign of that weakness in the US jobs market that we’ve talked about, ahead of the US nonfarms next week.  A host of Fed officials will be speaking today, not sure we’ll get much other than the usual ‘rate cuts will be slow and gradual’ although perhaps that message could alter if the US data is on the weaker side.  We’ll keep an eye on Trump tariff talk as he’s recently given conflicting statements about Canada, Mexico and the EU, the White House suggest 4th March remains a deadline, Trump has indicated 2 April is more likely. 

Trump yesterday said that Zelensky will be signing a ‘big deal’ on Friday, whereby Trump insists the US will get the money back they have ploughed into saving Ukraine, and make a lot in the future.  There is something odd about this deal that involves Ukraine’s mineral reserves in that there doesn’t seem to be any concrete ongoing support for Ukraine as part of the deal.  Without US and European help, Ukraine will potentially fall to Russia which would mean both China and Russia controlling vast amounts of the world’s rare earth minerals, something the West surely doesn’t want.  I don’t know if Russia’s real reason for its invasion is for those reserves or just to rebuild the Soviet Union, but surely Zelensky cannot sign a deal unless there is a firm deal that prevents Russia invading further.  As it stands, Russia have seized some $350bn of resource reserves in Ukraine since its invasion, according to Ukraine.

BP has said it will focus on oil and gas production over renewables in a pretty big change of strategy following some disappointing results..  Its shares fell on the day but were off the lows at the close.  Now, I’m all for saving the planet but my domestic gas and electricity bills are going up again, the standing charge is much higher than it was a few years ago and energy firms are making substantial profits, paying large dividends to shareholders just as the water companies have done, while our bills remain at elevated levels.  Natural Gas prices are creeping higher again but are still considerably lower than they were a couple of years ago.  It must surely be time to order energy companies to reduce domestic bills, instead the Ofgem price cap is rising and is due to rise again.  Not happy.

Spurs lost to Man City last night, I did watch it and I have to say I wasn’t too disappointed.  OK, losing is never great but their second half performance was mildly encouraging.  Man Utd came from behind to secure three valuable points against Ipswich, Arsenal saw their title hopes dealt another blow as they could only manage a draw against Forest, while Liverpool extended their lead at the top to 13 points with a win over Newcastle.

In cricket, I warned that England’s match against Afghanistan would be difficult and indeed it proved to be, England losing by eight runs having failed to reach the Afghan target of 325 before being bowled out with the penultimate ball of the innings.  England are now out of the Champions Trophy, leaving New Zealand and India, and most likely South Africa and Australia, but possibly Afghanistan, in the semi-finals.

I’m out and about once again Friday so there will be no report tomorrow.  I’ve attached Friday’s calendar below, US core PCE certainly the main event but CAD watchers will be looking at Canadian GDP, USDCAD now 1.4345 and still waiting on a tariff update from Trump.   Still got the 1.4500 USDCAD Call from a couple of days ago that cost a mere 20 cad pips, its almost at the stage where we could close half of it out at a profit to make the remainder.

Next week could be a big one, with US ISM PMI’s and employment numbers including the nonfarm payrolls, EU inflation and ECB rate announcement, to name a few.  Not much UK data next week but BoEs Bailey will be appearing in front of the Treasury Select Committee Wednesday. 

We’ve had some dismal weather recently but a quick look ahead to the weekend and the coming week suggest we’re in for a lot of sunshine.  Don’t confuse that with warm temperatures, but I’ll take a bit of sunshine even if it means frosts overnight.  We’re really hoping for clear skies over the next couple of nights, it is the last time until 20240 that we’ll be able to see seven planets in the early evening sky.  Mercury, Venus, Jupiter and Mars should be visible with the naked eye, the remainder will require binoculars or a telescope and even then Saturn may be difficult to see as it’s the nearest to the sun.  Find somewhere dark and see if you can spot them.

That’s about all, have a great day and a great weekend as and when it comes.  It’ll be March when you get your next report, where is the time going?

-  10.00 EU consumer confidence, sentiment

-  12.30 ECB minutes

-  13.30 US GDP, durable goods, initial jobless claims

-  15.00 US pending home sales

-  15.00 Feds Barr speaks

-  16.45 Feds Bowmans speaks

-  18.00 Feds Barkin speaks

-  18.15 Feds Hammack speaks

-  20.15 Feds Harker speaks

-  23.30 Japan Tokyo CPI

-  23.50 Japan retail trade

Friday

-  07.00 German retail sales

-  07.00 BoEs Ramsden speaks

-  08.55 German unemployment

-  12.00 India GDP

-  13.00 German HICP

-  13.30 US core PCE, personal income/spending

-  13.30 CAD GDP

-  14.45 US Chicago PMI