Daily Market Outlook, March 7, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute...

After a tumultuous week characterised by uncertainty surrounding U.S. trade plans and a global increase in borrowing prices, investor mood is still cautious on Friday. Riskier currencies and stocks fell as a result, although a large bond sell-off started to level off. The market's focus will shift later in the day to the U.S. nonfarm payrolls report and a speech by Federal Reserve Chair Jerome Powell, both of which may offer hints about how interest rates will go in the biggest economy in the world. With a decline of over 10% since its top in December, the Nasdaq formally entered a correction phase overnight as Wall Street struggles with a deteriorating U.S. economic picture and persistent worries over President Donald Trump's tariff policies. The Nikkei fell to its lowest level in six months, as government bond yields moderated somewhat following steep drops the day before. In the meantime, MSCI's most comprehensive index of Asia-Pacific stocks outside of Japan experienced a 0.75% decline. With the Shanghai Composite Index and the CSI300 blue-chip index closing the week lower as Chinese stocks followed the regional decline. Data released on Friday revealed an unexpected drop in China's imports during the January-February period, alongside weakening exports, as mounting U.S. tariff pressures continue to weigh on the recovery of the world's second-largest economy.

The ECB cut interest rates by 25bps, lowering the deposit rate to 2.5%. Debate centered on the term “restrictive,” with a compromise stating rates are “becoming meaningfully less restrictive,” balancing doves’ preference for further cuts and hawks’ view that the cycle is nearing its end. The data-dependent, meeting-by-meeting approach remains intact. Forecasts showed minor adjustments. Growth projections were slightly lowered due to early-year downside risks, while headline HICP for 2023 was revised upward on energy effects. Core HICP disinflation was brought forward, aligning with the target over the forecast period. Risks, largely tied to the US, skewed economic outlooks downward. While European fiscal measures offer some relief, their delayed impact leaves monetary policy as the immediate tool for addressing challenges.

Weather-related disruptions and activity linked to DOGE are expected to keep the Federal Reserve in a holding pattern for now. The prevailing market consensus anticipates that the BLS employment report, due later today, will show a gain of 160,000 jobs in February, slightly above January's total of 143,000. According to some market observers, January's employment numbers were not greatly impacted by extreme weather events like the California wildfires, indicating a general downturn in hiring following a robust end to 2024. Others contend that a more noticeable recovery may occur in February, with optimistic projections of 185,000 job increases and a stable 4.0% unemployment rate. However, unpredictable weather patterns may have distorted February's employment surveys. Additionally, DOGE-related shifts in government sector employment appear to have had minimal impact on this report, as layoffs were not anticipated. This factor, however, could play a more significant role in future 2025 employment data. This past week underscored the growing unpredictability of economic indicators. For instance, the Flash Services PMI initially plunged below 50 before being revised upward, while the Services ISM unexpectedly improved. One survey pointed to the fastest employment growth in three years, while another signaled contraction. Amid this conflicting data, the signal-to-noise ratio remains poor, making it likely that Powell’s upcoming speech will advocate for continued caution from the Fed.

Overnight Newswire Updates of Note

  • Rising Yields, Tariff Uncertainty Pressure UK's FTSE 100

  • Japan Bonds To Lose Mantle Of Lowest Yielding Major Market To China

  • China’s Bonds See Worst Slide This Year As Rate-Cut Doubts Grow

  • China Had Record $540B Of Exports In Rush To Beat Tariffs

  • China’s Energy Imports Drop On Supply Overhang And Weaker Demand

  • Spooked China Exporters: US Consumers Will Share Tariff Pain

  • Fed’s Waller Still Sees Potential For Two To Three Cuts In 2025

  • Gold Eases But Eyes Weekly Gain; US Payrolls Data On Tap

  • US Payrolls Expected To Rise Despite DOGE And Tariffs

  • US Hiring Set To Remain Healthy In February Before Policy Impact

  • Trump Pares Back Canada, Mexico Tariffs In Latest Whipsaw On Trade

  • Nasdaq Confirms Correction, Weak Dollar, Tariff News Fuels Unease

  • Crypto Leaders Flock To White House As Reserve Questions Swirl

          (Sourced from reliable financial news outlets)

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

  • EUR/USD: 1.0700-10 (563M), 1.0750 (420M), 1.0800 (500M), 1.0850 (288M)

  • 1.0895-1.0900 (360M)

  • EUR/CHF: 0.9500 (260M), 0.9550 (326M), 0.9650 (310M)

  • EUR/GBP: 0.8320-30 (531M), 0.8415 (358M)

  • AUD/USD: 0.6255-65 (767M), 0.6300 (2.5BLN), 0.6325 (497M), 0.6400 (367M)

  • AUD/NZD: 1.1060 (235M). NZD/USD: 0.5795 (1.2BLN)

  • USD/CAD: 1.4290-1.4300 (1.2BLN), 1.4315-25 (868M), 1.4350-60 (3.8BLN)

  • 1.4400 (1.4BLN)

  • USD/JPY: 146.50 (300M), 147.00 (1.3BLN), 148.00 (666M), 148.15-25 (470M)

  • 149.00-10 (1.4BLN)

CFTC Data As Of 28/2/25

  • CFTC Positions for the Reporting Week Ending February 25th  

  • Speculators reduced their net long position in CBOT US Treasury bonds futures by 6,869 contracts, bringing it down to 40,912.  

  • Speculators decreased their net short position in CBOT US Ultrabond Treasury futures by 18,507 contracts, now totaling 227,735.  

  • Speculators trimmed their net short position in CBOT US 10-year Treasury futures by 9,672 contracts, resulting in a total of 699,855.  

  • Speculators cut their net short position in CBOT US 5-year Treasury futures by 111,760 contracts, which now stands at 1,625,773.  

  • Speculators lowered their net short position in CBOT US 2-year Treasury futures by 140,066 contracts to 1,149,453.  

  • The euro has a net short position of -25,425 contracts.  

  • The Japanese yen has a net long position of 95,980.  

  • The British pound holds a net long position of 4,463.  

  • The Swiss franc shows a net short position.  

  • The net long position for Bitcoin is 204 contracts.

Technical & Trade Views

SP500 Pivot 6040

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Seasonality suggests bearishness Into March 7th

  • Above 6075 target 6195

  • Below 6040 target 5675

EURUSD Pivot 1.05

  • Daily VWAP bullish

  • Weekly VWAP bearish 

  • Seasonality suggests bearishness into March 30th

  • Above 1.0535 target 1.0860

  • Below 1.0505 target 0.9758

GBPUSD Pivot 1.26

  • Daily VWAP bullish

  • Weekly VWAP bullish 

  • Seasonality suggests bearishness into March 10th

  • Above 1.2685 target 1.30

  • Below 1.2560 target 1.2450

USDJPY Pivot 151

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Seasonality suggests bullishness into Apr 9th

  • Above 1.5330 target 154.40

  • Below 151.30 target 148

XAUUSD Pivot 2800

  • Daily VWAP bullish

  • Weekly VWAP bearish 

  • Seasonality suggests volatile bullishness into Feb 22nd

  • Above 2800 target 2997

  • Below 2750 target 2650

BTCUSD Pivot 95k

  • Daily VWAP bearish

  • Weekly VWAP bearish 

  • Seasonality suggests bullishness into Apr 9th

  • Above 95k target 105k

  • Below 95k target 65k