🌍 Market Report.
📉 The Reserve Bank of Australia (RBA) has cut its cash rate by 25 basis points to 4.1%, the first reduction since November 2020. The rate cut is seen as more of an easing of pressure on the economic brake rather than a significant stimulus, as the low unemployment rate means the RBA can move slowly in normalizing the cash rate. The RBA is still concerned about inflationary pressures from the strong labor market, and the economy is not seen as needing consecutive rate cuts. The RBA’s cautious approach to further easing reflects its concerns about the persistent inflationary pressures.
💵 The AUDUSD pair has been falling consecutively since the crisis of Covid 19. Despite the pair’s recent recovery, we believe that in this scenario, it may struggle to continue to rise from the current 0.6355 level.
📊 Bank of England Governor Andrew Bailey said in an interview that inflation is slowing and an expected pick-up in price growth later this year is unlikely to embed longer-term inflation pressures in the economy. The BoE has cut its benchmark interest rate to 4.5% from 4.75% and halved its forecast for economic growth in 2025 to 0.75%. However, the BoE expects inflation to hit 3.7% later this year, almost double its 2% target, prompting the central bank to add the word “careful” to its message about a likely “gradual” further reduction in borrowing costs.
📈 Federal Reserve Governor Christopher Waller said his “baseline” view is that the Trump administration’s new tariffs will have only a modest impact on prices that the central bank should try to look through when setting monetary policy. Just as the Russia-Ukraine war and the Silicon Valley Bank collapse did not prevent the Fed from changing interest rates. Waller argued that the data should guide policy action, not speculation about what could happen. The Fed is expected to hold its benchmark interest rate steady at the current range of 4.25% to 4.5% at its March meeting.
🕊️ But the interest rates and tariffs have lost some of their prominence in favour of the potential for an end to the Ukrainian War.
📈 Market View:
📊 Futures in the United States point to an opening with some optimism. The Mini S&P 500 futures are moving towards 6,155 points, while the Nasdaq 100 futures are trying to break through the 22,300 point barrier.
💵 The dollar continues to weaken, with the DXY dollar index falling below 107 points and approaching 106.50. However, in the last few hours it has tried to recover the 107 mark. However, the EUR/USD pair has not managed to take advantage of this weakness and remains below 1.05, currently trading at 1.0465. The commitments of European politicians to sacrifice fiscal discipline in the context of the war in Ukraine could be having a negative influence.
📈 Meanwhile, European equities continue to advance. The DAX 40 is approaching 22,900 points, marking a new high, and the EuroStoxx 50 has reached 5,535 points, also breaking records.
🛢️ Oil is making gains, with Brent crude standing at $75.50. Meanwhile, gold is up again after Friday’s fall, exceeding $2,925 an ounce.
🪙 However, Bitcoin is still showing weakness, stagnating at levels of 95,300. Everything indicates that it is forming a distribution zone that is preventing it from advancing.
🌍 Geopolitics:
🤝 The US and EU have different ideas about how to put an end to the conflict in Ukraine. Europe is committed to continuing to fund the war despite the Trump administration’s intention to end the conflict. French President Emmanuel Macron hosted a meeting in Paris with other European leaders to discuss ways to bolster Europe’s defense capacity, and new funding measures are expected to be presented at the upcoming March 20-21 EU summit.
💰 Ukraine conflict could cost the EU’s major powers an additional $3.1 trillion over the next 10 years, and NATO estimates the alliance will need to spend as much as 3.7% of GDP on defense. German Foreign Minister Annalena Baerbock has signaled that a significant plan for building strong defenses is in the works, and Lithuanian Defense Minister Dovile Sakaliene says “hundreds of billions will need to be spent immediately” to meet NATO capability targets. Even traditionally cautious countries like Denmark are now pushing to ease the EU budget rules to boost military spending.
💡 France’s minister for European affairs suggests discussing joint European bonds to increase defense funding amid an “existential moment” over Ukraine and the continent’s security.
📜 The EU’s Ursula von der Leyen proposed to exempt defense from EU limits on government spending by activating a “escape clause”, enabling member states to boost spending without risks of triggering an excessive deficit procedure. The U.S. has been vocal in demanding to lift the NATO spending target to 5% of GDP from the current 2% threshold, and EU member states’ total defense expenditure is expected to have risen more than 30% to 326 billion euros in 2025. Major European defense companies like Rheinmetall, Saab, BAE Systems, Leonardo, and Thales saw their shares rise significantly, with Thyssenkrupp also gaining as it looks to spin off its warship division.
⚔️ On the other hand, the British PM, Keir Starmer, suggests sending troops to Ukraine before peace talks between the US and Russia begin. “I feel very deeply the responsibility that comes with potentially putting British servicemen and women in harm’s way. But any role in helping to guarantee Ukraine’s security is helping to guarantee the security of our continent and the security of this country,” Starmer said in an op-ed for Telegraph.
💎 Ukraine is too juicy a business for the elites to let go. U.S. Senator Lindsey Graham referred to Ukraine as a “gold mine” due to the estimated $10-12 trillion worth of critical minerals located in the country. Graham argued that the West cannot afford to lose the war in Ukraine, as the mineral wealth could be used by Ukraine and the West. The Washington Post has previously reported on Ukraine’s vast mineral and energy wealth, describing it as a “raw-material mother lode” worth at least $12.4 trillion. Meanwhile, Ukraine’s President Zelensky has been criticized for shutting down media outlets and banning opposition parties, as he seeks to attract Western investment.
