US
Asian equity markets sold off, led by a 12% drop in the KOSPI, as Korean officials signal readiness to deploy their 100 trillion won market stabilization program. Meanwhile, US equity futures are largely flat while European stocks are marginally higher.
Crude oil prices continue to edge higher despite US assurances on securing shipping through the Strait of Hormuz. Gold recovered some of yesterday’s loss. Bond yields remain under upside pressure driven by a rise in both inflation expectations and fiscal concerns.
USD retraced some of this week’s sharp gains. Still, USD can continue to benefit in the short-term from haven bid driven by dollar funding needs. The cross-currency basis, the extra cost investors pay or receive to get dollars using another currency, has narrowed for the majors implying the cost of borrowing USD has increased.
Demand for short-term USD funding tends to spike during periods of stress due to the dollar’s dominant role in the global financial system (trade invoicing, cross border lending, global bond issuance, FX reserves). When stress hits, foreign market participants scramble for dollar to secure liquidity to roll over debt and meet liquidity needs.
However, a protracted conflict that leads to further disruption in energy production and shipping raises the risk the US economy enters stagflation and worsens the already fragile US fiscal backdrop. That argues against sustained USD strength.
Focus today are on the February ADP jobs (1:15pm London, 8:15am New York) and ISM services index (3:00pm London, 10:00am New York). Consensus expects ADP private payrolls at +50k vs. +22k in January. The ISM services index is projected at 53.5 vs. 53.8 in January.
Pay attention to the ISM Prices Paid and Employment sub-indexes for signs that the tension between employment and inflation is diminishing or worsening. The Fed Beige Book (7:00pm London, 2:00pm New York) will also offer fresh anecdotal insights on the US labor market and inflation backdrops.
SWITZERLAND
Switzerland February CPI was mixed. Headline CPI remained at 0.1% y/y for a third straight month, in line with the Swiss National Bank (SNB) Q1 projection but a tick higher than consensus anticipated. Core CPI eased to 0.4% y/y vs. 0.5% in January.
Overall, the bar for a negative SNB policy rate and/or foreign exchange intervention is low given geopolitical developments. Indeed, the SNB stressed on Monday “We are ready to intervene in the foreign exchange market to curb a rapid and excessive appreciation of the Swiss franc, which would jeopardize price stability in Switzerland.” SNB policymaker Antoine Martin doubled down on that warning today noting that the willingness to intervene is currently higher.
AUSTRALIA
AUD/USD is holding just above key support at 0.7000. Australia Q4 real GDP matched consensus at 0.8% q/q vs. 0.5% in Q3 driven by private demand (+0.3pts), public demand (+0.3pts), inventory restocking (+0.4pts). Net trade was a drag (-0.1pts). Year-over-year, real GDP rose 2.6% which is higher than the RBA’s December 2025 forecast of 2.3%.
RBA cash rate futures trimmed rate hike odds partly because stronger productivity growth eased upside risk to inflation. Real GDP per hour was up 1.0% y/y in Q4 while the RBA penciled-in 0.7%. Regardless, the RBA has room to deliver more rate increases this year given that all the bank’s internal models show a positive output gap consistent with tighter capacity constraints.
CHINA
USD/CNH is consolidating recent gains around 6.9200. China’s February PMIs showed a mixed picture. The official PMI signaled a modest contraction in manufacturing (actual: 49.0, consensus: 49.2, prior: 49.3) and near flat services (actual: 49.5, consensus: 49.7, prior: 49.4). In contrast, the private RatingDog PMI pointed to robust expansion in manufacturing (actual: 52.1, consensus: 50.1, prior: 50.3) and services (actual: 56.7, consensus: 52.3, prior: 52.3).
Tomorrow, China will unveil its 15th Five-Year Plan at the opening of the National People’s Congress. Officials are expected to set a 2026 growth target of 4.5% to 5%, down from around 5% in recent years, while keeping policy supportive.
It’s worth noting that China’s growth target is a government-set growth goal used as a policy tool to guide economic/social planning rather than a reflection of underlying supply and demand dynamic. As such, the quality and sources of China’s growth is more relevant for investors. From that perspective, China’s long-term economic health remains weak. Net exports continue to be the main growth engine, consumer spending is struggling to gain traction, and fixed-asset investment remains a drag.
POLAND
National Bank of Poland (NBP) policy decision is today. NBP is expected to cut the policy rate 25bps to 3.75% after keeping rates steady at 4.00% in January and February. However, the war-driven surge in crude oil prices risk feeding into higher inflation and prompt NBP to keep rates on hold. 8 of the 34 analysts polled by Bloomberg see rates on hold, the rest have a cut penciled in.
