[MARKET ANALYSIS] USD back on a firmer footing, Antipodeans lag on China's new growth target and metals prices

• DXY is mildly firmer this morning and currently trades within a 98.66 to 99.20 range; upside which follows on from some mild pressure in the prior session, as investors favoured risk assets. Haven inflow have resumed given the overall environment has not changed – the Gulf remains at war, and the Strait of Hormuz remains effectively shut, and there are currently little signs of easing. It is worth highlighting that Sky News Arabia reported commentary via the Iranian Deputy Foreign Minister who suggested that Iran “is prepared to abandon its nuclear program” on the condition that the US presents a rewarding alternative offer. This spurred risk-on trade, with the index falling from 99.08 to 98.75 over the course of around 15 minutes. Later Iranian press reported that Iran was prepared to get rid of its uranium stockpiles, in exchange for “something good” – though this proposal was made pre-war.
• Also clouding the environment are the increased fears surrounding the US private credit, patricianly in relation to the redemption of BDCs. ING opines that should investors be barred from withdrawing freely, then it may lead to stress in the credit market – and potentially filter through into the confidence of the USD, given the current geopolitical turmoil.
• Near term focus will be on the US data slate, which sees the release of weekly initial jobless claims (exp. 215k from 212k) and continuing claims (exp. 1.85mln from 1.833mln) - neither coincide with this week’s official jobs data. Challenger Job Cuts for February are due (prev. 108.4k), and Revelio’s jobs gauge will also be released, and the Chicago Fed will publish its labour market statistics. US export and import prices are out, and will help analysts refine their Core PCE views. US Productivity and Unit Labour Costs for Q4 are also due. Finally, Fed’s Bowman is set to speak later.
• EUR and GBP are once again pressured, as focus remains firmly on geopolitics and the inflationary/growth impacts of the net-importers. The pairs are off worst levels, following the aforementioned commentary via the Iranian Deputy Foreign Minister. There have been a few ECB speakers today, notably de Guindos suggesting that the ECB could change policy stance if inflation expectations change as a result of the war. For the GBP, ING points out the outperformance in the GBP against the EUR – the bank suggests that asset managers are unwinding previously held long EUR trades; moreover, markets have been pushing back calls for near-term cuts.
• Antipodeans underperform this morning, pressured by the downside across the metals complex and in the aftermath of mixed Australian trade data – a factor which has resulted in the Aussie lagging. Moreover, China set its 2026 GDP growth target at between 4.5-5% (as expected), nonetheless, the lowest since 1991, as Beijing seeks flexibility to manage economic challenges including weak consumption, a property-sector crisis, slowing population growth and global trade tensions.

The USD shows renewed strength amidst ongoing geopolitical tensions, notably in the Gulf region, while the Antipodean currencies lag due to concerns around China's modest growth target and weakness in metals prices. Investors are weighing the implications of these developments on global risk sentiment and the potential stress in private credit markets, highlighting the interplay between geopolitical factors and currency dynamics.