Trump doesn't like TACO. USD breaking down?
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Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the hosts and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only.

All right. It is Monday, 2nd of June, 2025. What's going on in this market and out in the broader world? First, let me say thank you to everyone who gave their feedback on the speed of my speaking. Looks like John's wife, Zero Saxo Market Call listeners won in terms of the appropriate speed of my speech. Really surprised and a little bit disturbed by some of you saying that you listen to podcasts on 1.4 times speed or even two times speed.

Your brains apparently work a little bit faster than mine. But that all being said, we'll get on to business, and there's lots of business to get on to. So we have some interesting moves in the market already in FX. The dollar breaking down, I'll get to that later in the pod. I think one thing I want to mention at the top is –

What I'm sure everybody has seen already, but this very fascinating story of the Ukrainian Operation Spiderweb, I believe it was called, in which they had secreted drones deep into Russian territory aboard trucks that were then launched to take out a significant portion of Russia's long-range bomber fleet.

And it's not just about the specifics of the story. I think it is just also a sign of this new age of warfare, these cheap drones. As one tweet I just saw saying that, you know, during something like the various U.S. operations across the Middle East, you have tens of millions of dollars being spent to take out single soldiers running around, maybe with an AK-47, right?

Here you have on the order of thousands, maybe hundreds of thousands of dollars spent on an operation that's taking out billions of dollars worth of strategic assets. And we just wonder, what is the new nature of warfare? What is the value militarily of these assets that cost so much when you can deliver ordnance potentially that can, cheaply, that can overwhelm their ability to be used and therefore you

Can you even produce more of these high value or would you even want to produce more of these high value assets? And that, you know, we can extend that to things like the idea that China has produced missile technology, for example, and what is the power, actual power of the U.S. Navy and these carrier groups, et cetera, if their defenses can be overwhelmed with the delivery of a relatively, in relative terms, inexpensive missiles. Of course, the technology there is far more sophisticated than these small drones, but I just –

A huge number of lessons learned, more specifically to the situation here, of course, after this attack is, is this going to incense Russia? Is this going to tame their ambitions? What is this going to do? It has to be a huge, you know, it's a huge insult to Putin and his responsibility, of course, a critical part of that attack.

A bit of geopolitical bid potentially in things like oil and especially gold, which is rebounding nicely as well. But let's look at how we closed last week. It looked like we were going to be into a negative session on Friday in the U.S. equity market. A pretty decent comeback into the close. We're sort of limping along here to get the week started because of the latest lashing out from Trump. On Friday, it was their claim that the U.S. claimed that China is not –

China also responding with some pretty strong language, and we have a confusing situation where some Trump administration sources saying that Trump and Xi may talk this week, but in the meantime, they're not talking.

China coming out with some pretty stern language on its view of what the U.S. is doing. And yeah, just getting bad vibes once again on the terror front after we sort of had this whole so-called taco trade. Trump always chickens out, which was more and more widely being talked about. And in fact, to such an extent that this is ironically potentially becoming something that affects Trump's behavior himself because Trump

late last week. If I haven't mentioned it on the podcast already, he was asked about

This Financial Times columnist that came up with the expression, it's circulated wildly and widely among hedge funds and even among journalists. Trump himself was asked about what is his view of the taco trade, and he said the what. And of course, when he found out what it was, he was enormously insulted. And who knows, maybe this is specifically the reason why these steel and aluminum tariffs were doubled at the weekend simply from tariffs.

His sense of personal insult at the claim that he chickened out or backs down from his negotiating positions too easily. But I think more important, I think, you know, we can't know what these next trade-related headlines will bring, even though the direction is somewhat negatively. We have a really critical week ahead for trade.

for U.S. macro data. And on that note, and with this latest Trump tariff situation, we have the dollar already on its knees a little bit here and even attempting to break lower against the dollar, sorry, against the euro. So euro dollar up above 114. And I have a breakdown of all of the upcoming U.S. data this week, which is quite important on my FX update. I'll provide a link to that in the podcast description. You can look for it there.

But it really looks like the dollar is attempting to break lower here at least. The euro dollar, the most interesting one now. The dollar has a bit more of a way to go. Remember all the kerfuffle last week about the Japanese bond market and the changing of the amounts of issuance of Japanese government bonds had the yen on the defensive there briefly intro week.

So a bit more wood to chop in dollar-in terms before we're confronting that massive 140 level. And we have yet to approach the cycle highs in euro-dollar as well, but there's some more clear-cut resistance below there, which we've been challenging today, the stuff just above 114. But just to run down a little bit what's going on in the U.S. this week on the data calendar,

And we have to recall here where we are with Fed expectations. We had the market backing all the way down to that the Fed won't cut again until September, and if it is going to cut, it's going to be around 25 basis points. But looking at what –

The potential here is for Fed action. The U.S. data can really shift the narrative, and very quickly so. So if we get a very ugly cycle of data here this week, for example, the May jobs report, et cetera, and then get another week report heading into the following month, so we have two cycles of data here before that late July Fed meeting, we can have the Fed cutting 50 basis points in July. Now, that is not a prediction. I'm just saying that the data mix is sufficiently negative on the –

labor market front, it could have the market needing to price that kind of outcome. So this is really pivotal stuff, these two sets of data. And it starts this week today with the ISM manufacturing, not generally closely watched, but I mean, we've had the employment sub-ed next for the ISM manufacturing. It's sub-50 if you take a sort of a three-month moving average for the better part of two years. So

U.S. manufacturing continuing to suck wind in terms of the labor market. And tomorrow we have the JOLTS. I hate this JOLTS survey, but it does get a lot of coverage despite the poor quality of data collection there. And it is for April. It's not even the May data point, but it can move the markets nonetheless. Wednesday, a bit more important, that private payrolls data point from ADP.

from Bay, as well as the ISM services, which should carry a bit more weight than the ISM manufacturing. We've seen quite a bit of volatility in the employment component of that one as well, which dropped below 50 last month. And then on Thursday, the jobless claims. Let's recall we've seen a number of one-off spikes in this initial claim series. I think the market would really seize on this data point if, and if is a big question,

Uh, if double underlining, uh, if we do see another, uh, another one of these prints in the elevated area anywhere near 240 or above, uh, would start to get the market's attention. This should be the high-frequency indicator that starts to, to flash a bit of yellow and red, uh, before some of the other ones and has generally failed to do so thus far. Um,

For a brief, let's recall last week was the first time, was a negative print there. So another one would be seized upon as, ooh, is this a trend now rather than one of these one-off spikes? And then on Friday, of course, we have the usual nonfarm payrolls change expected at plus 125 after a plus 177 for the April print.

I think this U.S. dollar or the U.S. data is really going to be the most critical for the U.S. dollar, even in the euro-dollar relationship, if we're focusing on euro-dollar. We do have the CPI up from the eurozone tomorrow, which includes a core reading there. That could be informing what the ECB does on Thursday. They are expected to cut the 25 basis points to getting to the theoretical neutral rate of 2.00% on the deposit rate.

But guidance will be really critical there. And if there's a soft inflation print tomorrow, it could have them leaning a little bit on the dovish side. There's only about a 25% odds of the following meeting bringing a cut. So that following meeting and the guidance could be a bit in play. But I really do think it's the U.S. situation and the general vibe around tariffs, trade, U.S. exceptionalism, and otherwise that is going to set the tone for dollar pairs this week.

Okay, I think I got a bit ahead of myself. Zooming back out to where we were with the U.S. equity market. Again, we managed to sort of rally back into the close a bit on Friday, but then starting off the week a bit on a weak footing here. Where are the support levels today?

really tough to say here. I think there's some pretty obvious ones. If you look at the NASDAQ future, about 500 points lower, that 2727 area. But it's 1,000 points to the 200-day moving average on the NASDAQ 100 cash index. So that's kind of the kind of distance we are from the really critical levels there. If we look at the S&P 500, we're a bit closer to the 200-day moving average

around $5,785. There's some gaps on the chart a bit lower than that, I believe around $5,700. But looking at the current markets, seeing a bit of near-term softness as the risk we would lean on. And of course, it'd be interesting to see any kind of reaction function to bad data. Is bad data bad news or is bad data

at some point celebrated because it means Fed easing. I have a bit of a hard time leaning on the latter, but this is the kind of week with this flurry of data we have coming up that could establish whether bad news is bad news. On the earnings front, almost nothing at all to talk about. There are a few companies out. The chief among them, Broadcom, which arguably at times is part of the Mag7 because it is slightly larger than Tesla,

despite Tesla's pretty significant comeback. It is reporting tomorrow, I assume after the close. And there's an AI story there. We saw, as I covered last week, how the very strong Nvidia earnings didn't get much. There was an initial positive reaction to it because it was a very impressive result. But the selling off after that is a bit disquieting in terms of what is the real momentum in the AI space in terms of valuations and how things are priced.

To take Broadcom, which has some kind of AI accelerator chip, it also is very important in data center networking applications. So there's big AI side to Broadcom, what Broadcom is delivering. They're priced at 21 times sales. Arguably, of course, you could say they're not insanely priced despite that because they're priced at around 11 times anticipated end of 2029 income.

But of course, there was a lot of built-in and quite massive growth into those forward projections. But the stock has been doing well, and it is the marquee, certainly, earnings report this week. Of course, we're not going to really get a proper earnings season in gear again until well into July.

All right, I think that was about all I had for you today. I just want to make a small note that crypto has been doing well as a forward indicator when we're threatening to punch above to new highs, which we did very briefly on the U.S. equity indices. Crypto is not confirming, and it's been pointing a little bit lower, if a bit gently so, and not non-threateningly so here lately. So it continues to serve as a decent forward indicator. Small note for the podcast itself.

I will be traveling tomorrow through Thursday evening. We'll try to do a podcast tomorrow morning. I'm not sure if I'll be able to get it in. However, if not, I will try to certainly do one, at least maybe even two from the road. I may have some time at the hotel to do a morning routine. So you can stay tuned for that. And unfortunately, that also means we're not doing the bigger podcasts with the full slide deck, et cetera, this week.

So a bit low on the resources this week, but we'll, of course, try to stay on top of things and bring you what we can with the next Saxo Market Call.