Bitcoin Hits Three-Month Low as Tariff Fears Dent Sentiment — Market Talk

1041 GMT - Bitcoin falls to a three-month low as renewed concerns about a trade war weigh on risky assets including cryptocurrencies, Saxo Bank analysts say in a note. President Trump said tariffs for Canada and Mexico will go ahead as scheduled after a one-month delay until March 4. Trump's latest announcement has sent the crypto fear and greed index to an "extreme fear" level, its lowest in months, the analysts say. Bitcoin sentiment remains fragile, they say. Bitcoin falls 7.4% to a low of $86,894, according to LSEG. Ethereum declines 9.7% to $2,379 after earlier hitting a four-month low of $2,333. ([email protected])1014 GMT - The zloty rises to a seven-year high against the euro and the forint hits a four-month high versus the euro after French President Emmanuel Macron suggested that a Ukraine peace deal could be agreed within weeks. The currencies continue to strengthen as news about a potential Russia-Ukraine truce builds momentum, Erste Group analyst Katarzyna Rzentarzewska says in an note. "The end of the war would be economically beneficial for the region and provide investment opportunities in Ukraine if the guarantees are strong enough." However, the optimism reflected in the currency market is potentially stretched at this point, she says. EUR/PLN falls to a low of 4.1310 and EUR/HUF reaches a low of 400.2828. ([email protected])1001 GMT - The economic boon from an end to fighting in Ukraine will be overshadowed in Europe by the need to spend more on defense, BNP Paribas's Isabelle Mateos y Lago says. The U.S. and Russia have begun talks over a cease-fire, creating an initial buzz around the likely boost to confidence in Europe, which suffered a severe energy and inflation shock when hostilities escalated three years ago. But now the main focus is the need for Europe to step up defense spending as the Trump administration demands greater expenditure from NATO members and threatens to withdraw its security presence on the continent. That will imply a heavy fiscal cost for Europe's capitals, but could also offer a boost to productivity, she says. "[A] meaningful part of the defense spending [will be] allocated to R&D that subsequently benefits the entire economy," she writes. ([email protected]; @joshualeokirby)0938 GMT - The Canadian dollar has room to weaken more materially after President Trump said he would press ahead with tariffs on Canada and Mexico next month after a one-month delay, Monex Europe analysts say in a note. "For the time being, we think markets will be cautious about taking USD/CAD aggressively higher, not least given the previous tariff suspension," they say. However, the longer traders wait without hearing news of a further suspension, the higher USD/CAD could rise. Tariffs are likely to be implemented at some point in the coming months, driving USD/CAD to 1.50. USD/CAD trades flat at 1.4258 after hitting a one-and-a-half-week high of 1.4282 late Monday, according to FactSet. ([email protected])0934 GMT - Sterling could fall if Bank of England chief economist Huw Pill hints at accelerating interest rate cuts in a speech at 1400 GMT, ING analyst Francesco Pesole says in a note. Pill favors gradual rate cuts but any comments that signal a faster pace of policy easing could have a tangible impact on rate expectations, he says. Markets are pricing in just 56 basis points of further cuts this year, according to LSEG. "We expect three more cuts this year, also due to the worsening fiscal picture." GBP/USD is a "cleaner way to play sterling downside" rather than EUR/GBP, given the euro's own challenges, Pesole says. GBP/USD trades flat at 1.2625. EUR/GBP rises 0.1% to 0.8296. ([email protected])0919 GMT - Germany's economy was stung by a plunge in exports in the final quarter of 2024, though domestic demand was robust, according to Pantheon Macroeconomics' Claus Vistesen. Exports fell 2.2% on quarter, partly driven by U.S. port strikes, extending the decline after a 1.9% drop in the third quarter. However, consumer spending edged up 0.1% quarter-over-quarter, indicating households are spending again, he says in a note. Looking ahead, the balance between inventories and net trade will be a key factor for growth in 2025. Inventories added to but trade subtracted from fourth-quarter GDP. Risks are tilted toward a sharper reversal in inventories, but there could be room for exports to rebound if frontloading against U.S. tariffs offer support, he says. ([email protected])0914 GMT - The euro retraces initial gains after Germany's election but it has scope to strengthen on a more sustained basis over the medium term, MUFG Bank analyst Derek Halpenny says in a note. Negotiations for forming a potential coalition between the CDU-CSU alliance and Social Democratic Party (SPD) could be relatively straightforward and completed by Easter, he says. This coalition has greater scope to deliver policy changes than under the "gridlock of the SPD-led three-party coalition that was rife with division." The change in government paves the way for economic policies that could boost optimism over the growth outlook and prove euro supportive. The euro trades flat at $1.0468 after hitting a four-week high of $1.0531 Monday, according to FactSet. ([email protected])0913 GMT - The Debt Management Office will auction 1.6 billion pounds in inflation-linked gilts maturing in 2035 on Tuesday, which could attract buyers at optically cheap levels, RBC analysts say in a note. Buying could be encouraged by recent broad gains for bonds globally, led by U.S. Treasurys, after recent weaker U.S. economic data. Still, the analysts are more cautious on inflation-linked bonds. For now, the upward trend in U.K. 30-year real yields remains intact, they say, pointing also to the weaker U.S. data and recent lower energy prices. "Whilst fundamentally we do think that we've entered/are entering a structurally higher inflationary environment...we see no benefit in trying to front run this market narrative." ([email protected])0837 GMT - The Canadian dollar and Mexican peso could weaken if the market takes President Trump's tariff threats more seriously, ING analyst Francesco Pesole says in a note. Trump on Monday said he would press ahead with tariffs on Canada and Mexico next month following an initial one-month delay. The tariffs probably won't materialise and markets are also pricing in a modest risk of that happening, Pesole says. However, USD/CAD and USD/MXN still face potential near-term gains if the market starts to price in more risks this week, he says. USD/CAD trades flat at 1.4260 after hitting a one-and-a-half-week high of 1.4282 Monday, according to FactSet. USD/MXN falls 0.2% to 20.4449 after reaching a one-week high of 20.5257 Monday.([email protected])0835 GMT - U.S. Treasury yields extend Monday's falls, with 10-year yields at their lowest in more than two months, as investors put more bets on Federal Reserve interest-rate cuts this year, says Deutsche Bank Research's Jim Reid in a note. Monday's fall in Treasury yields came alongside a broader risk-off tone, he says, while the 10-year real yield moved back beneath the 2% mark again. U.S. money markets now price in 54 basis points of rate cuts this year, with a first 25 basis-point reduction now priced for July, having recently been priced for September, LSEG data show. The 10-year Treasury yield falls to a low of 4.337%, according to Tradeweb. ([email protected])0813 GMT - Portfolio trading in the European corporate bond market is growing very quickly, Barclays Research's Zornitsa Todorova and Andrea Diaz Lafuente say in a note. Barclays' new database shows a new portfolio trade every 20 minutes and volumes reaching 250 billion euros in 2024, up 74% from 2023, the strategists say. Portfolio trading has firmly established itself in the euro-denominated investment grade market, capturing an 11% market share, they say. The typical portfolio trade is executed through an electronic platform, and involves around 60 bonds and a total of 40 million euro notional, they say. ([email protected])0809 GMT - The dollar trades steady as investors weigh President Trump's latest tariff remarks and look ahead to U.S. data later. Trump said tariffs on Canada and Mexico would go ahead on schedule next month following an initial delay. "Thus far, Trump's bark has been worse than his bite, though assuming that stance will hold water for the next four years might well prove folly," Pepperstone strategist Michael Brown says in a note. In economic data, the Conference Board's consumer confidence survey will be monitored along with the Richmond Fed's manufacturing index, both at 1500 GMT. The DXY dollar index trades at 106.623. ([email protected])