Currency Archives - Page 25 of 27

Mar 5, 2025 By PARKERYL Currency

Euro stands tall amid tariff confusion – United States

Written by the Market Insights Team

A dumb thing to do

Kevin Ford –FX & Macro Strategist

The Loonie remains on standby as U.S. Commerce Secretary Howard Lutnick signals the possibility of tariff relief for Mexican and Canadian goods under North America’s free trade agreement, potentially as soon as today. This could be the shortest trade war ever or extend the uncertainty while the US administration make up their mind in relation to their trade policies with their closest trade allies. Currently, the Loonie has been fluctuating between 1.439 to 1.454. While dollar softness has provided some relief to the USD/CAD, it remains on uncertain footing. FX Markets are closely watching for a possible policy pivot from President Trump, maintaining a cautious outlook.

While we wait on some news, it’s worth bringing back these two questions: what will be the economic impact, if they stay for long, and are these tariffs truly tied to fentanyl and immigration?

First, the Canadian Chamber of Commerce published a report modeling the potential economic fallout. Broadly speaking, tariffs not only reduce real incomes but also distort prices and intensify inflationary pressures. Most critically, the longer they persist, the greater the harm for both nations. From a macro standpoint, tariffs make minimal practical sense. As the Wall Street Journal fittingly described, this may well be the “dumbest trade war in history.” Consider the auto industry, for example—it’s so deeply integrated across the region that some vehicles cross borders up to eight times during assembly. The CUSMA/USMCA agreement, negotiated about five years ago, was designed to strengthen economic ties and was once praised as a “historic win” by Trump. Now it’s being deemed insufficient.

Second, are these tariffs really about fentanyl and immigration? The short answer is no. Data from U.S. Customs and Border Protection clearly shows that Canada contributes a negligible share to America’s fentanyl imports. Furthermore, immigration challenges are predominantly centered on the southwest border, as the statistics reveal.

So, what’s next? Canada and Mexico plan to challenge the tariffs under USMCA rules but resolving the dispute could take time. During Trump’s first term, he imposed tariffs on steel and aluminum and threatened the auto sector to force a NAFTA renegotiation. In response, Canada retaliated with higher tariffs on U.S. steel, aluminum, and various other goods. It took nearly two years from Trump’s election to finalize the USMCA. Similarly, in 2018, tariffs on Canadian solar products weren’t lifted until two years later, when they were found to violate USMCA terms.

Prime Minister Trudeau has vowed to get the tariffs lifted as quickly as possible. He also emphasized that picking fights with friends and allies is, in his words, a very dumb thing to do. If the tariffs persist beyond a few weeks, Canada and Mexico may push for an early renegotiation of CUSMA/USMCA. The first scheduled USMCA review between the U.S., Mexico, and Canada is set for summer 2026. Let’s see what happens in the next few hours.

Chart: Threats alone have disturbed short-term business activity across the region.

EUR: soars to 16-week high

George Vessey – Lead FX & Macro Strategist

The euro is up a whopping 2.5% versus the US dollar this week, erasing last week’s losses and more and hitting its highest level ($1.0640) since November. The playbook until now has been that rising tariff tensions were bad for the common currency as the EU would be targeted next by Trump. However, with investors more focussed on the negative implications for the US economy in an already softer US economic backdrop, the dollar has been the biggest loser of these tariff measures so far.

There is a realisation that the US dollar must adjust to a new reality of higher domestic prices and weaker growth, owing to Trump’s tariff measures. It’s losing its safe haven appeal it seems. Moreover, the dovish recalibrations of Fed policy has pushed the Eurozone-US real rate differential to its highest since September, having hit a 1-year low back in December just two weeks before EUR/USD fell to its lowest level in two years. The euro might have the legs to rise even higher over next couple of weeks to bring it close to fair-value territory implied by real rate differentials. Plus, the news coming out of Brussels that the EU is looking to boost defence spending could raise economic growth prospects and reduce expectations of rate cuts by the ECB (European Central Bank).

The ECB meets on Thursday, with a 25-basis point cut baked into market pricing. But the governing council may introduce new language to suggest that further reductions to the policy rate beyond March are no longer a given. This might spur a re-pricing of the rate cuts that the markets have factored in and provide an even stronger tailwind for the euro.

Chart: Euro has plenty of room to run higher.

The trade war has begun

Boris Kovacevic – Global Macro Strategist

The tit-for-tat trade war is officially underway. The US administration enacted new tariffs yesterday, raising duties on most Canadian and Mexican imports to 25% while doubling the existing 10% levy on Chinese goods to 20%. Retaliation was swift—Canada announced a phased tariff plan targeting approximately $100 billion worth of US goods, Mexico is expected to follow suit by the end of the week, and China imposed tariffs of up to 15% on select US products.

Until now, investors had grown complacent about tariff risks, reassured by Trump’s repeated delays and adjustments to the rollout. However, the latest round of levies signals a clear deterioration in trade relations, significantly increasing US recession risks. Investors on Polymarket have adjusted their outlook, accordingly, pushing the probability of the US economy contracting for two consecutive quarters this year from 23% last week to 37% today. This shift in sentiment is also evident in fixed-income markets, where expectations for Federal Reserve rate cuts have surged—markets now fully price in three rate cuts for the year.

Fears of a prolonged trade conflict and economic downturn have sent bond yields, the US dollar, and global equities tumbling. European markets, wary that the continent could be the next target for US tariffs, saw the STOXX 600 suffer its steepest daily loss (-2.1%) since August. While US equities pared some of their declines, they remain vulnerable. Treasury Secretary Bessent has reiterated the administration’s commitment to prioritizing Main Street over Wall Street, reinforcing concerns that the so-called “Trump put” may be far lower than initially expected. However, the confusion over the length and goal of Trump’s tariffs remains. Less than twelve hours after imposing these tariffs, did US Commerce Secretary Lutnik state that some of the levies might be taken back. Following the news flow and macro data remains critical.

Chart: Three cuts from the Fed in 2025 fully priced in.

GBP: Breaking through resistance barriers

George Vessey – Lead FX & Macro Strategist

The British pound is also surging higher against the US dollar amidst a slowdown in US economic data, eliminating the US ‘exceptionalism’ narrative and driving a convergence in US performance with elsewhere. GBP/USD has broken above its 200-day and 200-week moving averages and is flirting with $1.28 this morning, bang on its 5-year average and almost 6% higher than its January low of $1.21.

With key resistance barriers to the upside broken, sentiment in GBP/USD has shifted from short-term bearish to bullish. We half expected GBP/USD to trend lower over the next month before staging such a rebound, but it seems Trump trades are starting to unravel quicker, and the dollar’s tariff risk premium is fading fast as the focus shifts from the inflation implications of policy and onto the growth risks for the US economy. There are also indications that interest rates in the UK will stay higher for longer. While Bank of England Governor Andrew Bailey said recently that four rates in 2025 may be the most likely path for the evolution of the policy rate, still-sticky consumer prices and private sector wage growth may pose a hurdle.

As a result, sterling looks like an appealing currency in the G10 space, surging higher against low yielding safe havens as well as high-beta trade-sensitive currencies. GBP/JPY, for example, is up 1.2% this week, eying ¥192.0. GBP/CAD is up 1.4%, has risen every single day since February 11 and clocked a near 9-year high yesterday. However, with the surge in demand for the euro, GBP/EUR has slipped back from €1.21 to trade closer to the €1.20 handle this morning.

Chart: Pound pierces through key moving averages.

Euro shines across the FX space

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: March 03-07

All times are in ET

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

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Mar 5, 2025 By PARKERYL Currency

Dollar dives, euro elevates: tracking tariff turmoil – United States

Written by the Market Insights Team

The US dollar hit its lowest level since November and is now down over 4% from its January peak as US recession risks mount. Meanwhile, Europe’s improving growth trajectory has sent EUR/USD to 16-week highs, up 2.5% this week, whilst the pound has pierced through key upside resistance barriers versus the dollar. Tariff-related headlines will continue to dominate markets, but on the data front today, we have final PMI prints from major economies, and the US ISM services index, which is expected to remain resilient at 52.5.

The trade war has begun

Boris Kovacevic – Global Macro Strategist

EUR: soars to 16-week high

George Vessey – Lead FX & Macro Strategist

GBP: Breaking through resistance barriers

George Vessey – Lead FX & Macro Strategist

Euro shines across the FX space

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: March 3-7

All times are in GMT

Have a question? [email protected]

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Mar 5, 2025 By PARKERYL Currency

USD hit hard by tariffs as markets worry about US growth – United States

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

USD loses its shine on growth concerns

The US dollar bucked its usual status as a “safe haven” trade and instead fell for a second session overnight as worries about new tariffs on Canada, Mexico and China caused markets to fret about US growth.

US shares were again weaker overnight with the Dow Jones index down 1.6%.

The USD index fell 1.0% overnight and is now down 1.9% since US president Donald Trump confirmed on Monday that new tariffs would go ahead as planned.

The biggest gains versus the US dollar were in Europe with the euro and British pound jumping higher – both currencies are seen as currently insulated from tariffs while an expectation of increased defence spending also boosted the currencies.

Regionally, the Aussie climbed to three-day highs to gain 0.4%, while the NZD/USD gained 0.6%.

In Asia, the USD fell even faster. The USD/SGD lost 0.6% and neared three-month lows while the USD/CNH dropped a massive 0.7% as it also neared three-month lows.

President Trump and trade policies will likely remain in focus with his 90-minute joint address to the US Congress due at 9.00pm EST (1.00pm AEDT).

AUD/USD remains at risk despite steady GDP outlook

Away from tariffs, the key release today is Australian December-quarter GDP, due at 11.30am AEDT.

We predict a more robust 0.5% quarterly (1.2% year-over-year) increase in Q4 GDP.

For now, the AUD/USD remains in the 0.6200 to 0.6400 trading range, but with the market in a long-term downtrend, the risks remain for a break below support at 0.6085 and a possible eventual break below 0.6000.

KRW vulnerable as inflation eases below 2%

Tomorrow, the CPI for South Korea will be released.

Due in part to base effects, we anticipate that inflation will decrease from 2.2% year over year to 1.9% in February.

Additionally, core inflation probably decreased from 2.0% in January to 1.9% year over year in February.

Recent political events, the possibility of US tariffs, and a worse GDP forecast make a more expansionary budget seem more plausible.

However, we have a negative outlook on KRW. Unlike most markets in Asia, which have seen USD weakness, USD/KRW continues to strengthen and 50-day MA of 1441.48 remains key support.

USD weaker post tariffs, especially in Asia

Table: seven-day rolling currency trends and trading ranges

Key global risk events

Calendar: 3 – 7 March

All times AEDT

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

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Mar 4, 2025 By PARKERYL Currency

Amid price discovery turmoil, the US dollar loses its crown – United States

Written by the Market Insights Team

A new regional trade war

Kevin Ford –FX & Macro Strategist

Most market participants were expecting a pause in tariffs for at least another month. However, following last weekend’s heated meeting with Ukraine’s leader, it seems President Trump couldn’t afford to adopt a softer stance. He made it unequivocally clear that there’s no room for America’s closest neighbors to negotiate their way out of these duties. This marked a shift from his typical transactional approach, igniting concerns across equity markets, which erased last Friday’s gains. A wave of risk-aversion swept through North American markets as investors grappled with the implications of a new regional trade war.

Interestingly, the USD/CAD’s reaction to Trump’s confirmation of 25% tariffs on Canada and Mexico and confirmation of Canada’s retaliatory tariffs has been notably subdued compared to a month ago. This could reflect tariff fatigue, the market’s preemptive pricing of the news, or an adaptation to the ever-evolving tariff landscape. However, the most compelling factor appears to be the shifting narrative around the US dollar. Recent soft macro data, fears of competitive devaluation, and potential policy missteps have weighed heavily on the greenback, softening its immediate impact on the Loonie. Yesterday, the US dollar DXY index dropped 0.9%, underscoring this trend. In the chaos of price discovery, the dollar’s dominance has waned, US rates are lower, Bitcoin has retreated from six-digit highs, and US stocks have shifted from leaders to laggards.

Over the past two weeks, the macro narrative has shifted dramatically. On February 12^th, Fed Chair Jay Powell highlighted solid economic growth during his Congressional testimony. Yet, just two weeks later, the Atlanta Fed Nowcast slashed its Q1 GDP estimate from +2.9% to -1.5%, driven by trade disruptions as Americans rushed to import goods ahead of tariffs. Other factors—declining consumer confidence, weaker retail activity, and falling inflation expectations—have compounded the slowdown.

Adding to uncertainty, yesterday, the ISM manufacturing index slipped to 50.3 in February, missing expectations. Gains in supplier delivery times offset declines in new orders and employment, but without the supplier delivery boost, the index would have signaled contraction. While a US recession remains unlikely, the risks of a broader slowdown are steadily gaining traction.

For now, when it comes to this regional trade war, the key concern is duration. The longer tariffs remain in place, the more challenging it will be—particularly for Canada—to adjust its fiscal, monetary, and internal trade policies to this new economic reality.

USD: Macro weakness trumps tariff risks

Boris Kovacevic – Global Macro Strategist

Investors don’t like to fight an economic trend once it has established itself. That risk averse behavior is on display this week as investors continue to rotate from equities to bonds on every data miss we get. Mounting signs suggest that U.S. economic momentum is slowing. Last week’s data surprised to the downside, and the deterioration continued with the latest ISM PMI report. The manufacturing barometer rose less than expected in February, inching up from 50.9 to 50.3—barely signaling expansion. Meanwhile, the employment index slipped into negative territory, and price growth accelerated in anticipation of tariffs.

The impact: The Atlanta Fed’s Q1 GDP nowcast plunged from 2.3% just two days ago to -2.8%, a dramatic 5% downward swing. This shift underscores the transition from U.S. exceptionalism to rising stagflation risks. The dollar fell nearly 1%, erasing last week’s tariff-induced gains. So far, our Greenback thesis from a month ago has proven correct—we expected the U.S. dollar to be pulled between tariff hikes (supportive) and weakening macro data (detrimental). With tariffs seemingly better priced in than deteriorating data, EUR/USD and GBP/USD have responded asymmetrically in our favour.

However, FX investors cannot afford complacency regarding trade risks. President Trump dismissed any hope of further tariff delays on Canadian and Mexican goods, tweeting yesterday that negotiations were off the table. Equity benchmarks declined across the board as the dollar regained some stability, yet the tariff drama was insufficient to fully offset the macro-driven losses from yesterday’s session.

EUR: supported by European defence spending

George Vessey – Lead FX & Macro Strategist

It doesn’t bode well for Europe that US President Donald Trump followed through on his tariff threats against Mexico, Canada and China, promoting swift retaliation from the latter two. European equity future are down almost 1% this morning, reversing some of Monday’s defence-led rally as investors upped their bets that governments across the region will have to boost expenditure and shoulder more of the burden for their security. Will this really support Eurozone growth and curtail some of the ECB’s easing cycle though?

The main reason for the euro’s resilience of late has been the softer US economic backdrop, but the news of potential increases in Eurozone defence spending also appears to have lifted euro sentiment. EUR/USD rose back above $1.05 briefly, rebounding from a two-week low of $1.0360 touched on Friday. UK Prime Minister Keir Starmer said Britain and France will lead a “coalition of the willing” to draft a plan with Kyiv and allies to end the Russia-Ukraine war and ensure security guarantees for the US. Germany may play a key role in boosting defence spending, with reports suggesting new special funds of up to €900bn for defence and infrastructure spending. This spending and rising hopes of a peace deal in Ukraine supported the euro, trumping the tariff risk for now, but increased risk aversion across financial markets will likely limit the upside potential, and indeed we’ve seen EUR/USD slip back under $1.05 already this morning.

On the macro front, yesterday’s Eurozone inflation data revealed inflation fell for the first time in four months to 2.4%, underpinning ECB rate-setters’ hopes that the recent uptick in price pressures is proving temporary. The February figure was slightly worse than economists’ expectations 2.3%, however, two measures of underlying inflation also ticked down, such as services inflation, which came in at 3.7% from 3.9% – the lowest level since April 2024.

GBP: turning bullish versus dollar

George Vessey – Lead FX & Macro Strategist

Sterling catapulted above its 100-day moving average of $1.2620 yesterday, recording a daily gain of around 1% and hitting a fresh 2025 high of $1.2723. Such a move could lead to further gains towards the 200-day moving average at $1.2785 with short-dated implied volatility on the pound rising for a fifth straight day — the longest winning streak since late December.

We’ve recently been reporting whether the pound would exhibit it’s typical risk-averse behaviour in the wake of tariffs or whether it is safe haven of sorts as the UK is seen as less vulnerable to US tariffs due to the UK’s goods trade deficit with the US. Arguably, it’s neither in this case, as FX markets appear to be more concerned around the economic slowdown in the US alongside European leaders pushing forward with plans to boost defence spending and support Ukraine. Sterling also gained strength from expectations that UK interest rates will remain higher for longer. Bank of England Deputy Governor Ramsden highlighted that persistent wage pressures could keep inflation above target, though he noted future rate cuts may not be gradual. This outlook, combined with geopolitical developments, has boosted investor confidence in the pound for now.

There is certainly evidence of trade-sensitive currencies weakening with GBP/CAD rising to a new 7-year high and GBP/AUD scaling a new 5-year high, but the illiquid and risk-sensitive Swedish krona has been the top performer this week. The krona has emerged as a favoured currency, surging more than 2% versus the US dollar on Monday and GBP/SEK falling almost two standard deviations more than its average daily shift to the downside. Why? Because the Sweden’s military industry is seen as a major beneficiary of any funding increase with defence exports among the biggest of major economies as a share of GDP.

US dollar keeps losing ground against majors

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: March 03-07

All times are in ET

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Source link

Mar 4, 2025 By PARKERYL Currency

Currency confusion as trade war escalates – United States

Written by the Market Insights Team

Global equity benchmarks are tumbling as US President Donald Trump proceeded with 25% tariffs on Canada and Mexico and raised the tariff on China to 20% from 10%. Safe haven currencies are outperforming, but surprisingly, the Chinese yuan has also strengthened. The pound is near multi-year highs against the trade-sensitive Aussie and Canadian dollar’s. The euro is showing resilience, but the Swedish krona is a clear winner after European leaders pushed forward with plans to boost defence spending. The US dollar, meanwhile, is reeling from weakening US economic activity.

USD: Macro weakness trumps tariff risks

Boris Kovacevic – Global Macro Strategist

Investors don’t like to fight an economic trend once it has established itself. That risk averse behavior is on display this week as investors continue to rotate from equities to bonds on every data miss we get. Mounting signs suggest that U.S. economic momentum is slowing. Last week’s data surprised to the downside, and the deterioration continued with the latest ISM PMI report. The manufacturing barometer rose less than expected in February, inching up from 50.9 to 50.3—barely signaling expansion. Meanwhile, the employment index slipped into negative territory, and price growth accelerated in anticipation of tariffs.

The impact: The Atlanta Fed’s Q1 GDP nowcast plunged from 2.3% just two days ago to -2.8%, a dramatic 5% downward swing. This shift underscores the transition from U.S. exceptionalism to rising stagflation risks. The dollar fell nearly 1%, erasing last week’s tariff-induced gains. So far, our Greenback thesis from a month ago has proven correct—we expected the U.S. dollar to be pulled between tariff hikes (supportive) and weakening macro data (detrimental). With tariffs seemingly better priced in than deteriorating data, EUR/USD and GBP/USD have responded asymmetrically in our favour.

However, FX investors cannot afford complacency regarding trade risks. President Trump dismissed any hope of further tariff delays on Canadian and Mexican goods, tweeting yesterday that negotiations were off the table. Equity benchmarks declined across the board as the dollar regained some stability, yet the tariff drama was insufficient to fully offset the macro-driven losses from yesterday’s session.

EUR: supported by European defence spending

George Vessey – Lead FX & Macro Strategist

It doesn’t bode well for Europe that US President Donald Trump followed through on his tariff threats against Mexico, Canada and China, promoting swift retaliation from the latter two. European equity future are down almost 1% this morning, reversing some of Monday’s defence-led rally as investors upped their bets that governments across the region will have to boost expenditure and shoulder more of the burden for their security. Will this really support Eurozone growth and curtail some of the ECB’s easing cycle though?

The main reason for the euro’s resilience of late has been the softer US economic backdrop, but the news of potential increases in Eurozone defence spending also appears to have lifted euro sentiment. EUR/USD rose back above $1.05 briefly, rebounding from a two-week low of $1.0360 touched on Friday. UK Prime Minister Keir Starmer said Britain and France will lead a “coalition of the willing” to draft a plan with Kyiv and allies to end the Russia-Ukraine war and ensure security guarantees for the US. Germany may play a key role in boosting defence spending, with reports suggesting new special funds of up to €900bn for defence and infrastructure spending. This spending and rising hopes of a peace deal in Ukraine supported the euro, trumping the tariff risk for now, but increased risk aversion across financial markets will likely limit the upside potential, and indeed we’ve seen EUR/USD slip back under $1.05 already this morning.

On the macro front, yesterday’s Eurozone inflation data revealed inflation fell for the first time in four months to 2.4%, underpinning ECB rate-setters’ hopes that the recent uptick in price pressures is proving temporary. The February figure was slightly worse than economists’ expectations 2.3%, however, two measures of underlying inflation also ticked down, such as services inflation, which came in at 3.7% from 3.9% – the lowest level since April 2024.

GBP: turning bullish versus dollar

George Vessey – Lead FX & Macro Strategist

Sterling catapulted above its 100-day moving average of $1.2620 yesterday, recording a daily gain of around 1% and hitting a fresh 2025 high of $1.2723. Such a move could lead to further gains towards the 200-day moving average at $1.2785 with short-dated implied volatility on the pound rising for a fifth straight day — the longest winning streak since late December.

We’ve recently been reporting whether the pound would exhibit it’s typical risk-averse behaviour in the wake of tariffs or whether it is safe haven of sorts as the UK is seen as less vulnerable to US tariffs due to the UK’s goods trade deficit with the US. Arguably, it’s neither in this case, as FX markets appear to be more concerned around the economic slowdown in the US alongside European leaders pushing forward with plans to boost defence spending and support Ukraine. Sterling also gained strength from expectations that UK interest rates will remain higher for longer. Bank of England Deputy Governor Ramsden highlighted that persistent wage pressures could keep inflation above target, though he noted future rate cuts may not be gradual. This outlook, combined with geopolitical developments, has boosted investor confidence in the pound for now.

There is certainly evidence of trade-sensitive currencies weakening with GBP/CAD rising to a new 7-year high and GBP/AUD scaling a new 5-year high, but the illiquid and risk-sensitive Swedish krona has been the top performer this week. The krona has emerged as a favoured currency, surging more than 2% versus the US dollar on Monday and GBP/SEK falling almost two standard deviations more than its average daily shift to the downside. Why? Because the Sweden’s military industry is seen as a major beneficiary of any funding increase with defence exports among the biggest of major economies as a share of GDP.

GBP/AUD near 5-year high

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: March 3-7

All times are in GMT

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Source link

Mar 3, 2025 By PARKERYL Currency

US shares tumble, but FX more muted, as Trump says tariffs will proceed – United States

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

Markets hit as Trump confirms tariffs

Global markets shuddered overnight as US president Donald Trump confirmed that new tariffs on Canada and Mexico would go ahead as planned at midnight Tuesday 4 March EST (4.00pm Tuesday AEDT).

An increased 20% tariff on Chinese goods – raised from the 10% announced in January – will also be implemented.

US shares were hit hard with the Dow Jones down 1.5%, S&P 500 down 1.8% and the Nasdaq falling 2.6%. The S&P 500 is now down 4.9% from recent highs while the Nasdaq is down 8.7% from recent highs.

However, the reactions in FX markets were more muted, with investors worried about the impact on US growth at a time when US data has recently started to weaken.

Overnight, the US’s March ISM manufacturing number was reported at 50.3, down from 50.9 last month, and below forecasts at 50.6. US retail sales and consumer confidence numbers have also recently missed forecasts.

As a result, the USD has actually weakened on the day, most notably falling sharply versus the euro. The EUR/USD gained 1.1%.

In APAC, the AUD/USD gained 0.3% and NZD/USD gained 0.4%. USD/SGD was up 0.4%.

On the other hand, the tariff-target markets like Chinese yuan and Canadian dollar weakened. USD/CNH gained 0.1%, USD/CAD climbed 0.2% and USD/MXN gained 0.5%.

USD weakens as markets fret about growth

The US dollar will remain in focus as markets digest the tariff news and look to key US data.

Most notably, later this week, the US non-farm payrolls will be released. We anticipate a little increase in job growth to 185k in February.

Unusually cold weather and wildfires contributed to January’s weakness, which should result in a good payback in this report.

Lead indicators indicate a possible underlying slowdown, and we anticipate that trend employment increases will decrease in the upcoming months.

President Trump’s federal hiring ban probably had an effect on government employment, which probably decreased to 15,000 during the month.

At 4.0%, the unemployment rate most likely stayed constant. Layoffs and hiring have both stayed low.

Euro, GBP gain as Europe seen insulated…for now

The euro and British pound were the outperformers overnight on the view that Europe and the UK appear to have avoided US tariffs, at least for now.

Today, the UK BRC shop pricing index will be released. For the last six months (August 2024–January 2025), BRC shop price inflation has been negative; however, in the January print, the rate of deflation slowed to -0.7% year over year.

In February, non-seasonally adjusted prices usually increase by 0.4% month over month; if they resumed that pace this year, the yearly rate would stay at -0.7% year over year.

The GBP has been resilient during recent tariff news with GBP/USD hitting two-month highs overnight. The GBP has been stronger in other markets across APAC.

The AUD/GBP fell to five-year lows overnight while NZD/GBP hit ten-year lows.

Aussie, kiwi hold on overnight, but remain near lows

Table: seven-day rolling currency trends and trading ranges

Key global risk events

Calendar: 3 – 7 March

All times AEDT

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Source link

Mar 3, 2025 By PARKERYL Currency

Monumental narrative shift – United States

Written by the Market Insights Team

Dollar between (-) macro and (+) geopolitics

Boris Kovacevic – Global Macro Strategist

Rising inflation expectations and tariff angst are threatening the path of the US economy towards a soft landing, a scenario that seemed increasingly more likely from October onwards. That was when economic momentum started gaining traction again as the labor market began outperforming expectations. The election of President Trump led to a one-off boost in confidence as small and medium sized enterprises bet on tax cuts and the cutting of red tape. Now this narrative is in danger of falling apart due to tariff confusion and lower growth.

Last week, for example, ended on a sour note as Trump and Zelenskiy clashed in the Oval Office due to multiple disagreements regarding the war in Ukraine. The joint press conference that should have followed was canceled, sending a stark signal to the rest of the world that an immediate peace deal seems out of reach. Geopolitics and tariff chatter have clearly been a net-negative factor for risk assets as of late.

To make matters worse, investors have started questioning the health of the US economy. Last week’s weaker than expected macro data and front-loading of imports before US companies are hit by tariffs lead to a drastic drop of growth expectations. The Atlanta Fed Nowcast for Q1 fell from 2.3% to 1.5%, a decline only seen during periods of significant turmoil or crises. Inflation published on Friday was in line with expectations with the PCE index rising by 0.3% m/m in January. However, personal spending fell by 0.2%, the first decline in almost two years.

The dollar rose for a third consecutive session and is currently only supported by the geopolitical uncertainty as the macro picture looks increasingly bad. Investors went from pricing in one rate cut by the Fed just days ago to now expecting three for 2025. This is reflected in Treasuries as well. The 2-year yield fell below 4% for the first time since October, matching the low of the US surprise index. This week’s labor market data will be the first large litmus test for the US economy and therefore the US dollar in some time.

Euro in the shadow of Trump

Boris Kovacevic – Global Macro Strategist

The euro is once again feeling the force that geopolitical uncertainty can have on sentiment and markets. European sentiment as of late has been improving, although at a slower than expected pace. The US macro picture seems to be deteriorating, and investors are back at pricing in three rate cuts from the Fed. At the same time is the narrative surrounding policy easing by the ECB becoming more complicated as inflation is picking up again.

However, none of this mattered for investors concerned with the spat between Trump and Zelenskiy and the falling implied probability of a peace deal being reached in the near term. The euro pushed lower for a second consecutive week and is once again trading below the $1.04 mark. Investors expecting the ECB meeting on Thursday to be a new catalyst to push the currency in either direction might be disappointed.

The 25-basis point cut is fully priced in, so it will be about the forward guidance to play the role of the market mover. However, the uncertain trade and geopolitical environment will likely mean that policy makers should remain caution and sensitive to the news flow. Today’s inflation print for the Eurozone is expected to show some deceleration in inflation pressures. The bigger catalyst for renewed selling pressure might once again come from the political or macro front. We would need a significant surprise on the US labor market report on Friday to see some price action of above $1.05 or below $1.03.

Swinging with risk sentiment

George Vessey – Lead FX & Macro Strategist

Having jumped to a more than 2-month high above $1.27 last week, GBP/USD is back flirting with the $1.26 handle following renewed geopolitical uncertainty as the hostile White House meeting between Trump and Zelensky threatens prospects of a US-brokered ceasefire with Ukraine and Russia. The risk sensitive pound slid against safe haven peers, but remains firm against the euro, with GBP/EUR closing the month above €1.21 for the first time since 2016.

The UK’s worsening net international investment position and the fact it has a persistent current account deficit leaves sterling reliant on foreign capital inflows. With this in mind, if we see a bigger drawdown in equity markets, then realistically the pound should come under pressure as well via the risk sentiment channel. However, on the trade front, Britain is way down on Trump’s list for tariffs, both because he likes the UK and because the UK-US trading relationship is much more balanced than most, with US actually having a goods trade surplus with the UK. This is why sterling is viewed as a tariff haven of sorts. Indeed, the FX options market reveals that one-week risk reversals are least bearish on sterling right now versus most of the G10.

The main upside risk for sterling this week is if President Trump reverses or delays increases to tariffs on Mexico and Canada that are scheduled for Tuesday as this would likely boost risk sentiment across the board. Moreover, if the influx of US data disappoints this week, particularly the labour market report on Friday, this could help the pound resume its recovery back above $1.27 versus the dollar.

Dollar jumps despite yield slump

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: March 3-7

All times are in GMT

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

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Mar 3, 2025 By PARKERYL Currency

Tariff day and a busy week ahead – United States

Written by the Market Insights Team

The Loonie braces for impact, tariff day is here

Kevin Ford –FX & Macro Strategist

Little has progressed on the trade front since the one-month pause. Officials on both sides have speculated, and Canadian premiers have presented their case in Washington. Yet, here we are again, back to the wire, awaiting news at any moment.

Tariffs are in effect for now, though a last-minute deal remains possible. Last week, the Loonie adjusted to the increased likelihood of tariffs, but markets still largely expect the 25% tariffs won’t materialize. The Loonie climbed from a weekly low of 1.4182—just above the 20-week SMA—to a three-week high of 1.4472, marking a 290-pip weekly gain. If 25% tariffs are confirmed and Canada maintains retaliatory measures, the key resistance level of 1.4472 will likely be broken. Moves toward 1.46 for the Loonie and 21 for the Mexican peso would signal heightened bearish sentiment. The 60-day SMA at 1.433 serves as critical support if tariffs are delayed another month. Speculation continues around smaller tariffs or conditions like stricter drug traffic enforcement or matching U.S. tariffs on China, which could rise from 10% to 20%. Again, contradictory messages on tariff plans for Canada and Mexico have fueled volatility, particularly in USD/CAD, where implied volatility has surged last week.

Amid the chaos, one clear winner has emerged: the Canadian Liberals. PM Trudeau’s decision to prorogue parliament has boosted his party, now leading the Conservatives in polls for the first time in years. The Liberals have gained momentum by opposing Trump’s tariff threats and increasing investment in citizen-focused infrastructure. Time and wait have worked in their favor. Mark Carney has overtaken Chrystia Freeland as the most likely successor, with a final decision expected on March 9^th. As March unfolds, Canadian politics will play out against a backdrop of ongoing uncertainty.

Today, key macro data from the U.S. will reveal whether manufacturing levels remain above the 50-expansion mark. In Canada, PMI manufacturing data is also due, though tariff news will dominate market focus.

Dollar between (-) macro and (+) geopolitics

Boris Kovacevic – Global Macro Strategist

Rising inflation expectations and tariff angst are threatening the path of the US economy towards a soft landing, a scenario that seemed increasingly more likely from October onwards. That was when economic momentum started gaining traction again as the labor market began outperforming expectations. The election of President Trump led to a one-off boost in confidence as small and medium sized enterprises bet on tax cuts and the cutting of red tape. Now this narrative is in danger of falling apart due to tariff confusion and lower growth.

Last week, for example, ended on a sour note as Trump and Zelenskiy clashed in the Oval Office due to multiple disagreements regarding the war in Ukraine. The joint press conference that should have followed was canceled, sending a stark signal to the rest of the world that an immediate peace deal seems out of reach. Geopolitics and tariff chatter have clearly been a net-negative factor for risk assets as of late.

To make matters worse, investors have started questioning the health of the US economy. Last week’s weaker than expected macro data and front-loading of imports before US companies are hit by tariffs lead to a drastic drop of growth expectations. The Atlanta Fed Nowcast for Q1 fell from 2.3% to 1.5%, a decline only seen during periods of significant turmoil or crises. Inflation published on Friday was in line with expectations with the PCE index rising by 0.3% m/m in January. However, personal spending fell by 0.2%, the first decline in almost two years.

The dollar rose for a third consecutive session and is currently only supported by the geopolitical uncertainty as the macro picture looks increasingly bad. Investors went from pricing in one rate cut by the Fed just days ago to now expecting three for 2025. This is reflected in Treasuries as well. The 2-year yield fell below 4% for the first time since October, matching the low of the US surprise index. This week’s labor market data will be the first large litmus test for the US economy and therefore the US dollar in some time.

Euro in the shadow of Trump

Boris Kovacevic – Global Macro Strategist

The euro is once again feeling the force that geopolitical uncertainty can have on sentiment and markets. European sentiment as of late has been improving, although at a slower than expected pace. The US macro picture seems to be deteriorating, and investors are back at pricing in three rate cuts from the Fed. At the same time is the narrative surrounding policy easing by the ECB becoming more complicated as inflation is picking up again.

However, none of this mattered for investors concerned with the spat between Trump and Zelenskiy and the falling implied probability of a peace deal being reached in the near term. The euro pushed lower for a second consecutive week and is once again trading below the $1.04 mark. Investors expecting the ECB meeting on Thursday to be a new catalyst to push the currency in either direction might be disappointed.

The 25-basis point cut is fully priced in, so it will be about the forward guidance to play the role of the market mover. However, the uncertain trade and geopolitical environment will likely mean that policy makers should remain caution and sensitive to the news flow. Today’s inflation print for the Eurozone is expected to show some deceleration in inflation pressures. The bigger catalyst for renewed selling pressure might once again come from the political or macro front. We would need a significant surprise on the US labor market report on Friday to see some price action of above $1.05 or below $1.03.

Swinging with risk sentiment

George Vessey – Lead FX & Macro Strategist

Having jumped to a more than 2-month high above $1.27 last week, GBP/USD is back flirting with the $1.26 handle following renewed geopolitical uncertainty as the hostile White House meeting between Trump and Zelensky threatens prospects of a US-brokered ceasefire with Ukraine and Russia. The risk sensitive pound slid against safe haven peers, but remains firm against the euro, with GBP/EUR closing the month above €1.21 for the first time since 2016.

The UK’s worsening net international investment position and the fact it has a persistent current account deficit leaves sterling reliant on foreign capital inflows. With this in mind, if we see a bigger drawdown in equity markets, then realistically the pound should come under pressure as well via the risk sentiment channel. However, on the trade front, Britain is way down on Trump’s list for tariffs, both because he likes the UK and because the UK-US trading relationship is much more balanced than most, with US actually having a goods trade surplus with the UK. This is why sterling is viewed as a tariff haven of sorts. Indeed, the FX options market reveals that one-week risk reversals are least bearish on sterling right now versus most of the G10.

The main upside risk for sterling this week is if President Trump reverses or delays increases to tariffs on Mexico and Canada that are scheduled for Tuesday as this would likely boost risk sentiment across the board. Moreover, if the influx of US data disappoints this week, particularly the labour market report on Friday, this could help the pound resume its recovery back above $1.27 versus the dollar.

Dollar jumps despite yield slump

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: March 03-07

All times are in ET

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

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Mar 3, 2025 By PARKERYL Currency

All eyes on Aussie ahead of tariff deadline – United States

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

US tariffs due on Tuesday

The Australian and New Zealand dollars were stuck at recent lows on Monday as markets waited for news on the implementation of new US tariffs.

US president Donald Trump last week confirmed that his new 25% tariffs on Canada and Mexico, along with a new 10% tariff on China, would be launched at midnight, Tuesday, 4 March (EST).

However, markets are on edge, with previous announcements on trade being subject to last-minute delays or changes.

For now, the Aussie and kiwi have been pressured by these trade worries, with the AUD/USD down 0.4% on Friday and losing 2.2% over the week.

The NZD/USD was down 0.6% on Friday and lost 2.5% over the week.

We saw a similar story in Asia with the USD higher on trade worries. The USD/SGD gained 0.2% on Friday and climbed 1.3% over the week.

The USD/CNH slipped 0.1% on Friday but climbed 0.6% over the week.

EUR/USD hit by Ukraine worries, but euro gains in other markets

The EUR/USD fell sharply on Friday due to growing tensions between US president Donald Trump and Ukraine president Volodymyr Zelensky. However, the euro has been stronger in other markets.

The AUD/EUR and NZD/EUR both traded toward seven-month lows. The EUR/SGD neared two-week highs.

Ahead of this week’s European Central Bank meeting, HICP inflation for the Euro region will be announced today.

HICP inflation looks likely to have slowed somewhat by 10 basis points to 2.6%, while euro area HICP inflation decreased slightly to 2.3% year over year from 2.5% in January.

We believe that the softening of services prices is mostly responsible for the easing of core price pressures; services HICP inflation will drop to 3.8% from 3.9% earlier.

Aussie looks to retail sales, GDP

The Australian dollar faces a pivotal week with key data releases, including Q4 GDP and January retail sales.

Weakness in these figures could extend the AUD/USD’s decline, especially after a prior -0.1% retail sales contraction.

The RBA’s February meeting minutes released this Tuesday may reinforce a cautious stance, weighing further on the AUD if growth concerns persist.

In the US, February’s US Nonfarm Payrolls and ADP employment data will drive USD volatility. Strong job growth could revive bets on Fed tightening, buoying the dollar against peers like EUR and JPY. ISM Manufacturing and factory orders will also test sentiment toward the US economy.

The ECB’s rate announcement is expected to cut by 25-basis points, but any shift in policy guidance could sway EUR pairs. A dovish tilt may pressure EUR/USD, particularly if Q4 GDP revisions disappoint.

China’s February CPI and PPI releases loom over regional FX. Soft PPI and subdued CPI could signal persistent deflation risks, denting CNH and APAC proxies like AUD and NZD.

USD/SGD, USD/CNH push back to highs

Table: seven-day rolling currency trends and trading ranges

Key global risk events

Calendar: 3 – 7 March

All times AEDT

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

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Feb 28, 2025 By PARKERYL Currency

February ends gripped by risk aversion – United States

Written by the Market Insights Team

February wrap-up with unresolved tariff issues

Kevin Ford –FX & Macro Strategist

February is drawing to a close, and after five consecutive months of declines, the USD/CAD’s losing streak has eased near the 1.44 mark amidst heightened volatility and unresolved tariff issues. The Loonie has edged upward from its weekly low of 1.4182—resting just above the 20-week SMA—to a three-week high of 1.4453—a 271-pip increase. While no definitive trade policy decisions have been made, tariff risk premia keep the Loonie above 1.44. Contradictory messages about tariff plans for Canada and Mexico have heightened volatility, particularly in the USD/CAD, where implied volatility has surged with March 4^th just around the corner. A last-minute extension to April 2^nd isn’t ruled out, but volatility is expected until formal confirmation.

Volatility surged yesterday as equity markets grappled with escalating risk aversion. While Nvidia’s strong quarterly results initially offered a lift to markets, the optimism was short-lived. Risk aversion soon took the upper hand, driving the VIX index back above the critical 20 threshold.

Amid this month’s chaos and volatility, one clear winner has emerged: the Canadian Liberals. PM Trudeau’s decision to prorogue parliament has benefited his party, which now leads the Conservatives in polls for the first time in years. The Liberals have gained momentum by taking a strong stance against Trump’s tariff threats and increasing investment in citizen-friendly infrastructure projects. Mark Carney has overtaken Chrystia Freeland as the most likely successor, with a final decision expected on March 9^th. As we enter March, Canadian politics will unfold against a backdrop of continued uncertainty and volatility.

Today, all eyes are on the US PCE, the Fed’s preferred inflation measure. Any upside surprises could further unsettle market sentiment.

The key resistance at 1.445 has proven strong for the Loonie. 1.447 is the next level to monitor. Protection against a break above 1.45 adds pressure on the Loonie. The 60-day SMA at 1.433 serves as critical support if tariffs are delayed another month.

Next week’s packed macroeconomic calendar will provide a clearer picture of the US economy, with payrolls (Friday) and ISM manufacturing (Monday) as key data points. For Canada, manufacturing (Monday) and the unemployment rate (Friday) will take center stage.

Dollar balancing tariffs, weaker growth

Boris Kovacevic – Global Macro Strategist

The trade and geopolitical news flows once again overshadowed what seemed to be a pretty important day for US macro developments. Durable goods, home sales, jobless claims and GDP data sent mixed signals about the state of the worlds largest economy. GDP grew by an annualized 2.3%, while unemployment claims rose to a 2-month high and tumbled for a second consecutive month. Overall, the data continues to point to weaker economic momentum ahead and the dollar would have depreciated against this backdrop would it not have been for the tariff news.

Markets once again reacted to fresh tariff announcements made by the US President. Donald Trump confirmed that the 25% tariffs on Canada and Mexico will go into effect, while also hinting at potential new levies on China as soon as March. This bolstered the dollar against the Canadian Dollar and Mexican peso. However, the strengthening of the Greenback broadened out to most major currencies as well.

Beyond trade, Trump’s refusal to commit to a security backstop in Ukraine added another layer of geopolitical uncertainty. Meeting with UK Prime Minister Keir Starmer, he reiterated that the focus should first be on securing a peace deal between Russia and Ukraine, rather than discussing long-term military commitments.

Still, conviction around a sustained dollar rally is fading, as tariff fatigue and growth concerns begin to weigh on sentiment. Traders remain cautious despite the elevated trade uncertainty and lack of policy clarity. For now, FX markets remain driven by trade headlines, with the dollar benefiting from renewed tariff bets—but the long-term picture remains far from clear.

The US dollar index will likely end the week higher, a feat the dollar has only achieved once in the last seven weeks. The last hurdle to overcome is the US PCE report due today. The core figure could slow on a month-on-month basis. However, personal spending is expected to remain robust.

Euro back on the defence

Boris Kovacevic – Global Macro Strategist

Fresh trade tensions are adding pressure to the euro, as President Trump confirmed 25% tariffs on Canada and Mexico and hinted at new levies on China. While the EU was not directly targeted, the risk of further escalation weighs on sentiment, especially with Trump’s criticism of European trade policies and VAT systems still lingering.

While the dollar initially rallied on the tariff news, conviction around sustained USD strength is fading, as the economic drag from higher trade barriers could outweigh short-term inflationary effects. For the euro, the uncertainty keeps upside limited, with EUR/USD hovering under $1.0400 as traders assess whether tariffs will remain a US-focused issue or expand further.

On the other hand, the ECB remains confident that policy is still restrictive, but the debate over future rate cuts is intensifying as per the meeting minutes released yesterday. A 25bp cut next week to 2.5% is expected, yet officials are divided. Some have shown worries about sticky services inflation and trade risks, while others fear weak growth and missing the 2% inflation target. The neutral rate remains a wildcard, with policymakers questioning its usefulness as a policy guide. Meanwhile, disinflation is on track, but wage growth and energy risks call for caution.

Risk sensitive or safe haven sterling?

George Vessey – Lead FX & Macro Strategist

As we explained in yesterday’s report, the pound’s high yielding status is a double-edged sword in that when the market mood is upbeat, sterling tends to appreciate, but in deteriorating global risk conditions, the pound becomes more vulnerable. Hence, the latest bout of tariff angst has sent GBP/USD tumbling from $1.27 to $1.2570 in 24 hours. GBP/USD has erased its weekly gains and more, whilst several key moving averages continue to act as hurdles to the upside.

Apart from weakening against the US dollar though, some analysts think the FX market is viewing the pound as a tariff safe-haven of sorts, driven by confidence that the UK is less economically vulnerable to tariffs compared to major exporters like the EU. This is evidenced by sterling appreciating against all G10 peers this week bar the US dollar and Swiss franc. Meanwhile, if GBP/EUR closes the week above €1.21, it will be the highest weekly closing price in almost three years. If we look at sterling more broadly though, it appreciated against less than 50% of its global peers yesterday, which contradicts this sterling safe haven theory. Moreover, sterling’s vulnerability to global risk aversion due to its reliance on foreign capital inflows would likely limit any haven demand in our view.

Nevertheless, the meeting between US President Donald Trump and UK Prime Minster Keir Starmer appeared constructive, with hopes of a trade deal boosting the odds of the UK avoiding tariffs. The UK is one of the only countries in the world to have a neutral trade relationship with the US in goods, so it’s hard to see how/why Trump would have imposed them anyway. But even if the UK does evade tariffs, a slowdown in global trade would still hurt the UK economy, which would weigh on the pro-cyclical pound.

Risk aversion drives stocks and yields lower

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: February 24-28

All times are in ET

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

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