### United States
Last week’s economic landscape in the United States was marked by a rally in the dollar even amidst declining interest rates, which can be attributed to a renewed focus on tariffs and a spell of economic uncertainty. There has been a fresh wave of tariff threats, with the possibility of escalating tariffs on Canada and Mexico, in addition to further tariffs on Chinese goods. These developments have reignited concerns about economic disruptions caused by trade policy, leading to the dollar softening against the G10 currencies, despite its earlier strength. The Dollar Index, showing volatility, has experienced a pullback after a recent advancement that broke a longstanding period of consolidation above its 20-day moving average. Market apprehensions about economic growth are intensifying, with the Atlanta Fed GDP tracker slashing its Q1 2025 GDP forecast significantly. January’s real personal spending saw a notable decline, exacerbated by adverse weather conditions, though upcoming data releases may ease some concerns. The highlight of the week is the employment data expected on Friday, which should provide insights into job growth trends.
### Eurozone
The euro experienced a dip against the dollar, retreating after failed attempts to sustain the rally from earlier in the month. Recent data saw the eurozone’s February CPI rising marginally, though the year-on-year rate eased, suggesting potential deflationary pressures in the upcoming months. This environment set the stage for the European Central Bank’s anticipated rate decisions and revised forecasts. Additionally, the eurozone manufacturing PMI was slightly revised upwards, indicating some stabilization within the manufacturing sector.
### United Kingdom
The British pound witnessed volatility, initially reaching a notable peak before succumbing to selling pressures. Despite positive diplomatic developments, such as Prime Minister Starmer’s effective engagements and the prospect of trade leniency from the U.S., sterling faced headwinds. Recent data showed robust consumer credit and stable mortgage approvals, with the UK manufacturing PMI revealing a slight upward revision, though it remains below 50, indicating contraction.
### China
The U.S. dollar rose against the Chinese yuan, with the PBOC’s reference rate adjustments offering the dollar more room to appreciate. This comes amid improvements in China’s economic indicators, such as manufacturing and non-manufacturing PMI, which crossed the 50-mark, signaling expansion. The Cyxaixin manufacturing PMI also showed improvement, bolstering the outlook for China’s economic performance.
### Japan
In Japan, the yen weakened against the dollar, reaching highs not seen in nearly a week. This comes against a backdrop of lower U.S. interest rates and as Japan’s manufacturing PMI showed a slight uptick, though it remains below the crucial 50-mark. Upcoming employment data might further impact the yen’s standing as economic releases continue to shape market expectations.
### Canada
Canada’s economic prospect is being significantly influenced by U.S. tariff threats, leading to upward pressure on the greenback relative to the loonie. The U.S. dollar’s recent strength persisted over several sessions but now faces potential resistance. The Canadian economy is also awaiting the manufacturing PMI release, with recent trends showing a dip in January. Upcoming employment data later this week could provide additional insights into Canada’s economic direction.
### Australia
The Australian dollar has been facing sustained downward pressure, leading to recent lows not seen since mid-January. The currency’s depreciation comes despite back-to-back improvements in manufacturing PMI readings, though both remain marginally above contraction territory. Ahead of a busy economic calendar filled with trade data, retail sales, and GDP releases, the Aussie may find itself influenced by both domestic and international developments.
### Mexico
The Mexican peso showed resilience, albeit with some hiccups, amid U.S. trade and tariff dynamics. Despite fears of potential repercussions from tariff impositions, the peso endured a favorable stature relative to both its Canadian counterpart and recent selling pressures. This resilience is buoyed by an upcoming slate of economic indicators, such as remittances and the manufacturing PMI, which could further shape the peso’s trajectory as the country seeks to navigate through a complex trade landscape.
