# United States
As we anticipate tomorrow’s US tariff announcement, which still appears to be under internal debate, the US dollar is primarily stabilizing within yesterday’s price range. The latest news has generally met expectations, including the Japanese Tankan survey and the Reserve Bank of Australia’s decision to keep rates steady after beginning an easing cycle in its previous meeting. The futures market is still anticipating a May rate cut. The Eurozone’s CPI matched forecasts, with a notable decrease in unemployment to a new low of 6.1%. Today, the US releases the JOLTS report, though it seems to hold less market sensitivity now compared to earlier points in the cycle. The ISM manufacturing index is expected to decline under 50, a threshold dividing expansion from contraction. Auto sales might receive a temporary boost as buyers rush before tariffs take effect. The encouraging recovery in US equity indices late yesterday may have buoyed equities in Asia and Europe today. Except for India, major Asian markets rallied, with Taiwan, South Korea, and Australia seeing gains exceeding 1%. Europe’s Stoxx 600 also increased by more than 1%, reversing a four-day downward trend. US index futures are stable to slightly positive. Despite the equity rally, the bond market has remained robust, with European benchmark yields mostly dipping by 6-7 basis points. The US 10-year Treasury yield is nearly three basis points lower, sliding just under 4.18%, after hitting a five-month low of around 4.10% last month. Gold’s upward momentum continues, reaching $3,149 before consolidating. On the other hand, May WTI soared 3% to nearly $72, marking its highest point in around six weeks, and continues to show strength.
# Eurozone
The euro retraced half of its decline from the March 18 high near $1.0955 to last week’s low near $1.0735, closing yesterday around $1.0815. Trading today has been relatively calm, with prices moving between $1.0790 and $1.0830. This week will see significant options expirations at $1.08, totaling 820 million euros and 4.6 billion euros on Thursday and Friday. Last year, European investors poured a record $108 billion into US equities, but reports suggest some of these investments are being unwound. While there’s speculation about a potential extensive divestment, it remains a possibility rather than a certainty. Occam’s Razor suggests viewing recent actions as cyclical until proven otherwise. Eurozone’s preliminary March CPI was no surprise, slipping to 2.2% from 2.3%, while the core rate decreased to 2.4% from 2.6%. The final March manufacturing PMI stands at 48.6, a slight decline from the 48.7 flash estimate. February’s unemployment rate hit a historic low of 6.1%, down from 6.2% over the past four months, contrasting with February 2024’s 6.5% figure.
# United Kingdom
Sterling has been trading within a broad range established last Thursday, roughly between $1.2870 and $1.2990. For a broader top formation to be confirmed, it needs to decisively break below the $1.2860 area. The recent four-month high was recorded on March 20 near $1.3015. Momentum indicators suggest a downturn, as evidenced by the five-day moving average dipping below the 20-day moving average for the first time in three months. On the economic calendar, Nationwide’s house price index remained steady at 3.9% year-over-year. December’s 4.7% increase marked the strongest performance since October 2022. The final manufacturing PMI was revised to 44.9 from a preliminary 44.6 and down from 46.9 in February, representing the weakest level since the end of 2023, contrasted with 50.3 in March of last year.
# China
The dollar found support near CNH7.2530 yesterday, showing a firmer bias today. Trading above CNH7.2650 prompted an advance toward CNH7.2810, approaching last week’s high near CNH7.2825. Meanwhile, the People’s Bank of China introduced more volatility to the daily dollar fix. In February, the fix typically varied by 0.01%-0.02% from the previous day’s level, with one exception at 0.03%. However, March saw a dozen sessions where the fix varied over 0.3%. Today’s reference rate was set at CNY7.1775. Compared to the Chinese Federation of Logistics and Purchasing, the Caixin manufacturing PMI has been stronger, continuing to stand at 51.2 versus 50.4. Last March, the Caixin reading was 51.1, while the other index stood at 50.8.
# Japan
The dollar slightly exceeded its 50% retracement from the March 11 low near JPY146.55. As US equities recovered from a lower opening, so too did the dollar, reaching new session highs near JPY150.25, with the 10-year Treasury yield recovering to 4.25%. The dollar has held below JPY150.15 today, given the options expiring at JPY150.00 and JPY150.03, totaling $2.2 billion. Japan’s Q1 Tankan survey indicated some softness among large manufacturers, while non-manufacturers remained steady, a likely consequence of US tariffs and threats. Capex plans by large companies fell back to 3.1%, echoing Q1 23’s low, marking the lowest level since Q1 22, as new fiscal years tend to begin conservatively. GDP-related business investment has fluctuated over the past six quarters. Q4 24 saw a 2.3% quarterly rise, possibly slowing to 1.2% in Q1 25. Inflation over the next five years is projected at 2.3%, up from a previous forecast of 2.2%. Separately, February’s unemployment rate dropped to 2.4% from 2.5%, with the job-to-applicant ratio matching last year’s low at 1.24.
# Canada
In the face of US tariff threats and increased selling in US equities, the Canadian dollar has weakened for three consecutive sessions. The US dollar surged to nearly CAD1.4400, settling above the 20-day moving average for the first time since March 14. While it poked above CAD1.4400 today, it hasn’t sustained the increase and is back near CAD1.4365 as European trading heads into late morning. Sustaining levels above CAD1.4400 could target the CAD1.4450-70 area. Discussions between Trump and Carney reportedly went well, yet there’s no indication of tariff relief for Canada. Canada’s March manufacturing PMI is anticipated to have dropped for the third month in a row. Previously, the index moved above 50 in September for the first time since April 2023. As we look ahead to the US reciprocal tariff announcement and Friday’s employment report, Canada faces downside risks for job creation and potential for increased unemployment.
# Australia
The Australian dollar plunged through a support level around $0.6280 and dropped to $0.6220. It hasn’t traded below $0.6200 since March 4, nor closed below it since January 17. Options totaling A$1.5 billion are set to expire at that level on Friday. Today, the AUD is trading within yesterday’s range, between approximately $0.6230 and $0.6270. Momentum indicators are on the decline. As expected, the Reserve Bank of Australia maintained the overnight cash rate target at 4.10%. A rate cut at the May 20 meeting is fully anticipated by the futures market, which is pricing in three cuts for the year. The year-end target rate is seen slightly below 3.40%, the lowest in five months, having dropped seven basis points in the past week. Separately, Australia’s February retail sales rose by 0.2%. For the first two months of this year, the average monthly increase was about 0.25%, compared to an average of 0.65% in the same period of 2024.
# Mexico
The peso remains susceptible as the US challenges Mexico’s modernization efforts that have been integral since NAFTA was signed in 1992. NAFTA helped to validate and strengthen the integration of continental economies. With Mexican inflation around target, Banxico is moving aggressively to support the economy. The dollar climbed to nearly MXN20.52 today, with resistance potentially extending to MXN20.55, while the risk leans toward last month’s high of MXN21.00. Initial support is near MXN20.40. Mexico’s manufacturing PMI and IMEF surveys, expected today, will likely remain weak. Worker remittances, a key part of Mexico’s external balance, will also be reported. These averaged nearly $5.4 billion per month in 2024 and slightly below $5.3 billion in 2023. Historically, February remittances tend to decline from January levels, which stood at $4.66 billion this year.
