# United States
The decline of the US dollar has persisted today against most G10 currencies, except for the growth-sensitive dollar bloc, which is underperforming. Despite this, ahead of the US jobs report and Fed Chair Powell’s speech on the economic outlook, all G10 currencies have gained at least 1% this week. The US created an average of 166k jobs a month in 2024 and 216k a month in 2023, with 341k positions filled in January-February 2024. To match this, the US needs to have created approximately 198k jobs last month. The median forecast from Bloomberg anticipated 160k. Considering the miss on ADP (77k vs. expectations for 140k), some predictions suggest a lower figure. Factors such as tariff threats, government layoffs, reduced immigration, and cooling immigration suggest downside risks in the coming months. Meanwhile, the dollar has lacked chart support, with speculations around economic contractions, despite other data like PMI, ISM, and durable goods orders suggesting ongoing growth.
# Eurozone
The euro has demonstrated remarkable strength, climbing to a new high post-ECB’s rate cut and President Lagarde’s indication of a “meaningfully less restrictive” policy. This move resulted in the euro reaching almost $1.0855, the best level since November 6, the day after the US election. The euro surpassed the (61.8%) retracement of its Oct-mid-January 11-cent decline near $1.08 and extended gains to about $1.0870. Despite little chart resistance before the $1.0935 area, the move has been sharp, with the euro settling above its upper Bollinger Band for the past three sessions (approx. $1.0795 today). The euro’s 4.7% weekly gain marked its strongest performance since March 2009, with the ECB confirming market expectations of a pause before potential cuts, possibly in Q2. Following the ECB meeting, updates on Q4 24 GDP (0.1% quarter-over-quarter and 0.9% year-over-year) were provided, though the news was too dated for significant market impact, with focus shifting to US tariffs, its policy change on Ukraine, and eurozone fiscal efforts.
# United Kingdom
Sterling rose to nearly $1.2925, marking its highest since November and the (61.8%) retracement objective of sterling’s 13-cent decline from September through mid-January. It reached $1.2945 today. Following a settlement above its upper Bollinger Band on Wednesday, it settled back under (~$1.2890) yesterday, with positions near $1.2930 today. The UK’s economic calendar is sparse, with the main feature next week being the January GDP print and details on March 14. A YouGov poll indicated Prime Minister Starmer’s rising popularity, surpassing Farage’s support for the first time since October, capitalizing on the vacuum left by Germany’s coalition-building efforts. The UK Prime Minister naturally leads a European-led security coalition.
# China
The offshore yuan experienced a 0.85% increase this week, achieving its fourth weekly advance in five weeks. Still, the dollar remained slightly above last month’s low (around CNH7.2260). The PBOC set the dollar’s reference rate at CNY7.1705, marking its first increase since Monday, with Friday’s setting at CNY7.1738. Strong trade figures were reported, with exports rising 2.3% in January-February to $540 billion while imports dropped by 8.4%, generating a trade surplus of around $171 billion. Exports to the US surged to nearly $76 billion, circumventing tariffs, marking the largest Jan-Feb surplus since 2022. China is expected to report CPI and PPI tomorrow. Bloomberg’s survey anticipates a -0.4% year-over-year drop in February’s CPI, marking the weakest print since January 2024 (-0.8%) and the first negative reading since then. Producer price deflation may have eased to -2.0% from -2.3% in January, marking the highest since August 2024.
# Japan
The dollar was sold to almost JPY147.30 yesterday, reaching a marginal new low today near JPY147.20, its lowest since early last October. Positioned near the (61.8%) retracement of the rally from mid-September 2024 to the mid-January 2025 high, this spot is close to today’s lower Bollinger Band around JPY147.00. Japan will report labor earnings first thing on Monday, with a strong rise potentially prompting an earlier-than-expected rate hike, not fully anticipated until October. Furthermore, Japan is set to report its January current account balance, with expectations of a small deficit, the first since January 2023. This deficit likely stems from a sharp rise in the trade deficit, with figures indicating -JPY2.55 trillion compared to JPY62.3 billion surplus in December 2024 and -JPY1.52 trillion deficit in January 2024.
# Canada
News prevails that imported goods such as autos and parts under the USMCA agreement from Canada to the US will be exempt from the 25% tariff announced earlier this week. This helped the Canadian dollar extend its recovery to a seven-day high. Potash, required for agriculture, will encounter a similar 10% levy as Canadian energy. The greenback was sold to almost CAD1.4240, recovering back above CAD1.4315, trading quietly before today’s employment report (~CAD1.4280-CAD1.4320), with nearest resistance around CAD1.4350. Given the uncertain economic outlook, risks are skewed to the downside of the jobs report. Bloomberg’s survey suggests a 20k job growth (down from 76k in January and 30.6k in February 2024). Canada generated an average of 32k jobs per month in 2024 and 44.5k per month in 2023, with nearly 25k of those being full-time positions in 2024. In 2023, 35.6k full-time posts were filled monthly on average. The swaps market anticipates an 80% chance of a Bank of Canada rate cut next week, up from 50% a week ago. Meanwhile, the Liberal Party leadership contest concludes Sunday, with Carney expected to win, raising the question of whether he will call a snap election for a popular mandate.
# Australia
The Australian dollar reached nearly $0.6365 yesterday, the highest in eight sessions, but could not maintain its momentum and settled slightly lower. Today, it slipped below $0.6300. Australia recorded a 0.4% increase in household spending in January, though the December figure was revised to 0.2% from 0.4%. Last year, household spending grew by an average of 0.3% per month, compared to 0.4% per month in 2023. Australia’s central bank has countered market speculation of a further rate cut, with predictions leaning towards May (~80%), fully discounted by July. The futures market has about 2.5 cuts (or ~62.5 bp) priced for the year.
# Mexico
Following the imposition of 25% tariffs on Mexico earlier this week, Trump announced Mexican goods and services under the USMCA agreement would be exempt. This exception covers about half of Mexico’s exports to the US. Approximately 40% of Mexico’s exports fall under separate arrangements, including most-favored nation status. The peso rose for its third session yesterday, with the dollar falling to MXN20.2150 and maintaining this level today. In European dealings, the dollar briefly touched MXN20.23. Mexico is set to report February CPI today, with expectations for the year-over-year headline rate to rise to about 3.75% from nearly 3.60% in January, indicating the first increase since October. Last February’s rate was at 4.40%. The core rate might decrease to 3.62% from 3.66%, according to Bloomberg’s survey. Given the peso’s recovery, the odds still favor another 50 bp rate cut by Banxico on March 27.
