Market Overview
Market participants entered today’s session with significantly diminished risk appetite following a disappointing policy address that failed to provide the reassurance equities and bonds had priced in over the preceding sessions. The combination of geopolitical tensions, mixed policy signals, and the approaching holiday weekend has triggered a sharp reversal in sentiment, with equity indices, fixed income, and commodity prices all experiencing notable declines while the US dollar has strengthened substantially. The shift from hope to fear represents a critical inflection point as traders navigate reduced liquidity conditions ahead of extended closures across multiple financial centers.
United States
The US dollar has surged across the board as risk-off sentiment overwhelms the market. The greenback’s strength reflects both a flight-to-safety dynamic and a reassessment of policy expectations following recent commentary that offered little concrete guidance. The broad dollar index has advanced meaningfully, with the currency benefiting from rising US Treasury yields and diminished appetite for risk assets.
The 10-year Treasury yield has climbed approximately four basis points to break above the 4.36% level, driven by a combination of risk-off positioning and weak demand at key debt auctions. This yield movement has important implications for the Fed’s policy trajectory, as higher rates in the absence of explicit tightening signals suggest market-driven tightening rather than policy-driven moves.
Economic data releases today include Challenger job cuts and weekly jobless claims, which take secondary importance ahead of tomorrow’s March employment report. February trade data commands the spotlight, as it will prove instrumental in helping economists refine their Q1 GDP forecasts, which the Atlanta Federal Reserve currently tracks at approximately 2%. The 2025 US trade deficit remains virtually unchanged from 2024 at almost $912 billion, despite a meaningful compositional shift away from China. Over the three-month period through January 2026, the US trade shortfall totaled approximately $184 billion compared with $305 billion in the three months through January 2025, signaling a notable improvement in the trade balance trajectory.
Import figures are expected to slip for the second consecutive month, with imports remaining virtually flat throughout last year while exports rose by an average of 0.5% monthly. After surging 5.5% in January, exports are anticipated to have declined by approximately 2.3% in February. St. Louis Federal Reserve President Musalem and Chicago Federal Reserve President Goolsbee are scheduled to address monetary policy today, while Governor Barr will discuss artificial intelligence and consumer issues, providing market participants with additional insight into the Fed’s thinking at a critical juncture.
Eurozone
The euro stalled yesterday in advance of last week’s highs in the $1.1630–$1.1640 area, with short-term traders appearing to have trimmed long positions following a robust 1.5-cent rally compressed into just two sessions before the policy address. The subsequent retreat extended to approximately $1.1515 today, which aligns precisely with a retracement target derived from this week’s recovery that commenced around $1.1445. Nearby support is anticipated in the $1.1485–$1.1500 zone, a level that carries particular significance as options for 720 million euros struck at $1.1513 and a substantial 2 billion euros at $1.1500 expire today, potentially creating a magnet for price action.
The euro’s weakness reflects the broader risk-off environment sweeping through global markets, with European equities also suffering material losses. The Stoxx 600 index is snapping a three-day advance of nearly 4% and is currently off more than 1% in late morning turnover, providing headwinds for the shared currency. European 10-year yields have risen 3–7 basis points today, indicating that even the eurozone’s fixed income markets are not immune to the global repricing occurring across asset classes.
United Kingdom
Sterling peaked just 1/100th of a cent below last Friday’s high yesterday according to Bloomberg’s pricing data, demonstrating the narrow range in which the currency has been trading. After poking barely above the $1.3345 level, cable slipped back below $1.3300 and has been sold through $1.3200 today, representing a material deterioration from recent levels. The four-month low was established on Tuesday near $1.3160, and the intraday momentum indicator has reached oversold territory, potentially setting the stage for a technical bounce. Nearby resistance is anticipated in the $1.3240–$1.3250 area, a zone that cable must clear to restore any semblance of upward momentum.
The weakness in sterling mirrors the broader dollar strength and risk-averse positioning evident across all major currency pairs, with the pound offering no exception to the general theme of risk asset weakness permeating markets today.
Canada
The US dollar peaked against the Canadian dollar on Tuesday slightly above the CAD1.3965 level and was subsequently sold back to almost CAD1.3870 yesterday. The loonie has made a marginal new low today before being pushed above yesterday’s high shy of CAD1.3920. The week’s high was recorded on Tuesday at approximately CAD1.3965, and above this level, resistance is anticipated in the CAD1.4000–CAD1.4020 zone, representing a psychologically important round number that traders will watch closely.
Canada reports its February merchandise trade balance today, a release that carries significant weight given the sharp deterioration observed throughout last year. The goods trade deficit swelled dramatically to C$31.6 billion in 2025 from almost C$7.2 billion in 2024. Over the three-month period through January, Canada ran a C$7.5 billion deficit compared with a C$4.6 billion surplus in the three months through January 2025, marking a substantial swing in the trade position. The broader current account measure widened to a deficit of 0.9% of GDP last year from 0.5% in 2024, indicating structural challenges in Canada’s external accounts that may weigh on the loonie over the medium term.
Australia
The Australian dollar extended its recovery from around $0.6835 established on Monday and Tuesday to slightly more than $0.6960 yesterday, demonstrating resilience amid the broader risk-off environment. However, upside momentum has faded, and the aussie dipped below $0.6915 in late North American dealings before being sold to $0.6865 today. A break below this level may spur a retest of the week’s low, with stronger support anticipated closer to $0.6800, where a substantial options expiration of nearly A$1.2 billion is set to expire today, creating a potential pivot point for price action.
Australia reported its February goods trade earlier today, with the surplus widening dramatically to A$5.68 billion from A$2.26 billion in January and A$2.7 billion in February 2025. Exports surged 4.9% after falling a revised 1.6% in January, which was initially reported as a 0.9% decline. Imports fell 3.2% in February following a revised 1.1% increase in January, which was initially estimated as a 0.8% gain. Over the full year 2025, Australia’s goods trade surplus narrowed to approximately A$45.1 billion from A$66.9 billion in 2024, a concerning trend for the currency. Imports rose by an average of 0.5% monthly in 2025 after averaging 0.8% increases in 2024, while exports rose by an average of 0.4% last year and fell by the same amount on average in 2024. Australia’s current account deficit widened to 2.6% of GDP in 2025 from a 2.2% shortfall in 2024, painting a picture of deteriorating external balances that may constrain the aussie’s upside potential.
China
The US dollar was pressed to its lowest level in approximately three weeks yesterday against the offshore yuan, trading almost as low as CNH6.87. The greenback recovered to slightly above the midpoint of the session’s range in the North American afternoon around CNH6.88 before steadily climbing to a little above CNH6.90 after an initially quiet start in the local session. This rebound reflects the broad dollar strength evident across all major currency pairs as risk sentiment deteriorates.
The People’s Bank of China set the dollar’s reference rate lower for the third consecutive session today at CNY6.8880 versus CNY6.9025 yesterday, demonstrating a continued effort to support the onshore currency. This represents the second consecutive session of an outside reduction exceeding 0.20%, which marks the largest two-day adjustment since September 2024. The PBOC’s consistent fixing lower suggests policymakers remain concerned about excessive yuan weakness and are utilizing the daily fixing mechanism to provide support, even as the offshore market has pushed the currency weaker in response to global risk-off dynamics.
Japan
The Japanese yen has staged a notable recovery, with the dollar falling approximately 1.35% against the yen from Monday’s high to yesterday’s low, breaking the one-way market that Japanese officials had commented on when the dollar climbed four consecutive days last week. The risk-off environment and a jump in US yields have helped lift the greenback to almost JPY159.75 today, and once again the psychologically important JPY160 level comes into view. Options for nearly $1.5 billion struck at the JPY160 level expire today, creating a potential magnet for price action as traders position ahead of the expiration. Initial support is seen in the JPY159.35 area, which may prove important if the dollar attempts to consolidate recent gains.
The yen’s strength reflects the classic safe-haven bid that emerges during risk-off episodes, with Japanese investors repatriating capital and global investors seeking shelter in the Japanese currency. The weakness in the dollar against the yen stands in stark contrast to its strength against most other major currencies, highlighting the differentiated nature of today’s market moves. A weak reception at Japan’s 10-year bond auction saw yields rise as much as nine basis points today, indicating that even the Japanese fixed income market is repricing in response to global developments.
Emerging Markets
The Mexican peso demonstrated notable strength yesterday, with the US dollar trading below its 20-day moving average against the peso for the first time in nearly a month at approximately MXN17.8165 today. However, the greenback failed to settle below this level and straddled the MXN17.85 area in late dealings before returning to almost MXN17.96 today as the broader dollar rally reasserted itself. Latin American currencies accounted for four of the best-performing emerging market currencies yesterday, though this strength has proven ephemeral as risk-off sentiment has reasserted control.
The Indian rupee soared approximately 1.85% today, marking its biggest advance since 2013 as the central bank intensified capital controls that sparked a powerful short squeeze. Banks were prohibited from offering certain non-deliverable forward rupee contracts to both residents and non-residents, a significant restriction that immediately constrained market liquidity. A measure of volatility jumped to six-year highs, which in turn prompted the central-bank-supervised clearinghouse to boost margin requirements for forwards, further squeezing an already stressed market. The dollar settled near INR94.8325 before the two-day holiday but has now retreated to around INR93.1050, having fallen to almost INR92.8260, reflecting the extraordinary market dislocation created by the capital control measures.
The Brazilian real posted a 0.45% gain yesterday but failed to rank among the day’s best performers, while the Argentine peso suffered a 0.65% loss, earning the distinction of being the weakest currency in the world on the day. These divergent performances highlight the fragmented nature of emerging market performance and the country-specific factors that continue to drive currency movements despite broad global trends.
Global Markets
Equity indices have experienced sharp declines across all major regions as the hope that had lifted markets in recent days has been questioned following the policy address. Asia Pacific equities tumbled with most large bourses off 1–2%, with Hong Kong declining slightly less while South Korea’s Kospi was tagged for almost 4.5%, reflecting particular weakness in technology-exposed markets. India’s equities are bucking the trend and holding small gains in late turnover, providing a rare bright spot in an otherwise negative global equity environment. Europe’s Stoxx 600 is snapping a three-day advance of almost 4% and is off more than 1% in late morning turnover, while US index futures are off around 1.0%–1.5%, signaling that North American exchanges will open lower.
Benchmark 10-year yields are jumping higher across the developed world today. European 10-year yields are 3–7 basis points higher, and the 10-year Treasury yield is up approximately four basis points to poke above 4.36%, reflecting a broad repricing of duration risk across global fixed income markets. This yield movement has important implications for equity valuations, particularly for growth stocks that benefit from lower discount rates.
Gold’s recovery was initially extended to $4,800 today, fraying the 20-day moving average for the first time in three weeks, but the yellow metal was subsequently sold to almost $4,555 before finding bids. It stalled near $4,650 in early European turnover, suggesting that safe-haven demand, while present, remains insufficient to sustain a meaningful rally in the face of rising real yields. Silver held below its 20-day moving average at approximately $76.35 and was sold to slightly below $69.70 before stabilizing to straddle the $71 area in the European morning, indicating weakness in the industrial precious metal alongside the more defensive gold.
Crude oil prices have experienced significant volatility. May WTI opened near $99 today and initially slipped to $97.50 before hope faded and the contract reached slightly above $108, the highest price since the peak on March 9 at approximately $113.40. June Brent briefly traded below $100 and then reached almost $109.20, with Tuesday’s high closer to $110 and the war-high recorded on March 19 at a little above $112. The volatility in energy markets reflects uncertainty regarding geopolitical developments and their potential impact on global oil supply, with traders attempting to balance risk-off sentiment against supply concerns.
