## United States
Market sentiment remains cautious due to uncertainty surrounding the upcoming US tariff announcement, which is influencing trading activities and dampening short-term confidence. The US dollar is consolidating against the G10 currencies, with the Mexican peso experiencing roughly a 0.25% loss, placing it at the bottom of today’s performing currencies. Despite President Trump’s endorsement of Erdogan, the Turkish lira is relatively stable, thanks mainly to Finance Minister Simsek’s “whatever it takes” speech aimed at market stabilization.
In the equity markets, most Asia-Pacific bourses posted gains, except for those in mainland China, Taiwan, and India. A 1.1% rise in South Korea and a 3.8% surge in Indonesia underscore regional strength, contributing to a rebound in the MSCI Asia Pacific Index after a three-day decline. Meanwhile, European stocks, represented by the Stoxx 600, are surrendering most of yesterday’s gains, and US index futures are trading softer.
In the bond market, European 10-year yields are slightly softer, with the UK 10-year Gilt yield down approximately three basis points to around 4.73% following a soft CPI release. The US 10-year yield is firmer around 4.33%, shrugging off Moody’s negative outlook on the US fiscal situation. Gold is stable, hovering around the $3020 settlement mark. WTI crude is firm but remains below yesterday’s high of $69.70, the top level since March 3.
The Dollar Index has stalled after a recovery of about 1.25% from last week’s lows, failing to surpass yesterday’s peak of 104.45 while remaining above 104.20. With the slowing US economy being observed in softer survey data, this slowdown is expected to reflect in the real sector data soon. February’s durable goods orders may have decreased following a 3.2% jump in January. Looking ahead, the March nonfarm payroll growth due on April 4 is projected at around 120k, the smallest increase since last October.
Despite fiscal and monetary support post-2020, the US economy’s growth is anticipated to slow to trend (about 1.7%), which is considered non-inflationary. However, some concerns persist about a sharper slowdown due to government spending cuts, tariff uncertainties, taxes, and immigration policies.
## Eurozone
The euro showed resilience after slipping slightly below $1.0780 yesterday but ended lower for five consecutive sessions. It is currently trading in a narrow band above $1.0780, positioned between the 20-day moving average of $1.0775 and the five-day average of $1.0810. Options totaling nearly 2 billion euros expiring at $1.08 tomorrow and 2.2 billion euros on Friday add a layer of complexity to the euro’s near-term outlook.
The eurozone’s economic calendar is relatively light today and in the coming days, providing little fresh data to influence currency movements.
## United Kingdom
Sterling has recovered from a near two-week low on Monday at approximately $1.2885 to touch $1.2960 yesterday, though it returned to Monday’s lows today following a soft CPI report. Approximately GBP360 million in options expiring at $1.2945 today may influence trading. The UK’s February CPI posted a 0.4% increase, bringing the year-over-year rate to 2.8%, down from 3.0% in January. Core inflation fell to 3.5% from 3.7%, while services inflation remained stable at 5.0%.
Attention in the UK is now shifting to fiscal policy, with Chancellor Reeves set to deliver the Spring Budget Statement today. The Labour government is expected to prioritize austerity over accepting a larger budget deficit or raising taxes. Highlighting the growing socioeconomic challenges, experts have pointed to the decline in the average height of five-year-old children in the UK as a strong indicator of deteriorating living conditions, linked to poor diets and cuts to the National Health Service.
## China
Amidst a losing streak for the offshore yuan and recent PBOC dollar fix patterns, market analysts are on alert for potential changes in China’s foreign exchange stance. The reference rate was set lower today for the first time in five sessions, at CNY7.1754 compared to CNY7.1788 yesterday. The dollar has been rising against the offshore yuan for the seventh straight session, reaching CNH7.2750, its highest level since March 5.
Additionally, CK Hutchinson is proceeding with a $19 billion port sale, which includes strategic ports on both sides of the Panama Canal, despite pushback from Beijing. The deal is anticipated to be signed on April 2.
## Japan
Yesterday saw the dollar extend its gains against the yen to nearly JPY151, its strongest level since March 3, before being met by sellers. The dollar traded below JPY150 in North America yesterday, consolidating today between JPY149.85 and JPY150.60. Since hitting a five-month low on March 11 at JPY146.55, the dollar has rallied by 3% through yesterday’s high. A breach of the JPY149.50-60 range would dishearten bullish traders.
Japan’s services producer prices declined to 3.0% in February from a revised 3.2% (3.1% initially) in January, remaining at the upper end of the range observed since mid-2024. The swaps market has revised expectations downward, now anticipating about 38 basis points of rate hikes this year, compared to earlier expectations of 50 basis points.
## Canada
The US dollar is softer against the Canadian dollar for the third consecutive session, approaching the month’s low set on March 6 near CAD1.4240, with options totaling around $635 million expiring today. A breakthrough of this level might target CAD1.4200 next. The economic calendar in Canada is light this week, with January’s GDP data due on Friday as a highlight. Bloomberg’s survey median forecast predicts 0.3% growth, the fastest since last October. The Bank of Canada anticipates 1.8% growth this year, compared to 1.5% over the past two years, while the IMF forecasts a slightly more optimistic 2% growth rate.
## Australia
The Australian dollar reached a three-day high yesterday near $0.6325, recovering half of last week’s losses and testing this area in European trading today. The next retracement level at 61.8% is around $0.6240. Australia’s February CPI edged down to 2.4% from 2.5%, with the trimmed mean measure slightly decreasing to 2.7% from 2.8%.
In contrast to the UK, the Australian government unexpectedly announced income tax cuts, energy rebate extensions, and an increased threshold for state-run healthcare system taxes. These moves are aimed at addressing the budget deficit, expected to rise to A$42.1 billion in the 12 months through June 2026, up from a previous projection of A$27.6 billion. The fiscal policy shift ahead of the May election has not altered expectations for the central bank to cut rates at least twice more this year, with futures markets indicating almost a 50% likelihood of a third cut, unchanged since mid-last week.
## Mexico
Yesterday, the dollar dipped slightly below MXN19.96 before Mexico released stronger-than-anticipated January retail sales data, which rose 0.6% against a median forecast for flat growth, the largest increase since last July. Nevertheless, this is unlikely to deter the central bank from implementing another 50 basis point rate cut on Thursday, which would bring the target rate to 9.0%, after which the pace of cuts is expected to slow considerably, with room for several quarter-point reductions throughout the year.
In contrast, Brazil is taking the opposite approach. The minutes from last week’s central bank meeting in Brazil, which resulted in a 100 basis point hike to the Selic rate for the third consecutive meeting, indicated additional increases are likely, albeit at a slower pace. Consumer prices in Brazil rose approximately 1.3% last month, the largest monthly gain in three months. The hawkish stance boosted the Brazilian real by about 1.5% yesterday, leading the emerging market currency pack. After reaching a six-day high on Monday at BRL5.7725, the US dollar fell to around BRL5.6780 yesterday, with last week’s low near BRL5.6320 remaining the lowest since mid-October 2024.
