The USD is holding on to gains, oil prices are weakening, equity markets are down, and US yields are easing as tariff concerns take hold. The USD holds on to Thursday's gains following the US announcement that tariffs on Canada, Mexico and China will be effective on March 4th. Equity markets declined following President Trump's latest tariff announcement, soured investors' risk appetite, with the mining, tech, and auto sectors suffering the most. The US said on Thursday that 25% tariffs on Canada & Mexico would come into force on March 4th, while Chinese imports would face a further 10% levy. Economists anticipate tariffs will hurt US growth, increase inflation and potentially send Mexico and Canada into recession. Elsewhere, oil prices are set for their first monthly drop since November due to economic concerns. Bitcoin tumbles in early trading, extending declines from its 2025 highs to over 25% as Trump-fuelled euphoria fades. Today, we will focus on the German CPI report, CAD GDP, Core Personal Consumption Expenditures - Price Index, and President Trump's speech to drive direction to currency markets.
In the news. Global stocks slide as tariff threats add to big tech jitters. UK and US in talks on trade deal that could spare Britain from tariffs. Putin hopeful after US talks on Ukraine ceasefire. The EU and India target trade deal tis year. Western firms hope to return to Russia, but Moscow's meddling is still a threat. US judge halts Trump administration's calls for mass firing at agencies. British energy secretary to visit China in March to restart energy talks. Tech stocks drag European markets lower after nvidia sell-off ripples into tech sector. Ontario's Doug Ford wins a rare third majority government. China vows to retaliate as necessary after Trump threatens 10% tariff hike. Zelensky in Washington to sign minerals deal at the White House.
In currency markets. The USD holds onto gains as tariff threats sour risk sentiment. JPY slips in early trading, but remains up 3.2% against the USD, the GBP is up 1.2%, while EUR & AUD slipped by 0.3% in February. CNY up 0.1%, while Asian currencies on average are flat against the USD. Trading currencies cam under pressure, with NZD tumbled 0.5%, AUD, NOK & MXN weakened by 0.3%, JPY & ZAR fell 0.2%, and SEK is down 0.1% against the USD.
In commodity markets. Oil, Copper & Silver prices tumbled 1.4%. Natural Gas prices dropped by 0.5%. Gold prices weakened by 0.7%. Wheat prices strengthened by 0.7% and Soybean prices firmed by 0.3%.
CAD holds near monthly lows following President Trump's comments that a 25% tariff will be added on Canadian goods will go into effect on March 4th. The loonie tumbled to its weakest level since February 4th, extending its losses against the USD to a 5th straight day. We anticipate CAD could retest 1.4793 (February 3rd, 2025), its weakest level since 2003, as economists predict a prolonged trade war with the US will push Canada into recession and trigger further BoC rate cuts. Intraday, the key US inflation report and CAD GDP will primarily drive the loonie today.
EURCAD holds steady above 1.5000, with the EUR up almost 2.5% as weaker commodity prices and US tariff threats keeps the loonie on the back foot.
EUR steadies below 1.0400 ahead of key German and US inflation reports. The euro continues under pressure as investor sentiment fades with the threat of tariffs on the EU in April increasing after the US confirmed that tariffs will go ahead for Canada & Mexico in March. Euro found some support in early trading with upbeat German retail sales and import prices data. Investors will be focused on the German inflation report, which is expected to hold at 2.3% and the US inflation report which is expected to ease to 2.6%. In addition, President Trump's speech at 1pm EST will be monitored closely for any mention of European tariffs.
GBPEUR holds steady in early trading, but the pound has the potential to extend gains (up 3.7% y/y) with expectations of tariffs hitting the EU in April.
GBP stalls at 1.2600 ahead of the US inflation report. The pound gives back weekly gains despite the prospect that the UK has avoided tariffs with the US and increased hopes of a UK-US trade deal. The pound is expected to find some support from BoE Deputy Governor Ramsden after he said that a gradual and careful approach is needed to rate cuts, as UK house prices rise more than expected in February. We expect the pound to hold within current levels ahead of today's critical US inflation report.
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