The USD is firm, oil prices are steady, equity markets are mixed, and US yields are easing as risk sentiment wanes. The USD strengthened in quiet trading ahead of today’s critical US inflation report, which is expected to show year-over-year inflation levels rising to 2.7% in February, up from 2.6% previously. Global equity markets came under pressure in response to the US pushing ahead with tariffs on auto imports, increasing concern of a widening trade war. The S&P seems poised for its worst quarter since 2023, while all major automakers in Japan, Europe, and the US faced selling pressure following President Trump's proclamation to implement a 25% tariff on auto imports.Elsewhere, Bitcoin tumbled 2.2% to $85k, while gold & silver prices both strengthened on safe-haven buying. Today's focus will be on the US Core Personal Consumption Expenditures Price Index, US Personal Income, Michigan Consumer Sentiment Index, and the CAD GDP report to help provide intraday direction for currency markets.
In the news. Mark Carney says nothing off the table as Canada plans tariff retaliation. China's Xi meets foreign CEOs to urge trade stability. EU looks to hi the US services in tariff retaliation. Australia's PM calls May 3rd election in battle for second term. Strongest Myanmar quake in a century rocks Thailand and Vietnam. A state of emergency declared in Bangkok after earthquake. Tariffs slam US airlines as travel demand falters. Ukraine says mineral deal not final,; summary shows US demands more income. Stocks struggle, as gold at record high as trade fear weigh. Stock futures inch higher as traders brace for Fed's preferred inflation reading. US VP Vance to visit Greenland.
In currency markets. Euro dips and USD ticks higher with inflation and tariffs in focus. Ugandan shilling firms on foreign inflows from commodity exporters and charities. GBP steadies after better than expected UK retail sales report. Mexican peso and Canadian dollar hold steady despite increased tariff concerns. CNY is flat, while Asian currencies on average eased by 0.2% against the USD. Trading currencies are mixed, with SEK weakening 0.6%, NZD fell 0.3%, NOK, AUD & CHF eased 0.15%, MXN flat, JPY up 0.15%, and ZAR strengthened by 0.4% against USD.
In commodity markets. Oil prices are flat, Natural Gas prices weakened by 0.6%. Gold & Silver prices strengthened by 0.65%. Copper & Soybean prices eased by 0.3%, and Wheat prices tumbled 1.3%.
CAD continues to face pressure as investors remain cautious ahead of the April 2nd US auto tariffs, Canada’s anticipated response, and the possibility of further retaliation from the US. Domestically, the focus will be on the Canadian GDP report, which is expected to grow by 0.1% to 0.3% m/m in January. The US Core PCE will be the primary drive of direction for the loonie today.
EURCAD slips in early trading as inflation levels in France & Spain ease and German unemployment rises, supporting the prospect that the ECB will maintain its easing policy.
EUR ticks lower towards 1.0750 amid a firming USD ahead of the US PCE report. Euro comes under fresh selling pressure amid softer inflation data, increasing German unemployment numbers and increasing concern ahead of April 2nd US tariffs. Domestically, EU economic sentiment fell to95.2, compared to the expected 97 in March. The German unemployment rate increased to 6.3%, up from 6.2% in January, while the Spanish CPI dropped to 2.3% and the French CPI remained at 0.9%. The Core PCE is the Fed’s preferred gauge for inflation; if we see a 2.7% print as forecasted, it would suggest that the Fed will continue to keep rates on hold.
GBPEUR edged higher after stronger than expected UK GDP and Retail Sales results.
GBP steadies against the US, drawing strength from UK retail sales. The pound briefly gained in early trading after data showed UK retail sales beat expectations and offered some optimism on consumer resilience, while the GDP also grew in the fourth quarter. Domestically, uncertainty surrounding the US tariff plans for April 2nd continues to dampen risk sentiment and limits the pound’s ability to strengthen in the short term. Intra-day, attention will be on the key US inflation report to provide guidance for the pound.
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