The USD remains steady, oil prices have eased, equity markets are mixed, and US yields have edged higher amid concerns over the global trade war and a potential US shutdown. The USD struggles for traction, while the JPY strengthens on rate hopes, and the EUR remains capped at 1.0900. US futures fall even after the S&P posted its first winning session three, as concerns mount on whether Washington will avert a government shutdown on the weekend. Asian equities remain under pressure, whereas European equities have improved as optimism builds that the German government will approve the proposed debt overhaul and infrastructure spending plan. Trump’s increased tariffs on all U.S. steel and aluminum imports took effect on Wednesday, intensifying a campaign to reshape global trade in favour of the U.S. and provoking retaliation from Canada and the EU. U.S. Senate Democratic leader Chuck Schumer stated that his party would block a Republican spending bill to avert a government shutdown on Saturday. The impending shutdown adds an extra layer of concern for investors already facing a higher unemployment rate and the escalating global trade war. Elsewhere, Bitcoin edges higher to $83.3, while oil prices slipped to $67PB, and Gold prices firmed to $2,956 per ounce. Investors will be focused on the G7 ForeignMinister meeting in Canada, while U.S. Initial Jobless Claims and the U.S. PPI will help provide intraday direction to currency markets today.
In the news. Putin visits Kursk as Russia pushes back Ukrainian troops in captured region. Poland's president urges the US to move nuclear warheads to Polish territory. US Government closer to shutdown after Senate Democrats oppose bill. US special envoy arrives in Moscow, to discuss possible cease fire in Ukraine. Worst of US equity correction is likely over, JPMorgan says. Carney to shrink cabinet when he takes over as Canada's leader on Friday. Trump threatens further tariffs as EU and Canada retaliate for those already in place. Ford predicts Carney will have 'better' relationship with Trump than Trudeau did. Canada hits the US with tariffs on $29.8B worth of goods after Trump slaps on metals.
In currency markets. AUD & NZD remain under pressure as trade pressures mount on China. GBP & EUR are sidelined, while investors focus on the Bank of Japan who are expected to keep their rates on hold. CNY is flat, while Asian currencies eased by 0.15% on average against the USD. Trading currencies come under fresh pressure, with AUD & NZD tumbling 0.65%, SEK weakened by 0.5%, ZAR & NOK fell 0.3%, MXN & CHF flat, and JPY firmed by 0.15% against the USD.
In commodity markets. Oil prices fell 0.6%. Natural Gas & Gold prices firmed by 0.3%. Silver & Copper prices slipped by 0.1%. Wheat prices gained by 0.6% and Soybean prices strengthened by 0.75%.
CAD retreated from some of Wednesday’s gains as markets prepare for more US retaliatory tariffs. The Bank of Canada cut interest rates as expected yesterday, but the BoC Governor stopped short of signalling further easing after Canada announced counter-tariffs on the US. Oil prices increased by over 2% in the last two days, providing some underlying support to the loonie. We expect the CAD to remain on the back foot given the potential for additional retaliatory tariffs and caution ahead of Carney's swearing-in as the new PM, along with his comments regarding a federal election.
EURCAD steadies as both the EU and Canada prepare for more retaliatory tariffs from the US.
EUR drops below 1.0900 amid increasing US trade war concerns. Investors are becoming cautious as they anticipate escalating US-EU trade tensions following the EU’s retaliation to the US global steel and aluminum tariffs. Markets will focus on Germany’s outgoing lower house of parliament, which will hold a special session onThursday to debate the 500-billion-euro fund for infrastructure and the overhaul of borrowing rules in Europe’s largest economy. Intraday will focus on the US PPI report to help guide currency markets today.
GBPEUR edged higher as the euro struggled amid retaliatory US tariff concerns.
GBP holds at monthly highs despite increasing risk-off pressure. The pound struggles to stay above 1.2950 as the USD strengthens following Wednesday’s US CPI, which came in as expected at 2.8% for February. Domestically, the UK housing market experienced its weakest month in February since November 2023 as tax breaks lost momentum. Intraday will focus on the USPII, which is forecasted to rise by 0.3%, following a 0.4% increase in January.
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