The USD steadies, oil prices firm, equity markets rise, andUS yields are mixed ahead of the US inflation report. The USD steadied before the key US inflation report, and the Euro approaching five-month highs due to hopes for peace in Ukraine. US futures increased in anticipation of crucial inflation data, which is expected to show price pressures slowing in February. European equities rose on optimism over a potential Ukraine peace deal. Global equity markets largely overlooked the latest US tariffs on global steel and aluminum as the EU launched countermeasures. JP Morgan Chief Economist Kasman suggests there is a 40% chance of a US recession in 2025, with risks of lasting damage to the country's investment reputation if trust in the US governance is undermined. Elsewhere, Bitcoin eased almost 1% to $82.5k, while oil prices edge higher, but tariff concerns capped gains. In focus today, ECB President Lagarde’s speech, US CPI report, and BoC Interest rate decision & press statement will help drive direction to currency markets.
In the news. EU retaliate after Trump's steel and aluminium tariffs stake effect. Ukraine willing to accept a 30-day UK brokered ceasefire. Trump keeps steel, aluminum tariffs at 25%, after Ford lifts electricity tax. Sweden to expand arms and space capabilities without the US. Greenland's opposition wins election dominated by independence and Trump. EU targets Euro 26 billion of US products in tariff retaliation. UK growth push held back by poor Whitehall co-ordination, watchdog finds. Captain of container ship in the North Sea collision is Russian national. Lagarde says 'impossible' for ECB to always meet inflation target. Conservatives now just 1 point ahed of liberals; Nanos.
In currency markets. Currency markets mixed with EUR & GBP steady, while the South African Rand remains under pressure ahead of a budget speech after the US says it planned to cut federal funding. CNY & Asian currencies on average eased by 0.2% against the USD. Trading currencies are mixed, with ZAR tumbling 1%, SEK weakens 0.65%, JPY falling 0.44%, AUD down 0.15%, NZD, NOK & CHF flat, and AUD firmed 0.15% against the USD.
In commodity markets. Oil and Silver prices strengthened by 1%. Natural Gas prices tumbled by 3%. Gold prices are flat. Copper prices rallied by 1.4%. Wheat prices weakened by 0.9%, and Soybean prices slumped by 0.7%.
CAD stabilizes after a volatile session on Tuesday, following Trump’s pledge to double tariffs on steel and aluminum to 50%, only to reverse his decision a few hours later. Investors remain sidelined in early trading ahead of the US inflation report and the Bank of Canada’s interest rate decision. The Bank of Canada is widely expected to cut rates for a 7th consecutive meeting by 25 basis points to 2.75%, which should help cushion the Canadian economy against US tariffs. Year over year, the loonie has weakened by over 7% against the USD, and economists anticipate further weakness amid the prospect of an escalating trade war with the USD. Intraday the BoC press conference and US inflation report will drive direction for the loonie.
EURCAD continues to strengthen testing a near five-year high as Canada faces political and tariff uncertainty, while Europe continues to benefit from the prospect of a Ukraine peace deal and Germany's debt overhaul and spend strategy.
EUR pauses at 1.0900 as focus shifts to the crucial US inflation report and US tariffs. The 25% US tariffs on steel and aluminum have affected Europe, prompting the EU to respond with € 26 billion in tariffs on US products in retaliation. ECB President Lagarde stated that trade fragmentation could result in ‘larger, more disruptive relative price changes.’ Investors will focus on updates regarding Ukraine peace talks and the US inflation report for short-term direction.
GBPEUR is stable as the BoE is expected to maintain current interest rates, while the euro continues to gain support from the anticipation that the GermanGreen Party will back the defence spending deal.
GBP stabilizes above 1.2900 ahead of the US CPI report. The UK was impacted by the US global tariffs on steel and aluminum; however, unlike its global peers, the UK will not retaliate as it continues to seek a new trade deal with the US. The pound is expected to find support from an underlying support of a more hawkish BoE. Intraday, the US inflation report will be the primary driver for the pound.
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