Author: The Forex Feed

  • US Dollar Index breaks below 104.00 as Treasury yields fall ahead of Nonfarm Payrolls

    US Dollar Index breaks below 104.00 as Treasury yields fall ahead of Nonfarm Payrolls


    • The US Dollar Index depreciates as market expectations grow for more aggressive Fed rate cuts amid US growth concerns.
    • President Trump exempted Mexican and Canadian goods under the USMCA from his proposed 25% tariffs.
    • The US Nonfarm Payrolls is projected to show job growth, with employment rising to 160K in February.

    The US Dollar Index (DXY), which tracks the US Dollar (USD) against six major currencies, continues its losing streak for the fifth consecutive day, pressured by declining US Treasury yields. Market expectations of more aggressive Federal Reserve (Fed) rate cuts amid concerns over US economic growth are contributing to the weakness. The DXY is trading around 103.90 with 2- and 10-year yields on US Treasury bonds standing at 3.94% and 4.24%, respectively, during the early European hours on Friday.

    Traders are closely watching global trade developments, particularly Canada’s decision to delay its second round of retaliatory tariffs on US products until April 2. This move follows US President Donald Trump’s exemption of Mexican and Canadian goods under the USMCA from his proposed 25% tariffs.

    On the labor market front, US Initial Jobless Claims for the week ending March 1 fell to 221K, down from 242K the previous week, according to the US Department of Labor (DOL). The figure came in below market expectations of 235K. Meanwhile, the upcoming US Non-Farm Payrolls (NFP) report is projected to show a modest rebound, with job additions expected to rise to 160K in February, up from 143K in January.

    Atlanta Fed President Raphael Bostic commented on Thursday that the US economy remains in a state of flux, making it difficult to predict future developments. Bostic reiterated the Fed’s commitment to bringing inflation down to 2% while minimizing labor market disruptions. He also stressed the importance of business sentiment in shaping monetary policy decisions.

    US Dollar PRICE Today

    The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.31% -0.10% -0.12% 0.04% 0.46% 0.35% -0.25%
    EUR 0.31%   0.20% 0.21% 0.35% 0.78% 0.67% 0.06%
    GBP 0.10% -0.20%   0.00% 0.14% 0.57% 0.46% -0.11%
    JPY 0.12% -0.21% 0.00%   0.17% 0.60% 0.49% -0.08%
    CAD -0.04% -0.35% -0.14% -0.17%   0.42% 0.32% -0.25%
    AUD -0.46% -0.78% -0.57% -0.60% -0.42%   -0.10% -0.66%
    NZD -0.35% -0.67% -0.46% -0.49% -0.32% 0.10%   -0.56%
    CHF 0.25% -0.06% 0.11% 0.08% 0.25% 0.66% 0.56%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

     



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  • Risk Aversion Creeps Back as Markets Unconvinced by Trump’s Temporary Tariff Exemptions

    Risk Aversion Creeps Back as Markets Unconvinced by Trump’s Temporary Tariff Exemptions


    Risk sentiment in the forex markets appears to be tilting towards risk aversion in Asian trading, marking a shift from the broad Dollar selloff earlier in the week. Overnight, US President Donald Trump granted temporary tariff exemptions for Canadian and Mexican goods under the USMCA, delaying a full-scale implementation until April 2. While this provided some relief for Canadian Dollar, overall market sentiment remained fragile, with major US equity indexes closing in the red, led by losses in NASDAQ.

    The temporary exemption covers roughly 50% of Mexican imports and 38% of Canadian imports. However, Trump’s move has done little to inspire confidence, as markets remain skeptical about his erratic trade policies. Investors have become wary of his inconsistent messaging—one day insisting on strict tariff enforcement, the next day granting exemptions. This unpredictability has left traders cautious, unsure of how to position for potential future shifts in trade policy.

    Despite the tariff delay, risk-sensitive currencies like Australian and New Zealand Dollars have come under renewed selling pressure in Asia. The broader market focus has shifted toward the April 2 deadline, when Trump’s proposed “reciprocal tariffs” are set to take effect. These tariffs will target foreign nations that impose import taxes on US goods, keeping trade war fears firmly in play.

    Adding to market unease is the upcoming US non-farm payrolls report. With sentiment already on shaky ground, any significant weakness in the jobs data could deepen risk aversion. While a weaker NFP might increase expectations for a Fed rate cut, traders are growing concerned that deteriorating labor market conditions could signal a sharper economic slowdown. This dynamic suggests that even rising Fed cut bets may not be enough to offset broader recession fears.

    So far for the week, Dollar remains the worst-performing currency, struggling to find any solid footing. Canadian Dollar follows closely as the second weakest, alongside Australian Dollar. On the stronger side, Euro continues to outperform, driven by optimism over fiscal expansion plans in Europe. Sterling and Swiss Franc are also holding firm, while Yen and Kiwi are settling in the middle.

    In Asia, the time of writing, Nikkei is down -2.07%. Hong Kong HSI is down -0.06%. China Shanghai SSE is up 0.15%. Singapore Strait Times is down -0.01%. Japan 10-year JGB yield is up 0.023 at 1.535. Overnight, DOW fell -0.99%. S&P 500 fell -1.78%. NASDAQ fell -2.61%. 10-year yield rose 0.021 to 4.286.

    NFP in focus: NASDAQ and S&P 500 at risk of deeper correction

    US markets are standing on precarious footing, with investors attention on the February non-farm payrolls report due later in the day. There has been noticeable anxieties surrounding the impact of fiscal and trade policies changes. A set of weaker-than-expected NFP data could be taken as another signal of swift deceleration in the economy and rattle market sentiment further.

    Cooldown in the job market might prompt Fed to resume rate cuts earlier. Markets are currently pricing in 53% chance of a 25bps rate cut in March, reflecting growing belief that Fed will need to act sooner rather than later. However, the immediate market response to downside surprises may not be relief over monetary easing but rather heightened concerns about the pace of economic weakening, given recent policy uncertainties and trade disruptions.

    Markets anticipate 156k increase in NFP for February, up from 143k in January. The unemployment rate is forecast to remain at 4.0%, while average hourly earnings should hold steady at 0.3% m/m.

    The latest indicators paint a mixed picture: ISM Manufacturing PMI Employment subindex dropped to 47.6 from 50.3, while ISM Services PMI Employment inched up to 53.9 from 52.3. Meanwhile, ADP Employment reading of 77k missed last month’s 186k, and the 4-week moving average of jobless claims rose to 224k—its highest level so far this year.

    Technically, NASDAQ has been sliding for two consecutive weeks, now testing its 55-week EMA at 17,874.13. A decisive break below this level would confirm that the index is at least in a correction relative to the broader uptrend from the 10,088.82 low in 2022. The next key support to watch is the 38.2% Fibonacci retracement of 10,088.82 to 20,204.58, which comes in at 16,340.36. Extended losses here could set a negative tone for broader U.S. equities.

    The S&P 500, still trading comfortably above its 55-week EMA at 5,590.31, may follow in the NASDAQ’s footsteps if sentiment sours further. Should the index breach this EMA convincingly, it would likely confirm that the fall from 6,147.43 is a correction of the uptrend from the 3,491.58 low in 2022. This scenario would set a 38.2% retracement target around 5,132.89, marking a significant downside pivot.

    Overall, whether today’s NFP meets, misses, or exceeds expectations, the market’s reaction will hinge on how investors interpret the labor data in the context of looming trade uncertainties and weakening growth momentum. A softer reading could drive near-term Fed cut bets higher but might also deepen concerns that the U.S. economy is losing steam, thereby raising the stakes for traders and policymakers alike.

    Technically, NASDAQ is now eyeing 55 W EMA (now at 17874.13) with the extended decline in the past two weeks. Sustained break there will confirm that it’s at least in correction to the up trend from 10088.82 (2022 low). Next target will be 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

    Extended selloff in NASDAQ could be a prelude to the similar development in S&P 500. While it’s still well above 55 W EMA (now at 5590.31), sustained break there will align the outlook with NASDAQ. Fall from 6147.43 would then be correcting the up trend from 3491.58 (2022 low) at least, and target 38.2% retracement of 3491.58 to 6147.43 at 5132.89.

    Fed’s Waller: No immediate rate cut, but open to future easing

    Fed Governor Christopher Waller suggested that another rate cut at the next FOMC meeting is unlikely, but he remains open to further easing down the line.

    “I would’t say at the next meeting, but could certainly see [cuts] going forward,” he noted. Waller particularly highlighted the February inflation report and the evolving impact of trade policies as key factors in shaping the Fed’s outlook.

    Waller acknowledged the challenges in assessing the economic effects of tariffs, citing changing economic conditions and President Trump’s harder trade stance as factors complicating policy decisions.

    He noted that evaluating the impact of tariffs is more difficult this time, adding, “It’s very hard to eat a 25% tariff out of the profit margins.”

    Fed’s Bostic: Economy in flux, no rush to adjust policy

    Atlanta Fed President Raphael Bostic emphasized the high level of uncertainty in the US economy due to evolving policies under the Trump administration. With inflation, trade policies, and government spending all in flux, he suggested that meaningful clarity may not emerge until “late spring or summer”. Given this, he reiterated “We’ll have to just sort of really be patient.”

    Speaking overnight, he described the situation as being in “incredible flux,” with rapid shifts in trade and fiscal policies making it difficult to predict economic trends. Given this backdrop, Bostic urged caution, stating, “You’ve got to be patient and not want to get too far ahead.”

    He noted that just this week, there have been significant swings in expectations regarding economic policy. “If I was waiting before to see and get a clear signal about where the economy is going to go, I’m definitely waiting now,” he said.

    BoE’s Mann: Larger rate cuts needed as global spillovers worsen

    BoE MPC member Catherine Mann argued that recent monetary policy actions have been overshadowed by “international spillovers.” Financial market volatility, particularly from cross-border shocks, has disrupted traditional policy signals, making “founding premise for a gradualist approach to monetary policy is no longer valid”.

    Mann said that larger rate cuts, like the 50bps reduction she supported at the last BoE meeting, would better “cut through this turbulence” and provide clearer guidance to the economy.

    She believes that a more decisive policy stance would help steer inflation expectations and stabilize economic conditions, rather than allowing uncertainty to linger with smaller, incremental moves.

    Despite her stance, the BoE opted for a smaller 25bps rate cut in its latest decision, with Mann and dovish member Swati Dhingra being outvoted 7-2.

    China’s exports rise 2.3% yoy, imports fall -8.4% yoy

    China’s exports rose just 2.3% yoy to USD 539.9B in the January–February period, coming in below forecasts of 5.0% yoy and down sharply from December’s 10.7% yoy.

    Meanwhile, imports sank -8.4% yoy to USD 369.4B, missing expectations of 1.0% yoy growth and marking a noticeable drop from December’s 1.0% yoy.

    As a result, trade balance resulted in USD 170.5B surplus exceeding projections of USD 147.5B.

    Looking ahead

    Germany factory orders, Swiss foreign currency reserves and Eurozone GDP revision will be released in European session. Later in the day, Canada employment will also be published alongside US NFP.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8800; (P) 0.8863; (R1) 0.8900; More…

    Intraday bias in USD/CHF remains on the downside for the moment. Rise from 0.8374 should have completed at 0.9222, after rejection by 0.9223 key resistance. Deeper fall should be seen to 61.8% retracement of 0.8374 to 0.9200 at 0.8690 next. On the upside, above 0.8924 minor resistance will turn intraday bias neutral first. But rise will now stay on the downside as long as 0.9035 resistance holds, in case of recovery.

    In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    03:02 CNY Trade Balance (USD) Feb 170.5B 147.5B 104.8B
    07:00 EUR Germany Factory Orders M/M Jan -2.40% 6.90%
    07:45 EUR France Trade Balance (EUR) Jan -4.1B -3.9B
    08:00 CHF Foreign Currency Reserves (CHF) Feb 736B
    10:00 EUR Eurozone GDP Q/Q Q4 0.10% 0.10%
    13:30 CAD Net Change in Employment Feb 17.8K 76K
    13:30 CAD Unemployment Rate Feb 6.70% 6.60%
    13:30 CAD Capacity Utilization Q4 79.00% 79.30%
    13:30 USD Nonfarm Payrolls Feb 156K 143K
    13:30 USD Unemployment Rate Feb 4% 4%
    13:30 USD Average Hourly Earnings M/M Feb 0.30% 0.50%

     



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  • Japan is preparing to officially declare an end to long-term deflation

    Japan is preparing to officially declare an end to long-term deflation


    Japan is preparing to officially declare an end to long-term deflation, according to Economy Minister Ryosei Akazawa. This marks a significant shift in the government’s economic outlook and could influence the timing of the Bank of Japan’s next interest rate hike. While inflation has stayed above the BOJ’s 2% target for nearly three years, the government had not previously made an official declaration, as it considers deflation to be a broader issue linked to weak wage growth and subdued consumption.

    Akazawa stated that all four key indicators used to assess deflation:

    1. consumer prices,
    2. GDP deflator,
    3. unit labor costs,
    4. and the output gap

    have turned positive. Notably, Japan’s output gap turned positive in the fourth quarter of last year for the first time in six quarters, indicating that demand is now exceeding the economy’s full capacity. He emphasized the importance of continued coordination between the BOJ and the government to ensure inflation remains sustainably above 2%.

    While the BOJ ended its decade-long ultra-loose monetary policy and raised interest rates to 0.5% in January, the government has been cautious in officially declaring the end of deflation. Doing so could reduce justification for further fiscal stimulus but might also serve as a political advantage for the administration ahead of Japan’s upper house elections in July.

    The next meeting is around 6 weeks away.

    JPY has been strengthening today, its back under 148.00. USD/JPY is slipping further as I update, circa 147.50.



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  • Worried about the stock selloff? These low-volatility ETFs could help you…


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  • NFP Preview: February 2025 Jobs Report and US Dollar Impact

    NFP Preview: February 2025 Jobs Report and US Dollar Impact


    • The US Bureau of Labor Statistics will release the non-farm payroll (NFP) and jobs data for February 2025 on Friday, March 7th, 2025.
    • Economists are predicting 170,000 jobs added and the unemployment rate holding steady at 4.0%.
    • Key factors influencing February’s jobs report include potential federal job cuts, changes in trade policies, a strong services sector, and mild weather conditions.
    • Technical analysis of the US Dollar Index (DXY) shows it at a crossroads, where to next?

    Most Read: Dow Jones (DJIA) Holds Support: Tariffs, Data & US Auto Tariff Exemption

    The US Bureau of Labor Statistics is set to release the non-farm payroll and jobs data for February 2025 on Friday, March 7th, 2025.

    Job Market Expectations for February

    Economists predict 170,000 jobs were added in February, showing some improvement from January’s weaker result of 143,000 jobs. The unemployment rate is expected to stay at 4.0%, which is considered a healthy level given the current economic situation.

    For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

    However, private payroll data raised concerns by showing only 77,000 new jobs, which fell short of expectations. This might mean the overall jobs report could also disappoint.

    Average hourly earnings are expected to grow by 0.3% compared to the previous month, continuing the steady increase seen before. Wage growth is an important factor for policymakers because it shows how much pressure there is on inflation in the economy.

    There are challenges ahead with concerns that tariff uncertainty and growth worries may lead to a cautious approach toward hiring in the first part of 2025. It will be interesting to see if these concerns come to fruition and we see any cooling of the labor market and a drop in hiring. 

    Key Influences on February’s Jobs Report

    Federal Job Cuts

    The Department of Government Efficiency (DOGE) recently announced plans to cut 10,000 federal jobs. However, because of the timing, these cuts may not fully show up in February’s jobs report but could have a bigger impact in future months.

     Changes in Trade Policies

    New trade tariffs on goods from Mexico, Canada, and China are affecting how businesses hire. Some industries are benefiting, but others, like manufacturing, are facing challenges as they deal with higher costs and supply chain adjustments.

    Strong Services Sector

    The services industry continues to grow. The ISM’s non-manufacturing PMI rose to 53.5 in February from 52.8 in January. This is a good sign for jobs in areas like healthcare, hospitality, and professional services.

    Mild Weather’s Impact

    Warmer-than-usual weather in February likely boosted jobs in construction and other outdoor industries. This seasonal factor might slightly raise the overall job numbers for the month.

    Potential Impact and Scenarios

    Here’s how the market might respond to different outcomes in February’s job numbers:

    1. Stronger-Than-Expected Job Growth

    If the report shows more than 195,000 jobs added, we could see these effects:

    A strong labor market might make the Federal Reserve less likely to cut rates soon, pushing bond yields up.

    The U.S. dollar (USD) could strengthen against currencies like the euro (EUR) or the British pound (GBP) as traders expect less rate-cutting from the Fed.

    Oddly, good job numbers might hurt stock markets. With less chance of rate cuts, investors could shy away from riskier assets like stocks.

    1. Weaker-Than-Expected Job Growth

    If the report shows fewer than 135,000 jobs added, the market may react this way:

    Investors might move to safe-haven assets like gold or currencies such as the Japanese yen (JPY) or Swiss franc (CHF), fearing wider economic troubles.

    A weak report could raise expectations that the Fed might cut rates later in 2025, lowering the value of the USD.

    1. Neutral or Expected Job Numbers

    If the data is close to projections, around 170,000 jobs added, reactions might depend on smaller details, like:

    Changes to previous job numbers could shape market responses.

    Wages growing faster than expected might revive concerns about inflation.

    Solid growth in services jobs could provide some optimism for markets.

    How the market reacts will greatly depend on these scenarios and the finer details of the report.

    Potential Impact on the US Dollar Based on the Data Released

    Source: LSEG, TradingEconomics. Table Created by Zain Vawda

    Markets will be paying close attention to US labor data following a string of underwhelming data releases. The data of late has been one of a slowing economy, coupled with tariff uncertainty sets a perfect mixture for a potential recession. 

    This will have a knock on effect globally which makes US data and the performance of the economy key in the months ahead. 

    Technical Analysis – US Dollar Index (DXY)

    Looking at the US Dollar Index and it is now trading at the levels it did before the US election.

    Any gains made since the election of President Trump has been wiped away with the DXY peaking at 110.176 on January 13 before beginning its descent. Tariff announcements and chatter have attempted to push the Dollar higher but follow through has not been forthcoming as concerns linger about the impact tariffs may have on the USD as well.

    This leaves the US Dollar Index (DXY) at a crossroads with a break below the swing low at 103.37 likely opening up further downside.

    The silver lining may be that the DXY has lost a significant amount of value this week and could be due for a pullback. Potential profit taking ahead of the NFP release could also help.

    If a move higher comes to fruition, initial resistance rests at 105.00 which houses the 200-day MA and could prove to be a tough nut to crack. A move above 105.00 opens up a retest of 105.63 and the previous swing low (Feb 26) at 106.130.

    US Dollar Index (DXY) Daily Chart, March 6, 2024

    Source: TradingView (click to enlarge)

    Support

    Resistance

    Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

     

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  • Dow Jones backslides amid wavering sentiment

    Dow Jones backslides amid wavering sentiment


    • The Dow Jones shed around 575 points on Thursday, as trade war fears resume.
    • The more the Trump administration tries to soothe tariff fears, the worse things get.
    • Market sentiment is still churning despite announced tariff delays and upbeat jobs data.

    The Dow Jones Industrial Average turned tail and ran on Thursday, in tandem with the rest of the US equity indexes. United States (US) President Donald Trump continues to waffle on his own trade war rhetoric, exploring tariff exemptions and extensions on a sector-by-sector basis. However, the lack of clarity and consistency in policy that tends to get announced off-the-cuff via social media posting is beginning to weigh on market sentiment.

    The Trump administration is continuing to pivot on its own tariff threats, granting a 30-day reprieve for the US automotive industry, which remains heavily reliant on foreign trade to produce its vehicles. Other industries, sectors, and businesses are up for making a case for why they should receive an exemption, at least for a little while, and the ongoing uncertainty around President Trump’s trade war rhetoric is sinking investor risk appetite.

    US Nonfarm Payrolls (NFP) net job gains numbers for February are due on Friday, and Thursday’s Challenger Job Cuts number is providing little reason for traders to hope for a decent NFP print this week. Challenger firings reached their highest level since August of 2020 in February, climbing to 172K net terminations in key industries, strongly implying that a general slowdown is gathering speed.

    Dow Jones news

    Nearly the entire Dow Jones equity board is falling back on Thursday, with all but three listed securities trading into the red. Verizon Communications still managed to find some gains, climbing 1.2% to cross above $43 per share. Nvidia (NVDA) fell back once again, falling nearly 5% and dipping below $112 per share as the AI trade continues to fizzle out.

    Dow Jones price forecast

    Thursday is turning into a lunchbag letdown for bullish hopefuls, shredding the midweek rebound that has vanished as quickly as it disappeared. The Dow Jones is trading back into the 42,500 handle, with a near-term technical floor priced in at the 42,400 level.

    The Dow Jones is poised to make contact with the 200-day Exponential Moving Average (EMA) near the 42,000 key figure, but only if selling pressure is able to push bids down another 500 points, a move that would likely require a shift in fundamentals… or a bad employment data print.

    Dow Jones daily chart

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • Adoption of standard FX reject code too slow – Schroders trader

    Adoption of standard FX reject code too slow – Schroders trader


    Dealers have been too slow to adopt standardised codes for rejected foreign exchange trades, according to a senior buy-side trader, who also called on trading venues to help accelerate industry take-up.

    Last year, the FIX Trading Committee published a set of recommended practices on scenarios for rejected trades and adopted the Investment Association’s proposal of a standardised set of reject codes within its FIX Protocol – the main messaging language used by FX dealers.

    “There’s appetite in the

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  • Euro Holds Gains After ECB Cut, Yen Rallies on Higher JGB Yields

    Euro Holds Gains After ECB Cut, Yen Rallies on Higher JGB Yields


    Euro remained firm following ECB’s decision to cut interest rates, a widely anticipated move. During the subsequent press conference, President Christine Lagarde emphasized a shift to “more evolutionary approach” to policy, now that monetary conditions have become “meaningfully less restrictive.” She also acknowledged the high levels of uncertainty, noting that “risks are all over.”

    Lagarde welcomed Germany and the EU’s proposed defense and infrastructure investments, highlighting that they could offer broad support for European growth. However, she also cautioned that increased government spending might push inflation higher via rising aggregate demand. At the same time, ECB recognizes downside risks to the economy, particularly if trade tensions escalate, thereby dampening exports and threatening global growth.

    Meanwhile, Yen resumed its recent rally against Dollar and recovered against European majors. Support for Yen came from an upswing in Japan’s 10-year JGB yield, which briefly touched 1.515%, its highest level since June 2009. Expectations of another BoJ rate hike this year have fueled speculation, while Germany’s surging benchmark yield also exerts upward pressure on Japan’s yield.

    In contrast, U.S. yields are struggling under the weight of growing worries about a “Trumpcession.” Investors fear that the administration’s trade policies could tip the economy toward recession, softening expectations for robust growth and keeping Treasury yields in check. This dynamic contrasts sharply with Europe and Japan, where yields jumped notably this week.

    Against this backdrop, Yen stands as the strongest performer for the day so far, followed by Swiss franc and then Euro. Canadian Dollar has taken the opposite position, emerging as the worst performer, trailed by Sterling and Dollar. Australian and New Zealand Dollars are in the middle of the pack.

    In Europe, at the time of writing, FTSE is down 01.05%. DAX is up 0.63%. CAC is down -0.30%. UK 10-year yield is up 0.008 at 4.656. Germany 10-year yield up 0.101 at 2.892. Earlier in Asia, Nikkei rose 0.82%. Hong Kong HSI rise 2.47%. China Shanghai SSE rose 0.78%. Singapore Strait Times rose 0.66%. Japan 10-year JGB yield rose 0.053 to 1.499.

    US initial jobless claims fall to 221k, vs exp 236k

    US initial jobless claims fell -21k to 221k in the week ending March 1, below expectation of 236k. Four-week moving average of initial claims rose 250 to 224k.

    Continuing claims rose 42k to 1897k in the week ending February 22. Four-week moving average of continuing claims rose 3k to 1866k.

    ECB cuts 25bps as expected, not pre-committing to rate path

    ECB cut its deposit rate by 25bps to 2.50% as expected. It maintains a data-dependent stance and stressing it is “not pre-committing to a particular rate path” amid rising uncertainty.

    ECB noted that disinflation process remains on track, with inflation upgrade reflects stronger energy prices. Growth forecasts for 2025 and 2026 were downgraded due to weaker exports and investment, driven partly by trade and broader policy uncertainty.

    In the new economic projections:

    • Headline inflation to average 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027.
    • Core inflation to average 2.2% in 2025, 2.0% in 2026, and 1.9% in 2027.
    • GDP to grow 0.9% in 2025, 1.2% In 2026, and 1.3% in 2027.

    Eurozone retail sales fall -0.3% mom in Jan, EU down -0.2% mom

    Eurozone retail sales volume dropped by -0.3% mom in January, missing expectations of a modest 0.1% mom increase. The decline was driven by weaker demand for non-food products, which fell -0.7% mom, while sales of automotive fuel also slipped by -0.3% mom. In contrast, spending on food, drinks, and tobacco rose by 0.6% mom, offering a slight offset to the overall decline.

    Meanwhile, retail sales across the broader EU fell -0.2% mom on the month. Among individual EU, Slovakia saw the sharpest contraction, with retail trade volume plunging -9.0%, followed by Lithuania (-4.8%) and Cyprus (-2.2%). On the other hand, Slovenia (+2.3%), Hungary (+2.2%), and the Netherlands (+1.6%) recorded the strongest increases.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 148.12; (P) 149.15; (R1) 149.91; More…

    Intraday bias in USD/JPY is back on the downside with break of 148.08 temporary low. Fall from 158.86, as the third leg of the corrective pattern from 161.94 high, has resumed. Sustained break of 61.8% retracement of 139.57 to 158.86 at 146.32 will pave the way back to 139.57 low. On the upside, 149.32 minor resistance will turn intraday bias neutral and bring consolidations again, before staging another fall.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD Building Permits M/M Jan 6.30% -0.10% 0.70% 1.70%
    00:30 AUD Trade Balance (AUD) Jan 5.62B 5.68B 5.09B 4.92B
    06:45 CHF Unemployment Rate Feb 2.70% 2.70% 2.70%
    09:30 GBP Construction PMI Feb 44.6 49.8 48.1
    10:00 EUR Eurozone Retail Sales M/M Jan -0.30% 0.10% -0.20% 0.00%
    12:30 USD Challenger Job Cuts Y/Y Feb 103.20% -39.50%
    13:15 EUR ECB Deposit Rate 2.50% 2.50% 2.75%
    13:15 EUR ECB Main Refinancing Rate 2.65% 2.65% 2.90%
    13:30 CAD Trade Balance (CAD) Jan 4.0B 1.4B 0.7B 1.7B
    13:30 USD Initial Jobless Claims (Feb 28) 221K 236K 242K
    13:30 USD Trade Balance (USD) Jan -131.4B -93.1B -98.4B -98.1B
    13:30 USD Nonfarm Productivity Q4 1.50% 1.20% 1.20%
    13:30 USD Unit Labor Costs Q4 2.20% 3% 3%
    13:45 EUR ECB Press Conference
    15:00 USD Wholesale Inventories Jan F 0.70% 0.70%
    15:00 CAD Ivey PMI Feb 50.6 47.1
    15:30 USD Natural Gas Storage -96B -261B

     



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  • ECB Expected to Cut Rates: What It Means for the Euro and Markets

    ECB Expected to Cut Rates: What It Means for the Euro and Markets


    • A 25 basis point cut to the ECB deposit facility rate is widely anticipated, marking the seventh cut in the current cycle.
    • The ECB continues to cut rates amid slow Eurozone growth, while the Federal Reserve pauses, creating a notable divergence in monetary policy.
    • What next for EUR/USD?

    Most Read: Dow Jones (DJIA) Holds Support: Tariffs, Data & US Auto Tariff Exemption

    A 25 basis point cut to the ECB deposit facility rate is fully expected today. However, the chances of another cut in April are less certain, with markets now pricing in a 50/50 probability of a cut.. The market is now focusing on a possible pattern of quarterly rate cuts after this week. Investors are also considering whether the ECB might eventually lower rates below 2%, as forward rates for the end of the year are currently priced at 70 bps which would leave rates at 2.5%.

    While U.S. tariffs could still impact the economic outlook, the chances of the ECB cutting rates faster or more deeply have lessened. This shift comes after recent inflation data showed a smaller-than-expected decline, reducing pressure on the ECB to act aggressively.

    Source: LSEG

    What to Expect from the ECB’s Decision 

    Today’s decision is expected to mark the ECB’s seventh rate cut during its current cycle of reducing rates. Over the past year, the central bank has lowered rates by 150 basis points, with another 25-basis-point cut likely today. This would bring the rate close to the estimated neutral range of 1.5% to 2.5%, marking an important point in the ECB’s policy decisions.

    The reason for this expected cut is the slow economic growth across the eurozone and lower inflation pressures. January’s inflation data for the euro area showed that core inflation is cooling down. To boost demand, the ECB is under pressure to ease financial conditions even more.

    The Debate Over “Restrictive” Policy

    A major topic in today’s meeting is whether ECB President Christine Lagarde will keep calling the current policy “restrictive.” Some hawkish members of the Governing Council believe the policy is no longer restrictive, given the recent rate cuts and other easing steps. However, more dovish policymakers point to Europe’s ongoing economic challenges and uncertainty with growth and inflation as reasons to continue monetary support.

    Markets will pay close attention to Lagarde’s comments in the press conference. If she signals a move away from describing the policy as “restrictive,” it could lead to changes in market expectations and affect the value of the euro.

    Diverging Policies: ECB vs. Federal Reserve

    The ECB and the Federal Reserve are taking very different approaches to monetary policy. The Fed is being cautious and has paused its rate hikes as the U.S. economy shows signs of slowing. Meanwhile, the ECB is continuing to cut rates.

    This difference has caused the euro-dollar rate spread to narrow, giving the euro an advantage in recent trading. If the ECB stays focused on easing policies without hinting at big changes, the euro could remain strong against the dollar in the short term.

    Final Thoughts

    The recent strength and rise in EUR/USD hasn’t been driven much by ECB actions. Instead, it’s been more influenced by weak U.S. economic data and hopes for a ceasefire between Ukraine and Russia.

    Looking ahead, U.S. tariffs on the EU will play a major role in moving the EUR/USD rate. Over the medium term I do expect EUR/USD to weaken. This view also depends on the ECB cutting rates by at least another 50 basis points to reach 2.0%.

    Technical Analysis – EUR/USD

    From a technical standpoint, EUR/USD is currently enjoying one of its strongest weekly gains in recent memory. The question is will it be able to hold onto these gains through the ECB meeting and the US jobs data on Friday?

    The question is how far can the Euro rally at this stage?

    Weak US data and recessionary fears are really weighing on the US Dollar of late. Despite the recent concerns around inflation expectations and tariff announcements, the US Dollars selloff has been swift.

    There is scope for further upside but the RSI on a daily timeframe has already entered overbought territory, providing one warning sign. Given that we have NFP jobs data tomorrow it may not be wise to try and chase further gains to the upside.

    Immediate resistance rests at 1.0840 before the 1.0904 and 1.0948 comes into focus.

    A move lower may find support 1.0755 before the 1.0700 and 1.0600 handles become the areas of focus.

    EUR/USD Daily Chart, March 6, 2025

    Source: TradingView (click to enlarge)

    Support

    Resistance

    Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

    Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.





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  • Germany’s Fiscal U-Turn Boosts DAX 40. Forecast as of 06.03.2025

    Germany’s Fiscal U-Turn Boosts DAX 40. Forecast as of 06.03.2025


    Germany’s DAX 40 has outperformed other global stock indices, marking the onset of a transformation from the “sick man of Europe” to a locomotive of the European economy. Let’s discuss this topic and make a trading plan.

    The article covers the following subjects:

    Major Takeaways

    • Germany intends to borrow about €800 billion.
    • The ECB continues its monetary expansion cycle.
    • The German index is outperforming all of its counterparts.
    • The DAX 40 target should be raised to 25,000–26,000.

    Monthly Fundamental Forecast for DAX 40

    The new German administration’s policies are positively affecting the country’s economy, with the DAX 40 index reaching record highs. The Germans are celebrating substantial fiscal stimulus from the new government of Friedrich Merz as if the country’s football team has won the World Cup. This is similar to the positive effects that Donald Trump’s policies had on the US economy.

    S&P 500 Index vs. Its Counterparts

    Source: Bloomberg.

    Initially, the Christian Democratic Union party, which won the parliamentary elections, proposed to its potential coalition ally, the Social Democrats, to create a special fund for €200 billion. This figure rose to €500 billion, and now the press is talking about borrowing €800 billion! Germany is in a position to double this amount in order to increase its debt-to-GDP ratio of 62% to the US level of 120%.

    The allocation of hundreds of billions of euros to transportation, energy, and housing represents a significant shift in discourse, particularly in regard to the emergence of the term “German exceptionalism.” German banks are revising their GDP forecasts upwards from zero to 1.5–2%, the euro has reversed its downtrend against the US dollar, and even the most recent sell-off in the German debt market since 1990 has not alarmed investors. The bond yields of the leading eurozone economy remain significantly lower than those of the US. Berlin has the financial capacity to allocate additional funds.

    However, large-scale fiscal expansion could potentially prompt the ECB to tighten monetary policy, which could have negative implications for the DAX 40. For instance, the Bundesbank increased its key rate from 5% to 8.75% from 1989 to 1992, hurting the German economy. However, the current cycle of monetary stimulus in Frankfurt continues. The next reduction of the deposit rate from 2.75% to 2.5% is scheduled for March 6.

    ECB Interest Rate Expectations

    Source: Bloomberg.

    The DAX 40 index appears undaunted by the prospect of a trade war with the US, which is expected to spark in April. At the same time, the strengthening of the euro exacerbates the competitive positions of European exporters. On paper, currency devaluation serves to mitigate the adverse impact of tariffs. Germany is relying on domestic consumption and potential strategic partnerships with China. If there is a shift in the US policy, which has found common ground with its geopolitical opponent Russia, why should not the European Union adopt the same approach?

    Monthly Trading Plan for DAX 40

    German euphoria may persist, but its sustainability is uncertain. The DAX 40 pullback to 22,300–22,400 allowed traders to open long positions with a target of 24,000. However, this target will likely be adjusted upwards to 25,000–26,000. Meanwhile, the German stock index may face a sweeping sell-off if the US imposes tariffs on the EU. Against this backdrop, it would be prudent to move stop-loss orders to the breakeven point at 22,300–22,400, keeping long positions open.

    This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.

    Price chart of FDAX in real time mode

    The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.


    According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.

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  • Germany February construction PMI 41.2 vs 42.5 prior

    Germany February construction PMI 41.2 vs 42.5 prior


    German construction activity eased back in February, with incoming new work continuing to stay rather subdued overall. It suggests that any major recovery in the sector is still a non-starter but we’ll see how the sentiment will change amid the latest political developments. For now, all three sub-sectors i.e. housing, commercial, and civil engineering are still in contraction territory. HCOB notes that:

    “The construction sector is still far from recovery. After a strong month-on-month increase in the headline PMI in January,
    companies couldn’t keep up the momentum and reported a faster fall in activity. This drop in performance can be seen in the
    residential construction sector, commercial real estate, and civil engineering. The recession hits hardest in residential
    construction and is the least severe in civil engineering. If the newly formed government decides to roll out a comprehensive
    infrastructure program, it would likely benefit civil engineering the most. However, the economic boost would also help other
    sectors of the construction industry.

    “New orders are still scarce in the construction sector. Since spring 2022, orders have been dropping month after month.
    Currently, there are no signs that the construction industry will get more orders anytime soon. Against this backdrop,
    companies continue to cut jobs, with the pace of staff shedding remaining broadly steady for five months.

    “Looking ahead, companies are slowly crawling out of the depths of depression. The index of future activity has actually
    risen to its highest level since February 2022. Although companies, on balance, still think that activity in a year’s time will be
    lower than it is today, the trend of rising confidence over the past three months shouldn’t be overlooked.

    “A glance at the low capacity utilization in the construction sector, evidenced by the increasing availability of subcontractors
    over the past two years, shows that an economic stimulus package would be particularly effective right now. With low
    capacity utilization, new orders could be absorbed without significant price increases. In this sense, it’s a good time to
    kickstart the economy with a government infrastructure program.”



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  • USD/CAD Forecast: Greenback Weighed by Tariff Relief Hopes

    USD/CAD Forecast: Greenback Weighed by Tariff Relief Hopes


    • The USD/CAD forecast shows some relief for the Canadian dollar.
    • Trump excluded automakers in Canada from the 25% tariff for a month. 
    • Market participants worried about the impact of Trump’s tariffs on the US economy.

    The USD/CAD forecast shows some relief for the Canadian dollar as market participants expect a tariff relief on Canada. At the same time, the currency got support as the US dollar fell due to a dimmer outlook for the US economy.

    –Are you interested in learning more about making money with forex? Check our detailed guide-

    The Canadian dollar has collapsed since Trump implemented a 25% tariff on Canadian imports. The outlook for Canada’s economy and monetary policy shifted, with experts predicting tough times ahead. This would force the Bank of Canada to assume a more aggressive stance on rate cuts. 

    However, there was relief on Wednesday after a phone call from the US to Canada. According to reports, Trump said Canada had yet to meet the conditions to pause tariffs. However, he later softened his stance, excluding automakers from the tariff for a month. This was also a sign that the two countries could negotiate better trading deals to avoid a prolonged trade war. 

    Elsewhere, the greenback fell as market participants worried about the impact of Trump’s tariffs on the US economy. Already, data has shown a slowdown that has increased rate cut expectations. The ongoing trade wars will eventually hurt the economy. At the same time, tariffs might reheat inflation, forcing the Fed to keep rates elevated. 

    Meanwhile, US data on Wednesday revealed slower-than-expected private job growth. On the other hand, business activity in the services sector rebounded.

    USD/CAD key events today

    USD/CAD technical forecast: Bearish engulfed turns the table

    USD/CAD technical forecast
    USD/CAD 4-hour chart

    On the technical side, the USD/CAD price has reversed after peaking near the 1.4501 resistance level. The price now sits far below the 30-SMA, showing bears are in the lead. At the same time, the RSI trades below 50, indicating solid bearish momentum. 

    –Are you interested in learning more about MT5 brokers? Check our detailed guide-

    The previous bullish trend paused when the price neared the 1.4501 resistance level. While the price made higher highs, the RSI made lower ones. This created a bearish divergence that signaled weaker momentum and a looming reversal. Soon after, the price made a bearish engulfing candlestick pattern that pushed USD/CAD below the 30-SMA. 

    Bears are now facing the 1.4301 support level. Here, bulls might return to retest the 30-SMA. If it holds firm, the downtrend will continue below 1.4301.

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  • Swiss Jobless Rate Falls To 2.9%

    Swiss Jobless Rate Falls To 2.9%


    Switzerland’s unemployment rate decreased for the first time in ten months in February, though slightly, the State Secretariat for Economic Affairs, or SECO, said on Thursday.

    The unadjusted unemployment rate dropped to 2.9 percent in February from 3.0 percent in January.

    In the corresponding month last year, the jobless rate was 2.4 percent.

    The number of registered unemployed persons decreased to 135,446 in February from 135,773 in the prior month.

    The youth unemployment rate, which is applied to the 15-24 age group, edged down to 2.7 percent from 2.8 percent.

    Data also showed that the seasonally adjusted jobless rate stood at 2.7 percent in February, unchanged from January.

    For comments and feedback contact: editorial@rttnews.com

    Economic News

    What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.





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  • Tariff Pause for Automakers Soothes Markets, Euro Stands Tall Ahead of ECB Cut

    Tariff Pause for Automakers Soothes Markets, Euro Stands Tall Ahead of ECB Cut


    Risk sentiment is mildly positive in Asian session today, as investors digest the latest developments in US trade policy and Chinese economic measures. Markets welcomed the news that the US has granted a one-month exemption for imports from Mexico and Canada for auto makers. The decision came after US President Donald Trump met with executives from Ford, General Motors, and Stellantis, who urged him to delay the levies to avoid disruptions in the industry.

    Meanwhile, Hong Kong stocks surged to a three-month high, with optimism fueled by hints from China’s National People’s Congress about looser monetary policies, along with expectations for further stimulus. Adding to the bullish momentum, tech giant Alibaba saw its stock soar after unveiling a new AI model, which it claims is competitive with DeepSeek, a major player in the artificial intelligence race. The rally in Chinese markets is adding to overall risk appetite in Asia, though uncertainties remain around US-China trade tensions.

    In the currency markets, Euro continues to lead gains for the week as investors anticipate today’s ECB policy decision. The central bank is widely expected to deliver a 25-basis-point rate cut, but the outlook for further easing is more uncertain than ever. A trade war with the US is adding downside risks to growth, while Europe’s major economies are making historic shifts in fiscal policy, particularly in Germany, where new spending initiatives could support economic expansion. These conflicting factors make it challenging to predict ECB’s path beyond today’s meeting.

    ECB President Christine Lagarde’s press conference is unlikely to provide strong forward guidance, as policymakers will want to maintain flexibility amid rising geopolitical and trade uncertainties. However, despite the upcoming rate cut, Euro’s rally looks well-supported in the near term, particularly as markets focus on Europe’s growing fiscal momentum and rearmament plans.

    Sterling is the second strongest performer, followed by New Zealand Dollar. In contrast, Dollar remains at the bottom of the performance ladder, looking increasingly vulnerable ahead of tomorrow’s Non-Farm Payrolls report. Canadian Dollar is the second-worst performer of the week and Japanese Yen is also under pressure. Swiss Franc and Australian Dollar are positioned in the middle of the pack.

    In Asia, at the time of writing, Nikkei is up 0.82%. Hong Kong HSI is up 3.03%. China Shanghai SSE is up 0.78%. Singapore Strait Times is up 0.72%. Japan 10-year JGB yield is up 0.053 at 1.499, hitting a 16-year high. Overnight, DOW rose 1.14%. S&P 500 rose 1.12%. NASDAQ rose 1.46%. 10-year yield rose 0.055 to 4.265.

    ECB to cut rates, but trade war and fiscal shifts cloud outlook

    ECB is widely expected to continue its “regular, gradual” easing cycle today, reducing the deposit rate by 25bps to 2.50%. Markets are still pricing in two more cuts this year, but the path forward has become murkier in light of recent geopolitical and economic shifts. Also, interest rates are approaching neutral levels, making further easing a more delicate decision.

    On one hand, trade tensions with the US loom large, and the fallout from fresh tariffs and retaliatory measures could weigh on Eurozone’s already fragile economic recovery. On the other hand, the announcement of transformational fiscal changes in both Germany and at the European Commission level—aimed at boosting defense and infrastructure spending—could have a significant long-term impact on growth, partially offsetting the headwinds from a trade war.

    ECB’s new economic projections, to be released alongside today’s decision, are expected to show weaker growth and marginally higher inflation. However, data collection for these forecasts took place weeks ago, rendering them less reflective of the rapidly evolving environment. Thus, their usefulness for predicting medium-term policy moves may be limited, with markets keeping an even closer eye on the ECB’s forward guidance instead.

    Euro has been exceptionally strong this week, with recent optimism boosted by developments in European fiscal policy. It’s rally is unlikely to be deter by today’s ECB outcome.

    Technically, EUR/CHF has surged aggressively, now pressing long-term falling channel resistance (at around 0.9620), after decisively breaking above 55 W EMA. Sustained break above this resistance would suggest that the downtrend from 1.2004 (2018 high) has finally bottomed at 0.9204.

    Sustained trading above the channel resistance will be argue that whole down trend from 1.2004 (2018 high) has completed at 0.9204, on bullish convergence condition in W MACD.

    In this bullish case, further rise should be seen to 0.9928 structural resistance at least, with prospect of stronger rally, even still as a medium term corrective move.

    Fed’s Beige Book: Modest growth, rising price pressures, and tariff concerns

    Fed’s Beige Book report indicated that “economic activity rose slightly” since mid-January, with mixed regional performances. While four Districts saw modest or moderate growth, six reported no change, and two experienced slight contractions.

    Consumer spending was generally lower, with essential goods seeing steady demand but discretionary spending weakening, particularly among lower-income consumers. However, business expectations remained “slightly optimistic” for the coming months.

    On the labor front, employment “nudged slightly higher” overall, though wage growth slowed modestly compared to the previous report.

    While price pressures remained moderate, several Districts noted an uptick in the pace of increase, particularly in manufacturing and construction. Many firms struggled to pass higher input costs onto customers, but expectations of tariffs on imports were already prompting preemptive price hikes in some sectors.

    On the data front

    Swiss unemployment rate, UK PMI construction and Eurozone retail sales will be released in European session. Later in the day, Canada will release trade balance and Ivey PMI. US will publish jobless claims, trade balance, and non-farm productivity.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.0662; (P) 1.0729; (R1) 1.0857; More…

    Intraday bias in EUR/USD remains on the upside as current rally from 1.0176 is still in progress. Next target is 161.8% projection of 1.0176 to 1.0531 from 1.0358 at 1.0932 On the downside, below 1.0721 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

    In the bigger picture, the strong break of 55 W EMA (now at 1.0668) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. That came after drawing support from 0.9534 (2022 low) to 1.1274 at 1.0199. Rise from 0.9534 is still intact, and might be ready to resume through 1.1274. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD Building Permits M/M Jan 6.30% -0.10% 0.70% 1.70%
    00:30 AUD Trade Balance (AUD) Jan 5.62B 5.68B 5.09B 4.92B
    06:45 CHF Unemployment Rate Feb 2.70% 2.70%
    09:30 GBP Construction PMI Feb 49.8 48.1
    10:00 EUR Eurozone Retail Sales M/M Jan 0.10% -0.20%
    12:30 USD Challenger Job Cuts Y/Y Feb -39.50%
    13:15 EUR ECB Deposit Rate 2.50% 2.75%
    13:15 EUR ECB Main Refinancing Rate 2.65% 2.90%
    13:30 CAD Trade Balance (CAD) Jan 1.4B 0.7B
    13:30 USD Initial Jobless Claims (Feb 28) 236K 242K
    13:30 USD Trade Balance (USD) Jan -93.1B -98.4B
    13:30 USD Nonfarm Productivity Q4 1.20% 1.20%
    13:30 USD Unit Labor Costs Q4 3% 3%
    13:45 EUR ECB Press Conference
    15:00 USD Wholesale Inventories Jan F 0.70% 0.70%
    15:00 CAD Ivey PMI Feb 50.6 47.1
    15:30 USD Natural Gas Storage -96B -261B

     



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  • EUR/JPY extends upside above 161.00 ahead of ECB rate decision

    EUR/JPY extends upside above 161.00 ahead of ECB rate decision


    • UR/JPY gains momentum to near 161.15 in Thursday’s early European session.
    • The concerns over tariff risks on Japan might contribute to the JPY.
    • The ECB is anticipated to cut interest rates at the March meeting on Thursday.

    The EUR/JPY cross extends the rally to around 161.15 during the early European session. The Japanese Yen (JPY) weakens against the Euro (EUR) amid the risk-on mood after US President Donald Trump will delay Canada and Mexico tariffs on autos for one month.

    The White House announced a one-month delay for US automakers to comply with the US-Mexico-Canada Agreement from the tariffs imposed on Mexico and Canada. White House spokesperson Karoline Leavitt also said that Trump was “open” to extra tariff exemptions beyond the pause on auto levies. This, in turn, boost investors’ appetite for riskier assets and drags the safe-haven currency like the Japanese Yen lower.

    The growing concerns over tariff risks in Japan might contribute to the JPY’s downside. US President Donald Trump said that Japan and China are keeping their currencies down, signaling that he may impose fresh tariffs on imports if this does not stop.

    However, the upside for the cross might be limited amid rising speculation of further hike from the Bank of Japan (BoJ). The BoJ is widely anticipated to continue hiking this year, supported by improving economic conditions, rising prices, and stronger wage growth, which align with the Japanese central bank’s policy normalization efforts.

    On the Euro front, the European Central Bank (ECB) is expected to cut interest rates for the second time this year at its March meeting on Thursday. The markets are now fully priced in a quarter-point rate cut for the March meeting, taking the ECB’s key rate to 2.5% . A further reduction to 2% by the end of the year was also priced in.

    ECB FAQs

    The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

    In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

    Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

     

     



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  • Positive M&A outlook could boost deal contingent hedges

    Positive M&A outlook could boost deal contingent hedges


    Dealers expect an increase in deal contingent foreign exchange hedging activity in 2025, in conjunction with heightened takeover deals from corporates and private equity firms in the latter part of the year.

    “We’ve certainly seen an uptick in deal contingent hedging,” says Edmund Carroll, head of FX, rates and commodities corporate client solutions at UBS. “Compared to 2022 the number of DC trades is magnitudes higher now, simply because of the far higher deal flow.”

    As of March 4, the total year

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  • More on Mexico seeking new buyers for its oil due to Trump tariffs

    More on Mexico seeking new buyers for its oil due to Trump tariffs


    I posted the headlines earlier that Mexico’s state-owned oil company, Pemex, is actively seeking new crude oil buyers in Asia and Europe, including China, India, South Korea, and Japan, after Trump imposed a 25% tariff on Mexican crude imports.

    Previously, the United States accounted for 57% of Pemex’s oil exports, but with the new tariffs in place, the company is looking to diversify its market. While some Mexican crude has already been shipped to Europe and Asia, Pemex is now engaging in talks to redirect larger volumes, with potential Chinese buyers expressing strong interest.

    Despite market speculation, Pemex has ruled out offering discounts to U.S. buyers to offset the tariffs. Instead, the company plans to fulfill current contracts until expiry before redirecting shipments to new markets.

    ***

    Sending crude to Asia and Europe will come with higher shipping costs and logistical adjustments for Pemex.



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