Dollar is staging a notable rebound as markets transition into US session, though the exact catalyst behind the move is unclear. Part of Dollar’s strength could be attributed to a broad pullback in Euro, as traders begin to take profits after this month’s strong gain. Euro’s retreat is providing the greenback with some temporary relief. However, broader geopolitical and trade tensions may also be influencing the market’s cautious sentiment.
Trade tensions between the U.S. and Europe continue to escalate following fresh threats from US President Donald Trump. In response to the EU’s plan to impose retaliatory tariffs on American whiskey, Trump warned of a potential 200% tariff on European wine, champagne, and spirits. This marks an escalation in the ongoing trade dispute that began with Washington’s 25% tariffs on steel and aluminum imports.
At the same time, geopolitical uncertainties are deepening as U.S. officials arrive in Moscow for ceasefire discussions over the Ukraine conflict. Russia appears to be taking a hardline stance, with Presidential Aide Yuri Ushakov dismissing the proposed truce as nothing more than a temporary reprieve for Ukraine’s military. Ushakov emphasized that Russia’s ultimate objective remains a long-term peace settlement that prioritizes its own national interests. This rigid position suggests that negotiations may not yield immediate breakthroughs.
Against this backdrop, Dollar is emerging as the strongest performer of the day, followed by Yen and Loonie. On the other hand, Kiwi is currently the weakest performer, followed by Aussie and Euro. Sterling and the Swiss Franc are positioned in the middle.
Technically, though, it’s way too early to conclude that Dollar is reversing its near term down trend. For example, USD/CHF’s recovery from 0.8757 is seen as a corrective pattern that should be limited below 0.8911 support turned resistance. Fall from 0.9200 is still expected to resume at a later stage.
In Europe, at the time of writing, FTSE is up 0.07%. DAX is down -0.49%. CAC is down -0.33%. UK 10-year yield is up 0.018 at 4.698. Germany 10-year yield is flat at 2.882. Earlier in Asia, Nikkei fell 0.08%. Hong Kong HSI fell -0.58%. China Shanghai SSE fell -0.39%. Singapore Strait Times rose 0.12%. Japan 10-year JGB yield rose 0.023 to 1.547.
US PPI at 0.0% mom, 3.2% yoy in Feb, below expectations
US PPI for final demand as unchanged in February, coming in below expectations of 0.3% mom rise. The 0.3% mom increase in goods prices was offset by -0.2% mom decline in services.
On an annual basis, PPI slowed to 3.2% yoy, down from January’s 3.7% yoy and missing the expected 3.3% yoy reading.
PPI excluding food, energy, and trade services, rose 0.2% mom. Over the past 12 months, this measure advanced 3.3% yoy, maintaining a relatively steady pace.
US intial jobless claims tick down to 220k, vs exp 224k
US initial jobless claims fell -2k to 220k in the week ending March 8, slightly below expectation of 224k. Four-week moving average of initial claims rose 1.5k to 226k.
Continuing claims fell -27k to 1870k in the week ending March 1. Four-week moving average of continuing claims rose 6k to 1872k.
ECB’s Nagel: Tariffs could push Germany into recession again, but Fiscal shift provides stability
German ECB Governing Council member Joachim Nagel warned that Germany could face a third consecutive year of economic contraction if US tariffs take full effect. Speaking to BBC, Nagel noted that without the tariffs, Germany’s economy was already expected to stagnate with minimal growth of around 0.2%. With escalating trade tensions, the risk of another recession looms large.
Nagel sharply criticized US President Donald Trump’s tariff policies, calling them “economics from the past” and “definitely not a good idea.” He defended the EU’s decision to impose retaliatory tariffs, adding that such a response was a “necessity” rather than a choice.
Addressing Germany’s recent shift in fiscal policy, Nagel described the decision to increase borrowing for defense and infrastructure spending as an “extraordinary measure for an extraordinary time.”
He pointed out that the global economy is undergoing “tectonic changes,” which justify a more flexible approach to fiscal management. While Germany has traditionally maintained strict budget discipline, this shift would provide “some financial breathing room” to support recovery in the coming years, and send a “stability signal” to markets.
Eurozone industrial production rises 0.8% mom, led by intermediate and capital goods
Eurozone industrial production posted a solid 0.8% mom increase in January, aligning with market expectations. The gains were driven primarily by a 1.6% rise in intermediate goods output and a 0.5% increase in capital goods production. However, declines were seen in other categories, with energy production falling by -1.2%, durable consumer goods slipping -0.2%, and non-durable consumer goods dropping -3.1%.
Across the broader European Union, industrial production rose by a more modest 0.3% mom. Among individual member states, Lithuania (+4.6%), Portugal (+3.7%), and Austria (+3.3%) recorded the strongest gains, while Malta (-12.9%), Denmark (-10.6%), and Slovakia (-7.3%) saw the sharpest declines.
BoJ’s Ueda expects real wages to rise, boosting consumption
BoJ Governor Kazuo Ueda signaled optimism about Japan’s economic outlook, telling the parliament today that “import-cost-driven inflation” is expected to moderate while wages continue to “rise steadily.” This shift could lead to an improvement in real wages and consumption, a critical factor for sustaining domestic demand.
Ueda’s comments align with recent developments in Japan’s annual “shunto” wage negotiations, which have resulted in record pay hikes across major companies.
Hitachi announced a record 6.2% rise in monthly wages, fully meeting union demands. Toyota’s key auto parts supplier, Denso, also committed to historic pay hikes, while Toyota itself stated that the overall wage increase for its manufacturing staff would match last year’s levels—the highest seen since 1999.
Further clarity on the scale of wage hikes will come on March 14, when Rengo, Japan’s largest labor union federation representing 7 million workers, releases its preliminary report. Rengo had been seeking an average wage increase of 6.09%, up from last year’s 5.85%.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.0867; (P) 1.0897; (R1) 1.0919; More…
Intraday bias in EUR/USD stays neutral first. Deeper retreat might be seen towards 55 4H EMA (now at 1.0762). But strong support should be seen from 38.2% retracement of 1.0358 to 1.0946 at 1.0721 to contain downside. On the upside, break of 1.0946 will resume the rally from 1.0176 to retest 1.1274 key resistance next.
In the bigger picture, the strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.
