The USD is steady, oil prices firmed, equity markets are mixed, and equity markets rose amid tariff uncertainty. The USD remains on the sidelines ahead of Friday’s key US inflation report, while the pound weakened as UK inflation cools, increasing the prospect of a BoE interest rate cut. Global equities are mixed as uncertainties grow amid investors ahead of the April 2nd US tariff announcement. On Tuesday, Trump stated that he didn’t want too many exceptions, but he would“probably be more lenient than reciprocal because if I were reciprocal, that would be very tough for people.” Elsewhere, Bitcoin prices are steady, while copper futures surged to a record high as markets priced in the possibility of hefty import tariffs. Today's focus is on US durable goods, nondefence capital goods orders, aircraft, and Feds Kashkari & Musalem speeches, which will help drive intraday direction to currency markets.
In the news: Zelensky says the US proposes a new critical minerals deal with Ukraine. Trump May implement Copper import tariffs within weeks. UK inflation cools to 2.8% in February, but respite could be short-lived. US consumer sentiment tumbled to a four-year low, fears over tariffs mount. Russia, Ukraine agree to sea and energy truce as US seeks easing of sanctions. Denmark welcomes US changes to Greenland visit amid Trump spat. Canada freezes rebate payments to Tesla, bans it from future rebate programs due to tariffs. UK Finance Minister Reeves prepares for tough UK budget update as growth slows.
In currency markets. The USD holds on the sidelines amid ongoing tariff uncertainty. The Central Bank of Indonesia says it is ready to stabilize the rupiah, which is near a 27 year low. The Swedish central bank sees rate cuts at end but uncertainty remains high, minutes show. In Japan, the BOJ governor vows to raise rates if inflation pressure broaden. CNY and Asian currencies on average eased by 0.1% against the USD. Trading currencies are mixed, with MXN weakened 0.3%, CHF & JPY down 0.1%, SEK flat, ZAR up 0.2%, AUD firmed 0.3%, and NZD strengthened 0.45% against the USD.
In commodity markets. Oil prices gained by 0.6%. Natural Gas & Copper prices rallied 1.3%. Gold & Silver prices are flat. Wheat prices eased by 0.3%, while Soybean prices are up 0.1%.
CAD extends gains, testing its strongest level since February 25th. Still, the loonie appears capped amid a tightly contested Canadian Federal election and ongoing uncertainty ahead of expected US trade tariffs on April 2nd. We expect CAD to remain contained ahead of Thursday’s US GDP and Friday’s key inflation to provide guidance ahead of next week’s US tariff announcement.
EURCAD volatility persists as the euro retreats further from the March 11 high of 1.5850. However, month-to-date, the euro remains up2.5% as markets continue to expect that US tariffs will have a greater impact on Canada than on the EU.
EUR continues to drift lower amid a dovish ECB and ongoing tariff uncertainty. Investors take profits ahead of Friday’s key US inflation report and April 2nd US tariff announcement. The euphoria of the German debt overhaul and spending strategy, which helped the euro rally over the last few weeks, is overshadowed by the prospect of retaliatory tariffs from the US. Adding further pressure on the euro, comments from ECB policymakers indicate that everything points toward an April rate cut, along with suggestions that rates will fall to 2% by the end of 2025. Intraday, the US GDP and Fed comments will help drive the euro's direction.
GBPEUR weakens in early trading after disappointing grow data increases a prospect of further rate cuts by the Bank of England.
GBP drops to two-week lows ahead of today’s UK Budget. The pound continues under fresh selling pressure after UK inflation levels dropped to 2.8% in February, below expectations of 2.9% and January’s 3% print. Also out today, UK retail sales missed expectations, dropping to 3.4% (Feb), missing 3.6% expectations. Today, the focus will be on the UK Budget, where markets anticipate new cuts to welfare and government departments, while defence spending is expected to increase. We expect the pound to remain under short-term pressure due to the increasing likelihood of Bank of England interest rate cuts.
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