The British pound edged down to $1.265 after early February PMI data signaled stalled business activity for the fourth straight month, with job losses rising amid weaker sales and higher costs. This stagnation, combined with persistent inflation, raises concerns about a stagflationary environment, posing a challenge for the Bank of England. For the week, the sterling is up around 0.5%, and hit the highest level since December 17 after a hotter-than-expected inflation print. Meanwhile, UK retail sales exceeded all expectations, including and excluding fuel. The ONS also reported a UK budget surplus of £15.4 billion in January, falling short of the £20.3 billion estimate. GfK’s consumer confidence index remained negative, though all key metrics improved in February.

Sterling Edges Down Slightly

The euro hovered just below $1.05, heading for its third consecutive weekly loss against the USD, as investors braced for Germany’s general election on Sunday and assessed the latest PMI data from Europe’s largest economies. Polls suggest the conservative CDU/CSU bloc, led by Friedrich Merz, is likely to win but will need coalition partners to form a government amid economic stagnation. On the economic front, Eurozone private sector activity showed little growth in February, with the PMI remaining unchanged from January at 50.2 and falling short of the expected 50.5. Meanwhile, traders weighed ongoing geopolitical tensions, particularly after the US signaled plans to reduce support for Ukraine while engaging in negotiations with Russia, excluding both Ukraine and Europe. Additionally, US President Trump indicated he would likely impose a 25% tariff on automobile, semiconductor, and pharmaceutical imports starting April 2, a move that could significantly impact European carmakers.

Euro Little-Changed Ahead of Germany's General Election

The Australian dollar rose to around $0.64 on Friday, reaching its highest level in ten weeks as strong economic data fueled expectations of a more gradual easing cycle from the Reserve Bank of Australia. Data showed that private sector growth in Australia extended into a fifth consecutive month in February, with both manufacturing and services activities remaining in expansionary territory. Additionally, recent reports indicated that employment rose more than expected in December, pointing to a robust labor market. Earlier this week, the RBA lowered its cash rate by 25 basis points to 4.1%, as anticipated. However, the central bank took a more cautious stance on further rate cuts, citing concerns that the disinflation process could stall. In a press conference following the meeting, RBA Governor Michele Bullock emphasized that the central bank cannot yet declare victory over inflation and cautioned that there may be limited room for additional cuts.

Australian Dollar Reaches 10-Week High

The offshore yuan weakened toward 7.24 per dollar, despite the People’s Bank of China pledging to bolster the currency amidst mounting pressure from the stronger US dollar. In an effort to stabilize the yuan, the PBOC committed to boosting the currency's cross-border use and expanding the offshore yuan market. This comes as the US dollar continues to assert dominance, bolstered by the Federal Reserve's firm hawkish stance on interest rates and US President Donald Trump's evolving tariff threats. However, the yuan's weakness was partially offset by President Trump's remarks suggesting the potential for a new trade deal with China, providing a more optimistic outlook for US-China relations. On the monetary side, the PBOC opted to maintain its key lending rates for the fourth consecutive month in February 2025, with the one-year loan prime rate remaining unchanged at 3.1%, while the five-year loan prime rate stayed at 3.6%.

Offshore Yuan Weakens Despite PBOC Pledges

The Japanese yen fell past 150 per dollar on Friday, retreating from 11-week highs, even as hotter-than-expected inflation figures strengthened the case for a hawkish outlook on Bank of Japan monetary policy. Data showed core inflation in Japan rose to 3.2% in January, up from 3% in December, exceeding forecasts of 3.1%. Headline inflation also increased to 4%, up from 3.6%, marking the highest level in two years. Meanwhile, Bank of Japan Governor Kazuo Ueda commented on Friday that "from a long-term perspective, rising interest rates will help improve financial institutions' profits." He emphasized that the central bank is prepared to respond swiftly to market shifts, including through market operations if abnormal moves occur. Additionally, BOJ board member Takata noted on Wednesday that real interest rates remain deeply negative, suggesting that the central bank may need to further adjust its policy if economic conditions continue to evolve as expected.

Japanese Yen Weakens Despite Hot Inflation Data

The New Zealand dollar traded around $0.576 on Friday, hovering at its highest level in over two months and on track for its third consecutive weekly gain. On Thursday, the currency surged 1% after U.S. President Donald Trump stated a trade deal with China was "possible", although he did not provide specific details. China is New Zealand’s largest trading partner, and trade tensions between China and the U.S. could significantly impact the New Zealand economy. On the monetary policy front, the Reserve Bank of New Zealand on Wednesday delivered a widely expected 50bps cut to its official cash rate to a two year low of 3.75%. While the central bank signaled the possibility of further rate reductions, it also indicated that future cuts would likely be smaller and that the easing cycle was nearing the end. In economic news, the country’s trade deficit narrowed sharpy to NZ$486 million in January from NZ$1,064 million in the same month last year, as exports rose much faster than imports.

New Zealand Dollar Hovers at Over 2-Month High

The South Korean won tumbled around 1,435 per dollar, after hitting a near four-week high in the previous session, as investors turned cautious ahead of the Bank of Korea’s upcoming monetary policy decision. Sentiment was further dampened as South Korea, heavily reliant on chip and auto exports, particularly to the US, faces growing risks from US President Trump’s tariff threats, potentially impacting shipments. This has fueled calls for the central bank to cut rates, with a 25-basis-point reduction expected next week to support an economy that barely grew last quarter. On a positive note, South Korean officials have requested an exemption from US steel and aluminum reciprocal tariffs during their visit to Washington this week. Additionally, latest data showed that South Korea's business sentiment improved for the second straight month in February 2025, rising to 65 from 63 in January.

South Korean Won Tumbles

The dollar index held steady around 106.5 on Friday but remained on track for its third consecutive weekly decline, as President Donald Trump’s approach to tariffs has been less aggressive than markets initially feared. Trump imposed a 10% additional tariff on Chinese goods within his first month in office, but so far, proposed tariffs on other countries and key sectors have remained only as threats. This more cautious trade policy could alleviate concerns about inflationary pressures, providing the Federal Reserve with more room to cut interest rates further. Meanwhile, minutes from the latest FOMC meeting reaffirmed the Fed's cautious approach, signaling no immediate urgency to ease policy amid an uncertain economic outlook. Traders are now focused on Friday’s PMI readings and existing home sales data for further economic insights.

Dollar Set for Third Consecutive Weekly Drop

USDCNY decreased to a 11-week low of 7.23. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.45%, and in the last 12 months, it increased 0.51%.

Chinese Yuan Hits 11-week High

The South African rand strengthened to around 18.4 per USD, buoyed by a weaker dollar and a shift in focus from the delay of the national budget to the G20 meeting. The currency slipped to two-week lows on February 19 after a last-minute postponement of the budget presentation due to disagreements within the country's coalition government over a proposal to hike the VAT tax rate. Meanwhile, top diplomats from the world's largest economies gathered in Johannesburg for the two-day talks held for the first time in Africa. "The first G20 presidency by an African nation was an opportunity for the continent to be heard on critical global issues, like sustainable development, the digital economy and the shift toward green energy", President Ramaphosa said.

South African Rand Firms

GBPUSD increased to a 9-week high of 1.26. Over the past 4 weeks, British Pound US Dollar gained 2.35%, and in the last 12 months, it increased 0.05%.

British Pound Hits 9-week High

The Mexican peso hovered around 20.4 per USD, rebounding form the three-year low of 20.85 tested repeatedly since the start of the year, as markets assessed Banxico’s latest minutes, renewed U.S. tariff threats, and a weaker dollar. The minutes signaled openness to another 50bps rate cut in March if inflation trends allow, reinforcing a dovish stance as policymakers prioritize growth concerns amid moderating inflation. While an accelerated easing cycle could weigh on the peso, markets view Banxico’s approach as measured, preventing excessive depreciation. Meanwhile, U.S. tariff threats remain a key risk, with Trump’s rhetoric sustaining trade uncertainty despite recent signs of a possible deal with China. Though no concrete measures have been announced, any escalation could pressure the peso by disrupting trade flows. Additionally, broad dollar weakness has provided some support for the peso, along with Mexico’s still-high interest rates.

Mexican Peso Rebounds

The Russian ruble extended its recent surge to 88 per USD in February, the strongest in five months, tracking the momentum for other Russian assets amid the possibility that the war with Ukraine may end with a favorable outcome for Moscow. Russian officials attended talks with the US, with the absence of the Ukrainian delegation, to negotiate terms over a ceasefire in the ongoing war with Ukraine. Russian securities rallied after the rhetoric by members of Trump’s administration backed the possibility of the removal of sanctions after the conflict, which have restricted Russian exports and access to global financial markets since 2022, significantly hampering demand for the ruble. In the meantime, the CBR held its rate unchanged at the record-high 21% in its February meeting, as expected, but stated that it may consider a rate hike next month. Still, a stronger rebound was prevented by Moscow's measures to devalue the ruble to aid its export revenues for military expenditure.

Russian Ruble Rises to 5-Month High

The South Korean won strengthened to the 1,435 per USD mark in February, the highest in nearly four weeks, supported by a pullback in the US dollar while markets digested the impact that shocks to Korea’s trade would have in foreign exchange flows. US President Trump threatened to place a 25% tariffs on all autos and semiconductors in the White House’s latest series of restriction threats. Such measures, if imposed, would place sharp strain in South Korea’s exports, with auto exports to the US contributing to 1.6% of the GDP, while US imports of Korean chips were set to grow this year production from Chinese competitors limit the country's import demand. In the meantime, the Bank of Korea is expected to resume cutting its interest rate next week amid increasing growth concerns to the domestic economy.

South Korea Rises to Near 4-Week High

The Brazilian real hovered around 5.7 per USD, holding to its rebound from December’s all-time low of 6.29 seen December 18th as the dollar retreated globally, with investors reassessing Trump’s tariff threats as negotiation tactics rather than imminent economic disruptions. Domestically, President Lula’s firm stance on potential trade retaliation helped mitigate concerns over external risks, while a weaker dollar enhanced Brazil’s export competitiveness, supporting foreign currency inflows. Additionally, lingering inflationary pressures continue to support the central bank’s outlook of continued aggressive rate hikes, maintaining Brazil’s interest rate differential attractive for carry trades, sustaining demand for the real.

Brazilian Real Holds Strong

The Canadian dollar hovered around 1.42 per USD, maintaining its rebound from a 22-year low of 1.455 on January 31, as domestic data bolstered expectations for a tighter monetary policy and rising commodity prices attracted foreign currency inflows. Industrial producer prices surged by 1.6% in January, well above forecasts, and the Raw Materials Price Index jumped 3.7% month-over-month, signaling strong inflationary pressures that reduce expectations for further Bank of Canada easing. These figures, combined with a rebound in commodity prices supporting Canada’s export-driven economy, have improved the demand outlook for the loonie. Meanwhile, U.S. President Donald Trump announced on Wednesday that he would unveil new tariffs within the next month, adding timber and forest products to previously announced plans for tariffs on imported cars, semiconductors, and pharmaceuticals.

Canadian Dollar Rises on Inflationary Pressures

The dollar index weakened to 106.8 on Thursday as traders assessed the likelihood of the Federal Reserve keeping interest rates steady for an extended period while awaiting further developments on the trade war and Trump's policies. On Wednesday, President Donald Trump announced plans to introduce new tariffs within the next month, adding lumber and forest products to his previously stated intentions to impose duties on imported cars, semiconductors, and pharmaceuticals. Meanwhile, minutes from the latest FOMC meeting reinforced the Fed's cautious stance, signaling no urgency to cut interest rates amid concerns over inflation and the impact of tariffs and other potential policy shifts. Additionally, labor market data showed continued strength, with initial jobless claims rising by 5K to 219K last week. The greenback was mostly lower against the yen amid increasing bets the Bank of Japan will raise borrowing costs this year.

Dollar Weakens, Tariffs and Fed Weigh

The Japanese yen strengthened past 151 per dollar on Thursday, reaching its highest level in over two months as trade and geopolitical uncertainties boosted demand for the safe-haven currency. Earlier this week, US President Donald Trump announced plans to impose 25% tariffs on imports of automobiles, semiconductors, and pharmaceuticals, reigniting fears of a broader global trade war. Market anxiety also intensified over geopolitical tensions after Trump called Ukrainian President Volodymyr Zelenskiy a dictator amid ongoing talks with Russia to end the war in Ukraine. Domestically, the yen’s rise was supported by expectations that the Bank of Japan will raise interest rates further this year. However, uncertainty remains about whether the central bank will proceed with another rate hike in March. Traders are now awaiting Friday’s inflation data to gain more clarity on the future rate outlook.

Japanese Yen Hits Over 2-Month High

The Australian dollar traded above $0.635 on Thursday, holding near two-month highs as investors reacted to the latest labor market data. Australia’s jobless rate edged up slightly to 4.1% in January, up from 4% in December, while employment rose more than expected by 44,000. Earlier this week, the Reserve Bank of Australia cut its cash rate by 25 basis points to 4.1%, as anticipated. However, the central bank signaled a more cautious stance on further rate cuts, citing concerns that the disinflation process could stall. In a press conference following the meeting, RBA Governor Michele Bullock emphasized that the central bank cannot declare victory over inflation just yet and warned that there may be limited room for additional cuts. Currently, markets are pricing in a gradual easing cycle, with a cash rate forecast of 3.6% by September, implying two more quarter-point rate cuts.

Australian Dollar Stays Strong After Jobs Data

The offshore yuan rose to around 7.27 per dollar, rebounding from three consecutive sessions of losses, as investors digested the latest monetary policy decision from the People’s Bank of China. The central bank decided to keep its key lending rates unchanged for the fourth consecutive month in February 2025, amidst fluctuations in the yuan and the ongoing impact of US President Trump's aggressive trade policies. The one-year loan prime rate, which serves as a benchmark for most corporate and household loans, remained unchanged at 3.1%, while the five-year loan prime rate, used as a reference for property mortgages, held steady at 3.6%. These rates have remained at record lows following reductions in October and July of 2024. Externally, the rise in the yuan was attributed to the struggling US dollar following the latest FOMC minutes and evolving trade policies.

Offshore Yuan Rebounds After PBOC Decision

The dollar index hovered around 107 on Thursday, struggling to find a clear direction as investors assessed the latest FOMC minutes and ongoing developments in trade policies. The minutes from the Federal Reserve’s January meeting highlighted policymakers' focus on the need for more evidence of sustained disinflation, while also warning of inflation risks from potential shifts in trade, immigration, geopolitical disruptions, and strong household spending. The minutes echoed Chair Powell's previous statement that the Fed is in no hurry to cut rates further. In parallel, President Donald Trump announced plans to impose 25% tariffs on imports of automobiles, semiconductors, and pharmaceuticals, effective April 2. Investors are currently factoring in one rate cut for 2025, with some speculating the possibility of a second.

Dollar Struggles for Direction

The South Korean won tumbled around 1,440 per dollar, weighed down by ongoing dollar strength following US President Trump’s renewed tariff threats and the Federal Reserve’s latest meeting minutes. Trump proposed 25% tariffs on autos, semiconductors, and pharmaceuticals starting as early as April 2 but did not clarify whether they would target specific countries or apply broadly. Additionally, the Fed minutes signaled no rush to cut interest rates, expressing readiness to hold them steady amid persistent inflation. Elsewhere, the won found support as optimism grew after US-Russia peace talks on the Ukraine war, signaling a possible end to the conflict. At home, South Korea’s consumer sentiment rose to a three-month high of 95.2 in February, reflecting improved economic optimism, while producer inflation held at a five-month high of 1.7% in January. Traders now await the Bank of Korea’s policy decision next week, uncertain if it will adjust rates or maintain its stance.

USDJPY decreased to a 10-week low of 150.91. Over the past 4 weeks, US Dollar Japanese Yen lost 2.91%, and in the last 12 months, it increased 0.47%.

Japanese Yen Hits 10-week High

The dollar index trimmed gains to trade around 107.1 on Wednesday as traders weighed the FOMC minutes and escalating trade tensions. Minutes from the January 2025 meeting showed Fed policymakers emphasizing the need for more evidence of sustained disinflation while warning of inflation risks from trade and immigration shifts, geopolitical disruptions, and strong household spending. Meanwhile, President Donald Trump signaled plans to impose 25% tariffs on automobile, semiconductor, and pharmaceutical imports, with an announcement expected by April 2. Futures markets currently price in one rate cut for 2025, with the possibility of a second.

Dollar Little Changed at 107

The Mexican peso weakened past 20.4 per USD, approaching the three-year low of 20.85 tested repeatedly since the start of the year, as risk aversion intensified following renewed tariff threats from U.S. President Donald Trump. He reiterated plans to announce tariffs on automotive, semiconductor, and pharmaceutical imports on April 2, heightening concerns over U.S.-Mexico trade relations. The peso also faced pressure from Banxico’s recent 50 bps rate cut to 9.50% and its guidance for further easing, which could narrow the policy gap with the Fed, whose cautious stance reflects stalled disinflation. Additionally, uncertainty over Russia-U.S. peace talks on Ukraine drove demand for safe-haven assets like the dollar, further weighing on emerging market currencies.

Mexican Peso Nears Three-Year Low on Trade Risks

The Brazilian real weakened past 5.71 per USD, halting its rebound from December’s all-time low of 6.29 seen December 18th amid mounting concerns that U.S. tariff threats could erode Brazil’s trade surplus and reduce foreign currency inflows. Although these tariffs, up to 25% on automobiles, semiconductors, and pharmaceuticals, may not directly hit Brazilian exports, they raise fears of retaliatory measures and broader trade disruptions that could weaken demand for the real, leading to lower government revenues, which further exacerbate Brazil's fiscal challenges. This pressure is compounded by domestic indicators including the IBC-Br Index of Economic Activity falling 0.7% in December, while retail sales grew only 2% year-on-year, down from November’s 5.2% increase, signaling a slowdown in domestic demand. However, inflation remaining above the central bank’s 4.5% target reaffirmed expectations for another 100bps rate hike in March, providing support for the real.

Brazilian Real Weighed by Trade Fears

The South African rand depreciated to around 18.6 per USD, its lowest since early February, after Finance Minister Enoch Godongwana's eagerly awaited Annual Budget Speech was postponed. This marked the first such delay in three decades since the end of apartheid, underscoring growing divisions within the coalition government. The delay came after the Democratic Alliance, the main partner in the coalition, announced earlier in the day that it would not support a budget that includes a VAT increase. Godongwana had been expected to announce the VAT hike, but the ANC needs the DA's support to pass the budget.

South African Rand Weakens after Budget Speech Delayed

The euro traded around $1.045 as traders weighed the impact of rising defense spending, US tariffs, and geopolitical tensions. With the US signaling plans to scale back support for Ukraine and engaging in negotiations with Russia, excluding both Ukraine and European nations, some European governments met in Paris to discuss alternative support strategies. However, the informal meeting ended without concrete measures. Strengthening defense and aiding Ukraine could cost Europe's major economies an estimated $3.1 trillion over the next decade. Meanwhile, President Donald Trump indicated he would likely impose a 25% tariff on automobile, semiconductor, and pharmaceutical imports starting April 2, a move that could significantly impact European carmakers. On the monetary policy front, the ECB is expected to cut its deposit rate by 25 basis points at each of the next three meetings, bringing it down from the current 2.75%. Forecasts increasingly suggest rates could fall below 2% by 2026.

Euro Hovers at $1.04

The British pound fluctuated around $1.26, hovering near two-month highs as traders digest key economic data and its implications for monetary policy. The annual inflation rate unexpectedly rose to 3% last month, the highest in ten months, exceeding forecasts of 2.8%. Meanwhile, services inflation climbed to 5%, slightly below the Bank of England's projection of 5.2%. With inflation moving further from the central bank's 2% target, the data reinforced the BoE's cautious stance on rate cuts. Additionally, figures released on Tuesday showed wage growth accelerated in the final quarter of 2024, also rising in real terms when adjusted for inflation. As a result, money markets now expect only two rate cuts by the BoE this year, bringing interest rates down to 4%.

British Pound Hover at 2-Month Highs

The New Zealand dollar stabilized around $0.571 on Wednesday after initially declining in response to the Reserve Bank of New Zealand’s policy decision and commentary that suggested more cuts were likely. The central bank cut the official cash rate by 50bps to 3.75%, as widely expected, bringing the total easing over the past six months to 175bps. The decision came amid signs of moderating inflation, with policymakers aiming to revive a struggling economy. The RBNZ also flagged further reductions, projecting the cash rate to drop to 3.45% by June and 3.10% by year-end. Governor Adrian Orr reinforced this outlook, confirming a rate cut in April and then May sounds about right.

NZ Dollar Stabilizes After RBNZ Decision

The Japanese yen held its recent decline to around 152 per dollar on Thursday, as investors reacted to weaker-than-expected economic data. Core machinery orders in Japan, a crucial gauge of capital spending, unexpectedly fell in December. Additionally, Japan reported a larger-than-anticipated trade deficit for January, with imports outpacing exports. Despite this, the yen continues to find support from expectations that the Bank of Japan will raise interest rates further this year, though uncertainty remains about whether the central bank will make another rate hike in March. Externally, the yen faced pressure from a stronger US dollar, spurred by new tariff threats from US President Donald Trump. Trump announced plans to impose auto tariffs of around 25%, along with similar duties on semiconductors and pharmaceutical imports.

Japanese Yen Holds Decline Amid Weak Data

The South Korean won held steady at around 1,441 per dollar, pressured by ongoing US dollar strength amid US President Trump’s latest tariff threats. On Tuesday, Trump announced plans to impose around 25% tariffs on automobiles, along with similar duties on semiconductors and pharmaceutical imports, potentially as early as April 2. The won faced additional pressure amid geopolitical tensions as the US excluded European nations from peace talks with Russia over the Ukraine war. Meanwhile, investors await the US Federal Reserve’s meeting minutes, set for release later in the day, for insights into their cautious stance on rate cuts. Similarly, attention turned toward the Bank of Korea’s interest rate decision next week, as traders remain uncertain whether the central bank will adjust rates or maintain its stance amid global trade tensions and domestic political instability.

South Korean Won Holds Steady

The offshore yuan depreciated past 7.28 per dollar, marking its third consecutive session of losses, following the announcement of new tariff plans from US President Donald Trump. On Tuesday, Trump unveiled plans to impose 25% tariffs on automobiles, along with similar duties on semiconductors and pharmaceuticals. Further weighing on sentiment, Donald Trump Jr., the president’s eldest son, remarked that the US should be prepared to confront any potential military challenges from China, while remaining open to diplomatic talks with its rival. The trade war, which began during Trump’s first term, escalated as Trump imposed tariffs on China in his second term. In response, China targeted American firms and imposed tariffs on various US goods. On the economic front, China’s new home prices fell 5% year-on-year in January 2025, easing from a 5.3% drop in December. It was the smallest decline since July 2024, as China continues its efforts to address the ongoing property downturn.

Offshore Yuan Extends Decline

The dollar index maintained its recent gains, holding around 107 on Wednesday, as President Donald Trump's escalating tariff threats fueled inflation concerns. On Tuesday, Trump announced plans to impose auto tariffs of around 25%, as well as similar duties on semiconductors and pharmaceutical imports. Geopolitical tensions also supported the dollar, particularly after the US excluded European nations from peace negotiations with Russia over the ongoing war in Ukraine. On the monetary policy front, Federal Reserve officials reaffirmed their cautious approach to further interest rate cuts, emphasizing their focus on reducing inflation. Currently, markets are pricing in approximately 35 basis points of easing from the Fed this year. Traders are now awaiting the release of the latest FOMC minutes for additional insights into the future rate outlook.

Dollar Holds Firm on Fresh Tariff Threats

The Canadian dollar weakened past 1.42 per USD, halting its rebound from a 22-year low of 1.455 on January 31 as investors digested mixed inflation data. Annual inflation in January edged up to 1.9% from 1.8%, keeping it at or below the BoC’s 2% midpoint target for the 6th consecutive month and supporting expectations for continued easing. Although rising gasoline prices drove the uptick, tax breaks helped lower food costs. However, core measures such as the median and trimmed-mean rates remained elevated at 2.7%, above forecasts. Recent BoC minutes warned that prolonged uncertainty over potential U.S. tariffs could dampen business investment and fuel inflation, prompting policymakers to withhold forward guidance. Despite lingering fears over Trump’s new 25% tariffs on steel and aluminum and the risk of reciprocal tariffs escalating trade tensions, the Canadian dollar's recovery has been bolstered by a temporary exemption secured by Prime Minister Trudeau to allow further negotiations.

Canadian Dollar Stalls Amid Mixed Inflation Data

The South Africa rand traded around 18.4 per USD, moving further away from near two-month highs on February 14th, pressured by a firmer dollar and ahead of Finance Minister Enoch Godongwana's budget speech this week. Analysts anticipate South Africa's budget deficit forecasts will be larger than those in its October estimates for the next three years.

South African Rand Weaker

The euro extended its decline to $1.45 as traders weighed the implications of increased defense spending on inflation and interest rates. With the US signaling plans to scale back support for Ukraine and pursuing negotiations with Russia to end the war, European governments convened in Paris to discuss alternative support strategies. However, the informal meeting concluded without concrete measures. Strengthening defense and aiding Ukraine could cost Europe's major economies an estimated $3.1 trillion over the next decade. On the monetary policy front, the European Central Bank is expected to cut its deposit rate by 25 basis points at each of the next three meetings, bringing it down from the current 2.75%. Forecasts increasingly suggest rates could fall below 2% by 2026.

Euro Extends Decline

The British pound initially strengthened but later pared some gains to settle at $1.26 as traders assessed a mixed labor market report. Wage growth accelerated in the final three months of 2024, rising in real terms when adjusted for inflation. Additionally, the unemployment rate unexpectedly held steady at 4.4%, though vacancies and payrolled employees declined. The data reinforced the Bank of England's cautious approach to rate cuts, with Governor Andrew Bailey citing wage growth as a key factor keeping services inflation elevated. Traders now turn their attention to CPI and PPI figures due Wednesday for further insight into inflation trends. Meanwhile, investors are also closely monitoring developments in the Ukraine conflict, particularly after Trump initiated peace talks with Russia and UK Prime Minister Keir Starmer became the first European leader to propose sending peacekeeping troops.

Pound Pares Gains, Wage Growth in Focus

The Australian dollar held steady around $0.635 on Tuesday, hovering near two-month highs after the Reserve Bank of Australia lowered its cash rate by 25 basis points to 4.1%, as widely expected. However, the central bank signaled a more cautious approach to further policy easing in case the disinflation process stalls. Moreover, RBA Governor Michele Bullock said at the most-meeting presser that they cannot declare victory on inflation yet, adding that the RBA may not have as much room to cut. Currently, markets are pricing a shallow easing cycle, forecasting a cash rate of 3.6% by September or two more quarter point rate cuts. Externally, the Aussie faced downward pressure from the US dollar as Federal Reserve officials signaled that the central bank should refrain from rushing to resume interest rate cuts while it remains focused on curbing inflation.

Australian Dollar Holds Steady on RBA’s Hawkish Cut

The Australian dollar fell below $0.635 on Tuesday, reversing earlier gains after the Reserve Bank of Australia reduced its cash rate by 25 basis points to 4.1%, in line with expectations. This marks the first rate cut since November 2020, driven by easing inflationary pressures. Traders are now awaiting comments from Governor Michelle Bullock for further insights into the decision. Australia’s fourth-quarter consumer inflation data showed further deceleration, although the trimmed mean measure— the RBA’s preferred inflation gauge—remains above the 2%-3% target range. Recent data also revealed that Australian consumer inflation expectations rose to a ten-month high of 4.6% in February, up from 4% in January. Externally, the Australian dollar came under pressure from a rebound in the US dollar, following signals from Federal Reserve officials that the central bank is in no rush to resume interest rate cuts while focusing on curbing inflation.

Australian Dollar Falls as RBA Cuts Rates

The offshore yuan weakened around 7.27 per dollar, pressured by a stronger US dollar as Fed officials signaled caution on rate cuts while focusing on inflation. At home, traders weighed the impact of President Xi Jinping’s pledge to support the private sector during a private meeting with top business figures. Xi encouraged the business community to showcase their skills and trust in China’s model as global competition intensifies. Meanwhile, the NDRC outlined plans to ease difficulties for private companies, which further underscores the government’s support for the private sector. On the monetary policy front, PBOC Governor Pan reiterated that the central bank will let the market play a key role in setting the yuan’s exchange rate, while maintaining stability in the face of global volatility. He highlighted the yuan's stability and resilience amid external challenges. Markets now await the upcoming LPR announcement to gauge the PBOC's monetary policy stance and its impact on growth.

Offshore Yuan Slips on Dollar Strength

The New Zealand dollar weakened to around $0.571 on Tuesday, snapping a three-day winning streak and retreating from a two-month high as investors awaited the Reserve Bank of New Zealand’s policy meeting. The RBNZ is expected to cut its official cash rate by a supersized 50 bps on Wednesday, bringing it down to 3.75% amid rising unemployment, contracting economic growth, and inflation concerns. Traders will also focus on RBNZ Governor Adrian Orr’s press conference after the rate decision, which may offer clues about the interest rate outlook. Speculation suggests the central bank could reduce its base rate by 25 bps at each of the next two meetings in April and May. Externally, a rise in the US dollar after a three-day decline added pressure, following hawkish remarks from Federal Reserve officials.

NZ Dollar Retreats Ahead of RBNZ Decision

The South Korean won fell to around 1,443 per dollar as the US dollar rebounded, following hawkish remarks from Federal Reserve officials. They indicated that the Federal Reserve is in no rush to continue with interest rate cuts, as it focuses on curbing inflation. Similarly, attention is turning toward the Bank of Korea's upcoming interest rate decision announcement next week. This comes on the heels of the central bank's unexpected decision in January 2025 to keep the key interest rate at 3%, defying market expectations of a rate cut. As investors await the Bank of Korea's next monetary policy move, uncertainty looms over whether any adjustments will be made or if the current rate will remain unchanged amid global trade tensions and political instability within South Korea itself.

South Korean Won Falls Amid Dollar Rebound

The Japanese yen slipped to around 151.8 per dollar on Tuesday, breaking a three-day rally, as the dollar gained ground following comments from US Federal Reserve officials. They indicated that the Fed is in no rush to cut interest rates further due to ongoing inflation risks. In Japan, data released on Monday revealed the economy grew by 0.7% quarter-on-quarter in the fourth quarter, accelerating from 0.4% growth in the prior quarter and surpassing the 0.3% forecast. On an annualized basis, Japan’s GDP increased by 2.8% in Q4, in line with expectations and up from 1.7% growth in Q3. These positive figures support a hawkish outlook for the Bank of Japan’s monetary policy. While there is still uncertainty over whether the BOJ will raise interest rates again in March, further rate hikes are widely expected later in the year.

Japanese Yen Slips as Dollar Rebounds

USDHKD decreased to a 4-week low of 7.78. Over the past 4 weeks, US Dollar Hong Kong Dollar lost 0.01%, and in the last 12 months, it decreased 0.53%.

Hong Kong Dollar Hits 4-week High

The dollar index rose above 106.8 on Tuesday, reversing a three-day decline as Federal Reserve officials signaled that the central bank should refrain from rushing to resume interest rate cuts while it remains focused on curbing inflation. Fed Governor Christopher Waller suggested a pause in rate cuts based on recent economic data, unless inflation behaves similarly to 2024. Fed Governor Michelle Bowman also called for patience, urging the Fed to wait for more evidence that inflation is on track to reach the 2% target, while Philadelphia Fed President Patrick Harker advocated for holding rates steady amid a strong economy. Traders are now awaiting the release of the latest FOMC minutes this week for further guidance on the rates outlook. Meanwhile, the dollar faced pressure last week due to mixed US economic data and easing concerns about aggressive tariffs. Treasury Secretary Scott Bessent added that they are now examining currency manipulation as part of its broader trade strategy.

Dollar Rises on Hawkish Fed Remarks

The Russian ruble held near the 90 per USD mark in February, not far from five-month highs and tracking the surge in Russian assets amid the possibility that Russia’s was with Ukraine may be approaching its end. The Russian delegation will attend talks with Ukraine and the US to negotiate terms for a ceasefire after the US Presidential administration pledged to mediate a peace deal. Additionally, the lenient rhetoric from members of Trump’s administration backed the possibility of the removal of sanctions after the conflict, which have restricted Russian exports and access to global financial markets since 2022, significantly hampering demand for the ruble. In the meantime, the CBR held its rate unchanged at the record-high 21% in its February meeting, as expected, but stated that it may consider a rate hike next month. Still, a stronger rebound was prevented by Moscow's measures to devalue the ruble to aid its export revenues for military expenditure.

Russian Ruble Holds Surge Ahead of Talks

The Indian rupee was at 86.8 per USD, rebounding from the record low of 88.1 touched on February 10th as weakening fundamentals for the currency drove the RBI to intervene in the foreign exchange market. Tariffs by the US on key industrial metals of the Indian economy compounded the pressure of the move in emerging market currencies, triggering a selloff in the rupee that drove the RBI to shed its forex reserves in defense of the currency. The move contrasts with the more relaxed stance that the RBI has adopted in its defense of the rupee, as the resulting tight liquidity conditions drained bank reserves from key lenders. The shift to support liquidity and counter mounting concerns of slower growth also drove the RBI to deliver a 25bps cut in its benchmark repo rate, the first in nearly five years. This reversed the previous consensus that India would outperform major emerging economies, driving investors to close positions on Indian capital markets and pivot to competing Asian assets.

Indian Rupee Holds Rebound from RBI Intervention

The Swiss Franc remained strong at around 0.90 per USD, near its highest level since late December, as investors sought safer assets amid uncertainty over US trade policies. President Trump’s shifting stance on tariffs, with unexpected delays and exemptions, has created concerns about potential market disruptions. At the same time, the US is moving forward with talks to end the war in Ukraine, but European and Ukrainian officials are being excluded, adding to geopolitical risks. On the economic side, Switzerland’s inflation dropped for the second month in a row, hitting 0.4% in January, its lowest level in nearly four years. This marks the fifth straight month below 1%, raising fears that inflation could turn negative, challenging the Swiss National Bank’s 0-2% target. However, core inflation, which excludes volatile items, unexpectedly rose. If this trend continues, it could signal that underlying price pressures remain stable, easing concerns for the central bank.

Swiss Franc Holds Near 7-Week High

The Mexican peso held around 20.3 per USD, displaying resilience despite Banxico’s dovish stance, supported by still-elevated interest rate differentials and the temporary postponement of U.S. tariffs on Mexican goods. While Banxico’s recent 50bps rate cut to 9.50% and its guidance for further easing could narrow the policy gap with the Federal Reserve and weigh on the peso, continued investor demand for higher-yielding assets has provided support. Additionally, broader dollar weakness, driven by weak U.S. retail sales and signs of cooling PCE core inflation reinforcing Fed rate-cut expectations, along with Trump’s tariff delay and a strategic shift in trade policy, further underpinned the peso. However, lingering trade uncertainties and the risk of U.S. tariff implementation remain key headwinds that could cap further gains in the coming weeks.

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Sterling Edges Down Slightly

Euro Little-Changed Ahead of Germany's General Election

Australian Dollar Reaches 10-Week High

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Japanese Yen Weakens Despite Hot Inflation Data

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Japanese Yen Hits 10-week High

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South African Rand Weakens after Budget Speech Delayed

Euro Hovers at $1.04

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South Korean Won Holds Steady

Offshore Yuan Extends Decline

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Canadian Dollar Stalls Amid Mixed Inflation Data

South African Rand Weaker

Euro Extends Decline

Pound Pares Gains, Wage Growth in Focus

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Offshore Yuan Slips on Dollar Strength

NZ Dollar Retreats Ahead of RBNZ Decision

South Korean Won Falls Amid Dollar Rebound

Japanese Yen Slips as Dollar Rebounds

Hong Kong Dollar Hits 4-week High

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Russian Ruble Holds Surge Ahead of Talks

Indian Rupee Holds Rebound from RBI Intervention

Swiss Franc Holds Near 7-Week High

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