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What’s happening: The EUR/USD forex pair recorded gains on Friday amid weakness in the US dollar.
What happened: The US dollar came under pressure on Friday on economic growth worries with US President Donald Trump expected to announce reciprocal tariffs this week.
Investors also responded to several economic reports from the US and the Eurozone.
Why it matters: President Donald Trump threatened to impose 25% tariffs on vehicles and vehicle parts imported into the US starting April 3. Several nations around the globe said they would impose retaliatory tariffs, if the US President follows through with his threat.
Although investors expect tariffs to be less severe, they remain concerned about the negative impact on economic growth and elevated inflation levels.
The US dollar fell on Friday after economic data showed that the core PCE price index in the US rose by 0.4% in February to record the biggest gain since January 2024. The latest reading also came in higher than market estimates of 0.3%, adding to inflation fears.
The University of Michigan consumer sentiment for the US declined to 57 in March, from February’s level of 64.7. The figure also came in lower than a preliminary reading of 57.9. The region’s consumer sentiment declined for the third month in a row to reach the weakest level since November 2022.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.3% on Friday.
Data from Europe showed inflation in Spain and France being lower than market expectations for March, at 2.2% and 0.9% respectively.
The Eurozone’s inflation expectations for the next twelve months came in unchanged from the previous month at 2.6% in February, while the bloc’s industry confidence indicator improved slightly to -10.6 in March, from -11 in February.
The EUR/USD forex pair gained more than 0.2% to 1.0828 on Friday.
What to watch: Investors await the release of inflation data from Italy (1300 UAE Time) and Germany (1600 UAE Time) today. Analysts expect Germany’s annual inflation rate to remain unchanged at 2.3% in March, while Italy’s is expected to accelerate to 1.9% from 1.6% in February.
Markets will continue monitoring tariff-related announcements from Trump.
Context: Most markets in Asia settled lower on Friday as investors remained cautious about US President Donald Trump’s tariff announcements.
Details: The US President had announced a 25% tariff on all car imports, which is expected to weigh heavily on Japan’s export-driven economy.
Data released from Japan showed that the core consumer price index rose by 2.4% year-over-year in March, from 2.2% in the previous month. The latest reading marked the fifth straight month of core inflation being above the Bank of Japan’s 2% target. This fuelled speculations of further monetary policy normalisation by the central bank.
The BoJ kept its benchmark interest rate unchanged at its policy meeting earlier this month, with the board taking a cautious stance to monitor the impact of rising global risks.
Japan’s Nikkei 225 dipped 1.8% to close at 37,120.33 on Friday. China’s Shanghai Composite index shed 0.67% to close at 3,351.31, while the Shenzhen Component fell 0.57% to 10,607.33 on Friday, after recording gains in the previous session.
Hong Kong’s Hang Seng Index lost 0.65% to reach 23,426.60, while India’s BSE Sensex slipped 0.25% to settle at 77,414.92.
What to watch: Investors await the release of economic data on unemployment rate (0330 UAE Time) and Jibun Bank manufacturing PMI (0430 UAE Time) from Japan, and Caixin manufacturing PMI (0545 UAE Time) from China on Tuesday.
Japan’s unemployment rate is expected to rose to 2.6% in February, from 2.5% in January. The Au Jibun Bank Japan manufacturing PMI is projected to decline to 48.3 in March, from 49.0 in the previous month.
The Caixin China general manufacturing PMI, which rose to 50.8 in February from 50.1 in the previous month, is expected to rise further to 51.1 in March.
Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.69%, 1.97% and 2.61%, respectively.
US President Donald Trump threatened to impose up to 50% tariff on Russian oil buyers unless Moscow makes a deal to end the war with Ukraine. The news sent the safe-haven US dollar lower in forex trading this morning.
China’s official NBS non-manufacturing PMI climbed to 50.8 in March, from 50.4 in the previous month. The latest reading being the highest in three months lent support to the CNY/USD forex pair.
Japan’s industrial production grew by 2.5% in February, topping market estimates of a 2.3% gain, which sent the JPY/USD pair higher in forex trading this morning.
South Korea’s retail sales grew by 1.5% in February, following a 0.7% decline in the previous month, lending support to the KRW/USD forex pair.
Brazil’s economy added 431,995 formal jobs in February, higher than market estimates of 250,000 job adds. However, the BRL/USD pair fell in forex trading this morning.
UK’s mortgage approvals (1230 UAE Time), mortgage lending (1230 UAE Time), M4 money supply (1230 UAE Time), net lending to individuals (1230 UAE Time) and Bank of England’s consumer credit (1230 UAE Time), Brazil’s gross debt to GDP (1530 UAE Time) and nominal budget balance (1530 UAE Time), South Africa’s balance of trade (1600 UAE Time), as well as US Chicago PMI (1745 UAE Time) and Dallas Fed manufacturing index (1830 UAE Time).
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