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What’s happening: The US dollar declined versus most currencies on Friday as investors assessed the latest nonfarm payrolls (NFP) report.
What happened: The greenback tumbled to multi-month lows versus the euro and the Japanese yen after the world’s largest economy added fewer-than-expected jobs last month.
Growth in average hourly earnings also moderated in February, which resulted in the US dollar index dipping to its lowest level since early November 2024.
Why it matters: Data released on Friday showed nonfarm payrolls rose by 151,000 in February, following 125,000 job adds in the previous month. The figure fell short of market expectations of 160,000 job adds.
Average hourly earnings grew 0.3% in February, slowing from 0.5% in the previous month. The US unemployment rate rose to 4.1% last month, from 4.0% in January. The figure came in higher than market estimates of 4.0%.
The latest jobs data increased speculations of the US Federal Reserve cutting its benchmark interest rates by 25 basis points at its upcoming meeting in June. With a softer job market, investors shrugged off Fed Chairman Jerome Powell’s comments on the US central bank not rushing to slash interest rates due to lack of clarity on how President Donald Trump’s policies will impact the economy.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, recorded its softest week since November 2022. The index lost around 0.2% to 103.91 on Friday, after earlier hitting its lowest level since early November during the trading session.
The EUR/USD extended gains to record its best week in 16 years, driven by Germany’s fiscal reforms. The forex pair jumped to fresh four-month highs following the release of US jobs data. EUR/USD gained around 0.4% to 1.0834 on Friday.
The USD/JPY dipped to a five-month low in early trading on Friday but pared losses later during the session.
What to watch: Investors will continue monitoring the Trump administration’s announcements related to tariffs, which has fuelled concerns around the US economic outlook.
Data on consumer inflation expectations (1900 UAE Time) will also remain in focus today. US consumer inflation expectations for the year ahead, which remained at 3% for a third month in a row in January, is expected to rise to 3.2% in February.
Context: Equity markets in Asia closed lower on Friday as investors continued monitoring tariff-related news from the US.
Details: US President Donald Trump announced an exemption from tariffs for imports from Canada and Mexico that are covered by the USMCA, the North American trade agreement, until April 2.
Japanese stocks came under pressure due to a strengthening yen and rising government bond yields, with markets expecting the Bank of Japan to continue hiking interest rates in 2025.
Data released this morning showed Japan’s total value of loans grew 3.1% year-over-year in February, following a 2.9% gain in January and in-line with market expectations. Japan also posted a current account deficit of ¥256.6 billion in January, versus a year-ago surplus of ¥334.3 billion.
Data from China showed trade surplus widened to $170.52 billion in January-February, versus a year-ago surplus of $125.16 billion. The figure topped market estimates of $142.4 billion. The sharp rise was driven by an 8.4% year-over-year decline in imports, which was the steepest since July 2023. Exports grew 2.3%, slowing from December’s 10.7% jump.
US tariffs and deflation pressures in China weighed on investor sentiment. Data released this morning showed China’s consumer prices fell by 0.7% year-over-year in February, following a 0.5% increase in the previous month. Meanwhile, producer prices declined by 2.2% year-over-year in February.
Japan’s Nikkei 225 fell 2.17% to close at 36,887.17, while Hong Kong’s Hang Seng Index declined 0.57% to 24,231.30. China’s Shanghai Composite Index lost 0.25% to reach 3,372.55 and India’s BSE Sensex shed 0.01% to settle at 74,332.58 on Friday.
What to watch: Investors await the release of economic data on household spending (0330 UAE Time), GDP growth rate (0350 UAE Time) and machine tool orders (1000 UAE Time) on Tuesday. Analysts expect the Japanese economy to expand by 2.8% on an annualised basis in the fourth quarter following a 1.7% growth in the previous quarter.
Household spending in Japan, which rose by 2.7% year-over-year in December, is expected to increase by 3.6% in January. Japan’s machine tool orders, which rose 4.7% year-over-year to ¥116,146 million in January, are projected to grow by 3.5% in February.
Other Markets: European indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.03%, 1.75%, 0.94% and 0.46%, respectively.
Ukrainian President Volodymyr Zelenskyy said Russia had carried out “hundreds of attacks” last week, even as several countries are vying for a peace deal. The news sent the RUB/USD pair higher in forex trading this morning.
Argentina’s industrial production jumped 7.1% year-over-year in January. This being the second consecutive month of growth lent support to the ARS/USD forex pair.
Indonesia’s motorbike sales grew 4.0% year-over-year to 581,277 units in February, compared to a 5.5% decline in the previous month. However, the IDR/USD pair rose in forex trading this morning.
Brazil recorded a trade deficit of $0.3 billion in February, compared to market expectations of a $1.9 billion surplus, which exerted pressure on the BRL/USD forex pair.
Saudi Arabia’s GDP grew by 4.5% year-over-year in the fourth quarter, following a 2.8% expansion in the previous quarter. However, the SAR/USD pair fell in forex trading this morning.
Switzerland’s consumer confidence (1200 UAE Time), Italy’s PPI (1300 UAE Time), Greece’s balance of trading, industrial production and inflation rate (1400 UAE Time), Ireland’s industrial production (1500 UAE Time), Israel’s GDP growth (1500 UAE Time) and Mexico’s consumer confidence (1600 UAE Time).
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