The movement of the US dollar has once again captured market attention after strengthening by 0.18%, despite initially weakening. This increase was driven by higher liquidity demand due to sharp declines in the stock market. Initially, the dollar was under pressure from concerns about the impact of US tariff policies and President Trump’s statements regarding a “transition period” for the US economy. Additionally, the decline in US bond yields also weighed on the currency’s movement.
Market Focus This Week
Market participants are currently monitoring several key factors that could influence the dollar’s movement in the coming days:
US Inflation Report (CPI) for February
- Expected to decline to 2.9% year-on-year from 3.0% in January.
US Tariff Policy
- A 25% tariff on steel and aluminum imports is scheduled to take effect on Wednesday, potentially impacting economic activity and global trade.
US Consumer Sentiment Index
- Forecasted to drop to 63.5, reflecting market concerns about current economic conditions.
Federal Reserve Interest Rate Policy
- The probability of a rate cut by the Federal Reserve in the March 18-19 meeting remains low, with only a 7% chance of a 25 basis points cut.
Global Currency Movements
Developments in the global economy and monetary policies are also influencing the movement of major currencies:
- EUR/USD: Weakened (-0.10%), despite briefly rising after better-than-expected Eurozone investor confidence data and German industrial production figures.
- USD/JPY: The yen strengthened (-0.53%) to a five-month high. This gain was driven by rising wage pressures in Japan, which increased expectations that the Bank of Japan may adopt a more hawkish monetary policy.
- ECB & Interest Rates: The market currently sees a 51% chance that the European Central Bank (ECB) will cut interest rates in April.
Conclusion
The US dollar is likely to experience volatility in the coming days, influenced by inflation data releases, consumer sentiment, and the impact of US tariff policies. Investors should closely monitor these developments to make informed trading and investment decisions.
