The US dollar gained strength against major global currencies early Wednesday as investors awaited the release of February’s Consumer Price Index (CPI) report. The CPI is a key measure of inflation, and its results could influence the Federal Reserve’s monetary policy decisions. Other economic reports, including the weekly petroleum inventory data and the US Treasury budget figures, are also set to be released.
On Tuesday, global market sentiment turned negative after former US President Donald Trump announced plans to double tariffs on Canadian steel and aluminum imports to 50%. However, he later retracted the threat after Ontario suspended a 25% surcharge on electricity exports.
According to Francesco Pesole, an analyst at ING, markets are looking for relief from the ongoing tariff tensions, but there is little evidence that stock market instability will force Trump to scale back his protectionist stance.
Forex Market Overview
- EUR/USD: The euro weakened slightly against the dollar, with the exchange rate dropping to 1.0906 from 1.0922 at the US market close on Tuesday. However, this was still higher than Tuesday morning’s 1.0897 level. The European Central Bank (ECB) has no major data releases scheduled for Wednesday. ECB President Christine Lagarde expressed concerns that uncertainty surrounding US trade policies is making it harder for the bank to control inflation. The ECB’s next meeting is set for April 16-17.
- GBP/USD: The British pound also fell against the dollar, declining to 1.2943 from 1.2953 at Tuesday’s close. However, it remained above Tuesday morning’s level of 1.2927. The Bank of England’s next policy meeting is scheduled for March 20.
- USD/JPY: The US dollar strengthened against the Japanese yen, rising to 148.6963 from 147.7556 at Tuesday’s close. The yen was under pressure after data revealed that Japan’s producer prices remained unchanged in February, and manufacturing sentiment turned pessimistic in the first quarter. The Bank of Japan is set to meet on March 18-19.
- USD/CAD: The US dollar also rose against the Canadian dollar, climbing to 1.4415 from 1.4410 at Tuesday’s close. It briefly spiked to 1.4514 on Tuesday after the Trump administration announced plans to double tariffs on Canadian steel and aluminum. The Bank of Canada is expected to cut interest rates by 25 basis points in its next policy decision, with Canadian consumer sentiment data for March also set to be released.
