The US Dollar (USD) is trading more defensively at the outset of what may be a decisive week for markets. President Trump’s drugs/border tariffs reprieve for Canada, Mexico and China ends tomorrow and US data reports this week may present further evidence of slowing US growth momentum after last week’s softer-than-expected data (GDP revision, sentiment data and consumer sentiment), Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD eases as investors ponder tariff, growth risks
“Growth concerns, sprinkled with worries about sticky prices, will come into sharper relief this week if the US pushes ahead with tariffs which are all but certain to lift price pressures and chill activity in key industrial sectors. Note that after last week’s data round, the Atlanta Fed’s GDPNow tracking plunged; US data reports this week may add to growth concerns, particularly if weak government hiring is evident in the NFP report Friday.”
“On the session so far, European FX has strengthened on expectations of increased defence spending and pressure for a resolution to the Ukraine war. Eurozone CPI data was also a little warmer than expected, lifting short-term yields. Asia FX is underperforming, meanwhile, as the CNY softens on tariff risks. Japan’s vice Finance Minister Mimura—the country’s point person on FX—said that a weak yen could hinder growth in real wages, which officials view as a key ingredient to ensure price and economic trends remain positive.”
“Broader USD trends continue to mimic the pattern of trade seen in the early stages of the first Trump presidency; if that pattern extends, the USD may be on the cusp of another lurch lower. US data reports this morning include final manufacturing PMI, Construction Spending and the February ISM Manufacturing data. Mexico releases Remittances data at 10ET. The Fed’s Musalem speaks on the economy and policy outlook at 12.35ET.”
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