EUR/USD: Fed's inaction will also help dollar

Overnight, the Canadian dollar experienced sharp volatility after US President Donald Trump announced a possible increase in duties on steel and aluminum imports from Canada to 50%. This unexpected tightening of trade policy caused a sharp weakening of the loonie, as markets feared an imminent blow to Canadian exports.However, the situation changed after Ontario Premier Doug Ford announced the suspension of surcharges on electricity exports to the United States and scheduled a meeting with U.S. Commerce Secretary Howard Latnick. After that, Trump made it clear that he could reconsider the tariff increase, which helped the Canadian dollar partially regain its lost ground.Tariff uncertainty and Bank of Canada rate expectationsDespite the temporary easing of pressure, tariff-related uncertainty continues to negatively affect business sentiment on both sides of the border. Companies and consumers are concerned about the possible economic consequences of trade restrictions, which increases pressure on the Bank of Canada (BoC).The markets have already priced in a 25bp reduction in the key rate at today's BoC meeting. However, market participants now expect at least two additional rate cuts before the end of the year, as the regulator is likely to seek to mitigate the effects of the trade conflict and support economic growth.Special attention today will be focused on the rhetoric of the Bank of Canada: its forecast and comments can set the tone for the further movement of the Canadian dollar and determine expectations for future monetary policy decisions.USD/CAD technical analysisFor (H4), USD/CAD declined to the level of 1.4541, and the intraday sentiment remains neutral for now. In general, the current movement from 1.4791 looks like a corrective structure, where the recovery from 1.4150 can be considered as the second phase of correction.If the quotes break through 1.4541, the buyers will open the way to 1.4629, the level of 100% projection of the movement of 1.4150–1.4541 from 1.4238. However, in the broader perspective, strong resistance near 1.4791 may limit growth, which will lead to the formation of a third wave of decline.On the other hand, if the pair falls below 1.4238, we will get a signal for the beginning of the third downward wave, which is aimed at breaking the support of 1.4150.In the long-term horizon, according to the Daily, the uptrend remains in force after the breakdown of the key resistance zone of 1.4667/89 (the highs of 2020 and 2015). The next growth target is the 1.4993 level, which is a 100% projection of the 1.2401–1.3976 movement from 1.3418.This scenario will be relevant as long as the support of 1.3976 (2022 maximum) remains stable, even if the pair goes into a deep correction.

Today, the key event in the financial markets will be the publication of the US Consumer Price Index (CPI) for February. According to forecasts, the overall CPI index grew by 0.2% on a monthly basis (against 0.5% in January) and amounted to 2.8% year-on-year (against 3.0% previously). The core CPI index is expected to reach 0.3% mom and 3.2% YoY.Markets are closely following the report after the unexpectedly high January reading. An important question remains whether this was a temporary effect related to the revision of prices at the beginning of the year, or whether it indicates continued inflationary pressures.The Bank of Canada (BoC) will also hold a meeting today, at which the interest rate is expected to decrease by 25 bps to 2.75%. This step is aimed at protecting the Canadian economy from the effects of US tariffs. The market consensus is also leaning towards this decision, as the slowdown in the economy requires a more lenient monetary policy.Main newsJapan: wage growthMajor Japanese corporations, including Toyota, have agreed to fully meet the demands of trade unions for wage growth, which averaged 6.1%. This is the most significant growth in recent decades. Now investors' attention is shifting to small and medium–sized enterprises, which form the backbone of the Japanese economy - will they be able to afford similar increases?Strong wage growth supports domestic demand and strengthens the case for further rate hikes by the Bank of Japan (BoJ).Ukraine and the USA: Truce and strategic agreementsThe US and Ukrainian delegations have completed negotiations, following which Kiev agreed to a 30-day truce mediated by Washington. In response, the United States will restore military assistance and resume intelligence sharing.The parties also reached an agreement on the development of Ukraine's critically important mineral resources, which could enhance the region's investment attractiveness. However, the final approval of the deal depends on Russia's reaction.USA: increase of tariffs on metalOn March 1, 25% tariffs on steel and aluminum imports came into force, which increases the risk of a recession in the United States. President Trump initially threatened to raise tariffs to 50% on imports from Canada, but then backed down when Ontario agreed to cancel retaliatory measures.This uncertainty caused sharp fluctuations in financial markets, which were already under pressure due to Washington's large-scale protectionist steps.US labor market dataJOLTs showed 7.74 million job openings in January, which is higher than expected (7.63 million). At the same time, the number of involuntary layoffs has decreased, which may have a positive impact on consumer confidence.However, the NFIB index, which measures the mood of small businesses, continued to fall for the third month in a row, reaching its lowest level since the beginning of the election campaign. This reflects the concern of entrepreneurs about tariff policy and possible cuts in government spending.Stock markets: continued declineUS stock indexes closed down again.• S&P 500 fell 0.8%, approaching the correction zone• Dow Jones lost 1.1%• Nasdaq declined by only 0.2%, while the Russell 2000 index even showed a slight increase (+0.2%)Defensive sectors, including healthcare and consumer goods, were under the most pressure, while cyclical assets showed less drawdown. European stocks also fell sharply (Stoxx 500 -1.7%), but the morning rise in futures indicates a possible rebound amid news of a truce in Ukraine.Bonds and the foreign exchange marketIn the foreign exchange market, the euro, the Swedish krona and the Norwegian krone became the growth leaders, while the Japanese yen weakened slightly.Yields continued to rise in the bond market:• The yield on 10-year German bonds increased by 6 bps, while 2-year bonds decreased by 2 bps.• In the US, 10-year Treasury bonds also rose by 6 bps, leading to increased rate volatilityThe spread between Italian and German bonds remained stable, indicating that there was no significant flight to safe haven assets.ResultsToday, markets are focused on US inflation data and the Bank of Canada's decision. Stock markets remain under pressure, but the morning rise in futures indicates a potential reversal. The foreign exchange market supports the euro and Scandinavian currencies, while American bonds remain highly volatile.

FOREX Fundamental analysis for EUR/USD on March 12, 2025Despite investors' gloomy forecasts about the US economy due to Donald Trump's tariff policy, the actual data shows a different picture. The labor market remains strong, and inflation is slowing down, which corresponds to the "soft landing" scenario that supporters of the dollar have long dreamed of. However, the question arises: has the EUR/USD rally gone too far?In January, the number of vacancies in the United States increased, while the number of layoffs decreased, which, along with an increase in employment, confirms the stability of the labor market. Bloomberg experts expect that inflation in February will slow down from 0.5% to 0.3% in monthly terms and create conditions for the resumption of the Fed's monetary policy easing cycle. Derivatives predict a reduction in the federal funds rate by 80 basis points by the end of 2025, although a week ago this figure was 60 points.Investor concerns have intensified after Donald Trump's statements about a possible recession and a "transition period" in the US economy. The president dismissed the collapse of stock indexes, although he previously considered them an indicator of the success of his policies. This caused panic in the markets, which was reflected in the growing expectations of monetary expansion.The collapse of the S&P 500 forced Trump to soften his rhetoric. He said he expects a boom in the economy and sees no signs of recession. At a meeting with representatives of large businesses, the president stressed that tariffs are only the first step, and the real victory will be achieved when production starts returning to the United States. White House officials explained the "transition period" as a transition from the chaos created by the previous administration to stability under Trump's leadership.EUR/USD prospectsIn my opinion, the markets are overly scared. There is still a long way to go before a real recession in the US economy, and expectations of large-scale monetary easing by the Fed seem overstated. In addition, it is unclear whether Friedrich Merz will be able to convince the Green Party to support changes in the fiscal brake. This can lead to profit-taking on long EUR/USD positions.To continue the growth of the EUR/USD pair, a symbiosis of an optimistic scenario for Germany and an extremely pessimistic one for the United States is needed, which is unlikely so far. Doubts can trigger a pullback to an uptrend. A drop below the 1.0890 pivot level may be a signal for short-term sales.

USD/CAD forex analysis on March 11, 2025In Tuesday's morning session, the USD/CAD currency pair shows neutral dynamics, remaining near the 1.4435 mark. The volatility of currency pairs is low. Investors have taken a wait-and-see attitude, waiting for important economic data and decisions that may set the direction of further movement.On Tuesday at 14:30 (GMT+2), the market will focus on the February US inflation report. The annual consumer price index is projected to decrease further from 3.0% to 2.9%, and monthly from 0.5% to 0.3%. The base index (excluding food and energy resources) may also drop from 3.3% to 3.2% in annual terms and from 0.4% to 0.3% on a monthly basis. These data can strengthen market expectations regarding a possible easing of the Federal Reserve's monetary policy.An additional uncertainty factor remains the risk of escalating trade conflicts. In March, the administration of Donald Trump may announce new tariffs against the EU, as well as impose duties on steel and aluminum imports. Markets see this as a threat to economic growth.The Bank of Canada will hold a monetary policy meeting on Wednesday at 3:45 p.m. (GMT+2). The key rate is expected to decrease by 25 basis points to 2.75%. This will be the seventh decline in a row. However, the regulator's further steps remain questionable due to increased uncertainty related to the US tariff policy.This week, US duties of 25% on a number of Canadian goods came into force. In response, Canadian Prime Minister Justin Trudeau announced mirror measures. At the same time, the United States granted a temporary postponement for some items on the USMCA list, which leaves room for possible negotiations.The head of the Bank of Canada, Tiff Macklem, previously stressed that the regulator will have to consider the balance between the risks of an economic slowdown and rising inflation caused by trade restrictions. According to market estimates, the probability of a March rate cut has exceeded 80%.The latest employment report in Canada disappointed investors: job growth in February was only 1.1 thousand instead of the expected 20.0 thousand, against the previous value of 76.0 thousand. The average hourly wage accelerated from 3.7% to 4.0%, while the unemployment rate remained at 6.6%, contrary to the forecast of 6.7%.USD/CAD technical analysis for todayOn the daily chart, the Bollinger bands continue to expand, indicating high volatility. The MACD indicates a weak buy signal, as its histogram is above the signal line. The stochastic oscillator maintains an upward direction, approaching the overbought zone, which may signal a possible correction in the near future.Trading recommendations• Purchases should be considered after a confident breakdown of the 1.4472 level, with a target of 1.4550. The stop loss can be placed at 1.4435. Implementation period: 1-2 days.• Open sales after the breakdown of the 1.4400 level down, with a target of 1.4300. The stop loss is 1.4450.Thus, the USD/CAD pair remains in a zone of uncertainty, and the upcoming macroeconomic events may set a new direction for it.

AUD/USD showed a moderate decline during Tuesday's Asian session, developing an uncertain "bearish" trend that began to form at the end of last week. Quotes are testing the 0.6260 level for a downward breakdown, while market participants expect new catalysts for further movement. The pair's growth potential is limited due to uncertainty in US trade policy, which reduces interest in risky assets, including the Australian dollar.China, Australia's largest trading partner, has imposed "mirror" duties on some American agricultural products in response to the increase in US tariffs on Chinese imports from 10% to 20%. Andrew Hauser, Deputy Governor of the Reserve Bank of Australia (RBA), noted that global trade uncertainty has reached a 50-year high. This may force companies and households to postpone investments and planning, which will negatively affect economic growth.Data on consumer inflation in the United States will be published tomorrow at 14:30 (GMT+2). The annual rate is expected to decrease from 3.0% to 2.9%, and the monthly rate from 0.5% to 0.3%. The base index, which excludes food and energy resources, may also drop from 3.3% to 3.2% on an annual basis and from 0.4% to 0.3% on a monthly basis. This may strengthen expectations of further easing of the Fed's monetary policy. However, markets fear that an escalation of trade wars could lead to an acceleration of inflation in the future. In particular, the introduction of new tariffs on goods from the EU, as well as on steel and aluminum imports to the United States, is not excluded.The recently released data from Australia did not provide significant support to the Australian dollar. The Westpac consumer confidence index rose from 0.1% to 4.0% in March, while the National Australia Bank's business conditions index increased from 3.0 to 4.0 points in February. However, the business confidence index decreased from 5.0 to -1.0 points, indicating a deterioration in business sentiment.AUD/USD Technical Analysis for todayAccording to the Daily, the Bollinger indicator shows a moderate decline, while the price range is narrowing, reflecting the mixed nature of trading in the short term. The MACD indicator is declining, maintaining a weak sell signal. Stochastic also shows a decrease, being in the middle of the working area.Trading recommendations- Selling deals after the breakdown of the 0.6250 level down with a target of 0.6200. It is recommended to set the stop loss at 0.6274.- Purchases will be relevant in case of a rebound from the 0.6250 level and an upward breakdown of the 0.6274 level. The target will be 0.6330. In this case, the stop loss should be placed at 0.6250.

FOREX Fundamental analysis for EUR/USD on March 11, 2025If earlier the Democratic administration sought a mild slowdown in the US economy amid lower inflation, the new Republican administration is abruptly changing course, which could lead to a recession. Donald Trump's statements about the "transition period" and calls to ignore the stock market have caused panic among investors. This led to the EUR/USD pair approaching the level of 1.085 again after a decline in the European session.The decline in the euro was caused by the refusal of the Green Party in Germany to support Friedrich Merz's initiative to change the fiscal brake. This plan included financing military expenditures and the creation of a special fund for 500 billion euros for infrastructure. Two-thirds of the votes in parliament were required for implementation, but the new composition, which will begin work on March 25, is unlikely to support these ideas, as the left-wing parties and Alternative for Germany oppose the initiative.If Friedrich Merz fails to realize his plans, this may trigger large-scale sales of EUR/USD. The drop may be as rapid as the rumored March rise, when the pair showed its best weekly performance since 2009.The new US administration seems ready to allow a recession and rising inflation in order to "make America great" in the long run. However, consumers do not know how to respond to such changes. The inflation expectations recorded by the Federal Reserve Bank of New York show that a decline in GDP may slow down price growth.The risks of a recession in the United States are growing. Goldman Sachs increased the probability of a recession from 15% to 20%, Yardeni Research — from 20% to 35%, and JP Morgan — from 30% to 40%. Morgan Stanley lowered its forecast for US GDP for 2025 to 1.5%, and for 2026 to 1.2%.The US dollar continues to weaken, which is reflected in the shift in expectations for the resumption of monetary easing by the Fed from July to May. However, the strength of the euro depends on Friedrich Merz's ability to negotiate with the Greens. If he succeeds, EUR/USD may rise to the level of 1.10.The key risks for the euro remain a possible trade war between the United States and the EU, as well as an escalation of the armed conflict in Ukraine. These factors may limit the growth potential of the single currency.Given the current uncertainty in the market, it is possible to consider the installation of pending forex orders at the boundaries of the established range.:- Purchase of EUR/USD from 1.0875 with the aim of further growth.- Sale of EUR/USD from 1.0805** in case of a decrease.

The Eurozone: investor sentiment and macroeconomic expectationsThe Sentix index, reflecting investor sentiment, will be published in the Eurozone today. It is important to understand whether the positive momentum of February has been maintained in March. This indicator can provide additional guidance for assessing the current dynamics of economic growth and investment activity in the region.A number of macroeconomic data is expected to be published in Sweden, including the cost of production index, household consumption, as well as data on industrial orders and turnover. These indicators will help to better assess the vector of development of the Swedish economy. However, special attention will be paid to the GDP indicator for January, although its predictive power relative to actual data remains low.In Norway, the market is following the February inflation. In January, core inflation unexpectedly rose to 2.8% YoY, mainly due to rising import prices. According to forecasts, core inflation could strengthen by 0.25% mom in February (seasonally adjusted data), which would leave annual growth at 2.9%. This is higher than Norges Bank's December forecast (2.7%), which may increase speculation about a possible slowdown in the disinflationary trend or even its reversal.During the week, the focus will be on the meeting of representatives of the United States and Ukraine on Tuesday, as well as possible news from Germany, where a large-scale fiscal package approved by the new government is being discussed.Overview of key eventsIn the United States, the February labor market report showed an expected increase in the number of jobs by 151 thousand (forecast: 160 thousand, previous value: 143 thousand). Despite the dismissal of 30,000 public sector employees and a decrease in migration inflows, this indicator remains stable. Unemployment increased to 4.1% in February from 4.0% in January, but so far it does not signal a recession or overheating of the economy.On the geopolitical front, Donald Trump announced the possibility of imposing new large-scale sanctions and tariffs against Russia in order to increase pressure on Moscow as part of the settlement of the conflict in Ukraine. A meeting between representatives of the United States and Ukraine is scheduled this week in Saudi Arabia, and it is expected that it will be more productive than Vladimir Zelensky's recent visit to Washington, which ended with the suspension of military assistance to Kiev.In the Eurozone, the final GDP data for the fourth quarter turned out to be higher than expected, with growth of 0.2% (previous reading: 0.1%). The GDP growth forecast for 2024 has also been revised from 0.9% to 1.2%, which is a positive signal for the region's economy.In China, the February consumer price index decreased by 0.7% YoY (forecast: -0.5%, previous value: +0.5%), which was the first decrease in 13 months. The main reasons were the early Lunar New Year celebrations and lower food prices. Further attention will be focused on assessing the effectiveness of Beijing's economic stimulus measures.In Denmark, industrial production fell by 11.9% in January (seasonally adjusted data). Even taking into account the traditional volatility of this indicator, this is a significant decrease. The pharmaceutical sector made the main contribution to the decline, but excluding pharmaceuticals, production still decreased by 7.7%.Stock markets: recovery or correction?US stock indexes ended Friday with gains after an unexpectedly strong employment report and moderately dovish comments from Fed Chairman Jerome Powell. However, the weekly decline was significant. The S&P 500 lost 3.3%, while European markets declined 0.6%. The Nasdaq and Russell 2000 indexes reached a correction level relative to post-election highs, while the S&P 500 fell by 6% from its peak values.Over the past three weeks, there have been significant differences in the dynamics of various sectors and regions. In the United States, the banking sector, the automotive industry, and the consumer sector were the most affected, with declines of 5-10%. In Europe, despite the general decline in markets, the sectoral picture is different: the main losses were recorded in real estate (-8%) and consumer durable goods (-8%), while capital goods and raw materials companies showed an increase of 3-4%.Private investors were faster than professional investors in predicting a correction, as the AAII bulls and bears index went into negative territory at the beginning of the year. However, despite the deepening correction in the US stock markets, the index remains at historically low levels, and the Fear & Greed index has reached the "extreme fear" zone.The weekend brought "bearish" comments from Donald Trump, who said the US was expecting a "transition period" due to tariffs. Unlike in his first administration, when the stock market was an important indicator of politics, he now highlights the country's long-term strategic interests, which increases uncertainty for investors.Bond and currency markets: rising yields and a stronger dollarThe February employment report did not have a significant impact on the bond market, but yields rose by the weekend after Powell's statements, who noted that the US economy was "feeling fine" and the Fed was in no hurry to revise the rate. However, part of this movement was offset on Monday by a deterioration in global risk appetite and a decline in stock indexes.The US dollar has recovered some of the losses it suffered during the tumultuous past week. The EUR/USD exchange rate, which fell below 1.04 on Monday, reached 1.0889 on Friday, but then adjusted to 1.0835.In the Scandinavian currency market, SEK remains the strongest among the major currencies: EUR/SEK broke through the 11.00 mark and is trading around 10.90. At the same time, EUR/NOK continues to grow gradually, approaching 11.80.Thus, global markets continue to balance between the prospects of monetary policy, inflationary trends and geopolitical risks, which creates increased volatility of currency pairs and uncertainty in the short term.

FOREX Fundamental analysis for EUR/USD on March 10, 2025While Europe is gripped by euphoria due to Germany's transition to large-scale fiscal stimulus, in the United States, political uncertainty is increasing the risks of recession. This has changed the forex hedging system, and speculators have been selling the US dollar for the seventh week in a row, and the EUR/USD pair has shown the best weekly dynamics since 2009. The gap between expectations and reality on both sides of the Atlantic has caused a sharp rise in the main currency pair.Fed Chairman Jerome Powell said that the central bank can afford to wait with a rate cut, as the current situation does not require immediate action. However, the futures market raised expectations for the scale of monetary easing. Now, by the end of 2025, three rate cuts are expected, although one or two were predicted at the beginning of the year. This is due to a series of disappointing data on the US economy, which increases the risks of recession.US President Donald Trump does not rule out the possibility of an economic downturn, noting that the current policy of the White House may cause short-term turbulence, but in the long run it will lead to the prosperity of the country. Treasury Secretary Scott Bessant believes that the United States needs a period of "detoxification" to reduce dependence on government spending.In Germany, the situation is the opposite. After years of fiscal consolidation, the country's economy found itself in recession in 2023-2024. However, the ambitious plans of the new Chancellor Friedrich Merz have caused optimism in the markets. Expectations of large-scale fiscal stimulus led to capital inflows to Europe, which supported the growth of stock indexes and accelerated the EUR/USD rally to the fastest pace since 2009.The further dynamics of the EUR/USD pair will depend on whether the pessimistic scenarios for the United States and the optimistic ones for Germany are realized. Jerome Powell stressed that the Fed needs to see progress in reducing inflation and weakening the labor market. At the same time, employment growth of 151 thousand in February was called "solid", which became the basis for profit-taking in EUR/USD.It remains unclear whether Friedrich Merz will be able to get the support of two-thirds of parliament to change the fiscal brake. A possible trade war between the US and the EU, which could negatively affect the eurozone economy, will also be an important factor. These concerns restrain the further growth of the EUR/USD pair.New data on the US consumer price index (CPI) for February may shake up the market again. Continued disinflation will accelerate the sale of the dollar, and rising prices will trigger sales of EUR/USD. In the near future, the euro may enter a consolidation phase. While the pair is trading below the 1.0850 pivot, short positions are a priority.