The United States Dollar has whipsawed since Friday morning’s open, and is starting this week and month on the back foot as geopolitical news dominates the global conversation
Overview
On Friday, President Trump and Ukrainian President Zelenskyy met with reporters at the White House in an exchange that quickly devolved from testy to outright hostile at times, effectively eliminating the potential for a minerals deal that could ensure continued US support for Ukraine. This devolution of relations between the two nations initially caused the Dollar to pop substantially stronger in the Friday afternoon session as geopolitical risk premiums rose to historic highs. Such a move, however, has now been more than reversed following new developments from Europe and the UK surrounding the Russo-Ukrainian conflict over the weekend. After Friday’s rather disastrous meeting at the White House, President Zelenskyy met with several European leaders including representatives from the UK, France, and Italy to assemble what UK PM Starmer called a “coalition of the willing” to secure Ukrainian defense against Russia.
Focus this week is now shifting back – once again – to tariff talk out of the US. President Trump’s proposed tariffs of 25% against Canada and Mexico are scheduled to go into effect tomorrow after a one-month delay, but markets are yet to be convinced that these levies will actually come into effect. Commerce Secretary Howard Lutnick this morning roiled markets further by suggesting there is further room for negotiation between the three nations ahead of tomorrow’s deadline, which is keeping the Dollar depressed this morning. Regardless of what, if anything, actually goes into effect tomorrow morning, the only thing traders can be sure of is heightened volatility this week as conflicting headlines continue to move markets.
The data calendar is fairly busy this week as we begin the last month of Q1. The US will release manufacturing PMI later this morning, followed by services and composite readings on Wednesday. Non-farm payrolls for February are also due out Friday morning, expected to show a slight increase from January’s rather weak surface figure. The European Central Bank will release its latest interest rate decision Thursday morning and is widely expected to cut rates by 0.25%.
What to Watch This Week…
- US, UK & Eurozone Composite PMIs, Wednesday
- European Central Bank Rate Decision, Thursday
- US Non-Farm Payrolls, Friday 8:30AM
- Monex USA Online is always open
Complete Economic Calendar can be found here.
EUR ⇑
The single currency is the biggest winner in the G10 this morning against all currencies, but is posting outsized gains against USD of nearly a percent since the Asian session open. The prospect of a substantial increase across the larger Eurozone in defense spending, triggered by discussions of a coalition defense for Ukraine against Russia over the weekend, has given EUR quite the boost ahead of the European Central Bank’s expected interest rate cut later this week. If such increased spending does materialize, it’s possible the ECB may ease rates much less than expected through this calendar year.
GBP ⇑
Pound Sterling, another big beneficiary of geopolitical discussions over the weekend, has gained more than eight tenths of a percent of ground against the Buck in early trading today. Traders’ general view that increased defense spending would help many European economies has helped boost GBP in a big way, and Sterling now sits just shy of its strongest point against USD so far this calendar year. The UK, along with the Eurozone and the US, will release services and composite PMI readings on Wednesday, largely expected to show that most sectors posted very slight growth in February.
