The United States Dollar’s recent slide is continuing this morning, as the Buck is trading weaker against most G10 currencies.
Overview
Emerging markets, though, are facing a rout of their own today as global risk sentiment has soured substantially over the weekend, keeping the Bloomberg Dollar Spot Index close to flat since yesterday evening’s Asian session open. Risk assets, US equities in particular, are facing a steep selloff this morning after news over the weekend of a Chinese artificial intelligence company that can compete with many of the mega-cap tech companies in the US, pushing Nvidia shares down 11% in pre-market trading and dragging S&P 500 futures down more than 3% with it. This comes on the heels of the S&P’s multiple record closes last week.
The Buck is still reaping a small bit of benefit from its traditional safe haven status this morning, especially with respect to minor and emerging-market currencies, but any positive bounce is muted as the reason for the rush to havens directly impacts US equities. News over the weekend that Chinese company Deepseek could threaten the outperformance of the US tech sector has prompted a sharp selloff in the US and around the world, and markets are beginning to question writ large the over-importance that AI, in particular, has had for US equities. The Chinese firm claims to have created an AI model that rivals the performance of US firms’ products but is doing so using cheaper and less sophisticated chips. If this claim is true, it would be a decided blow to the tech sector that has driven such a strong performance from US equities over the last two years. Many US tech companies are due to report earnings this week as well, which promises to add extra volatility into an already jam-packed week. President Trump also unexpectedly imposed large tariffs on Colombia last night, though a deal between the two nations has allegedly already been struck.
On top of major tech sector news, there are also a great many data points and releases on the economic calendar for the last week of the month. The Bank of Canada, Federal Reserve, and European Central Bank all report their latest interest rate decisions this week, along with GDP data from the Eurozone and US PCE, the Fed’s preferred inflation index.
Review our Annual Currency Outlook for additional insights into FX Trading for 2025!
What to Watch This Week…
- Federal Reserve Rate Decision, Wednesday 2PM
- Bank of Canada Rate Decision, Wednesday
- Eurozone GDP Thursday
- European Central Bank Decision, Thursday
- US PCE Price Index, Friday 8:30AM
- Monex USA Online is always open
JPY ⇑
Japanese Yen, along with the Swiss Franc, is capitalizing on the flight to safety this morning and has strengthened more than a percent against the USD since the Asian opened yesterday evening. Though the Yen didn’t see much of a lift after the Bank of Japan raised interest rates by 25 basis points last Friday, today’s risk-off move is taking JPY to its strongest point versus USD since mid-December. Japan’s national CPI also came in hotter than expected last week, at 3.6% versus expectations of 3.4%, and core CPI printed at 2.4%. Wage negotiations for this year have also begun and early expectations are for a 5-6% increase, which would help keep inflation higher and shore up bets for the BoJ to raise rates further this year.
AUD ⇓
The Australian and New Zealand are two of very few major currencies losing ground against USD this morning, and are the worst performers in the G10 today. Both currencies are sensitive to economic developments in China, and the world’s second-largest economy’s factory and service-sector activity unexpectedly slowed last month. Questions continue to swirl around the US’ trade relations with China as well – last week’s chatter from Trump and his administration struck a positive tone, but this weekend’s bombshell release regarding Deepseek and Chinese tech potential could very well throw a wrench into such positive developments.
