Currency Market Overview - The dollar index (DXY00) reached a 2-week high, increasing by +0.35%, supported by safe-haven demand due to concerns over a prolonged Iran conflict following President Trump's comments about seizing Iranian oil [1] - The dollar's gains are limited by a decline in T-note yields, which has weakened interest-rate differentials [1] Interest Rate Expectations - Swaps markets are pricing in a 3% probability of a +25 basis point rate hike at the upcoming FOMC meeting on April 28-29 [2] - The FOMC is expected to cut interest rates by at least -25 basis points in 2026, while the Bank of Japan (BOJ) and European Central Bank (ECB) are anticipated to raise rates by at least +25 basis points in the same year [3] Eurozone Economic Indicators - The EUR/USD pair fell to a 1-week low, down by -0.42%, pressured by a stronger dollar and a decline in the Eurozone's March economic sentiment index, which fell to a 6-month low of 96.6, below expectations [4][5] - German March CPI rose by +1.2% month-on-month and +2.8% year-on-year, marking the largest year-on-year increase in two years, which is a hawkish signal for ECB policy [5] Japanese Yen Performance - The USD/JPY pair decreased by -0.46%, with the yen recovering from a 1.75-year low against the dollar due to comments from Japan's currency officials indicating potential bold actions in foreign exchange markets [6] - BOJ Governor Kazuo Ueda's remarks about closely monitoring currency movements contributed to the yen's gains, alongside falling T-note yields [6]

Core Viewpoint - The dollar index has declined due to a combination of geopolitical developments and disappointing economic data, leading to reduced demand for the dollar [1]. Economic Indicators - The US February Chicago Fed National Activity Index decreased by -0.31 to -0.11, falling short of expectations of 0.16 [2]. - US January construction spending unexpectedly fell by -0.3% month-over-month, contrary to expectations of a +0.1% increase [3]. Currency Movements - The euro (EUR/USD) increased by +0.48%, reaching a 1.5-week high as the dollar weakened following President Trump's postponement of military actions against Iran [4]. - The yen (USD/JPY) decreased by -0.62%, recovering as crude oil prices fell and labor unions in Japan reported average pay increases above 5% for the third consecutive year, which may influence the Bank of Japan's interest rate decisions [6]. Central Bank Outlook - The swaps market indicates an 8% probability of a +25 basis point rate hike by the Federal Open Market Committee (FOMC) at the upcoming April meeting, with expectations of a rate cut of at least -25 basis points by 2026 [3]. - The European Central Bank (ECB) is perceived to have a 65% chance of a +25 basis point rate hike at the April 30 policy meeting, as officials express concern over prolonged inflation above target levels [5].

Group 1 - The dollar index (DXY00) fell by -0.14% as T-note yields decreased and the ADP employment change showed the fewest new jobs added in five weeks, indicating a dovish factor for Fed policy [1][3] - The ADP weekly employment change for the four weeks ending February 28 increased by +9,000, the smallest increase in five weeks, signaling a slowdown in hiring by US employers [3] - The FOMC meeting began with expectations for the Fed to maintain the federal funds target range at 3.50%-3.75%, while the core PCE price index remains above the Fed's target, suggesting an extended pause in rate changes [4] Group 2 - February pending home sales unexpectedly rose by +1.8% month-over-month, contrary to expectations of a -0.6% decline, which limited losses in the dollar [2][3] - The dollar's outlook is negatively impacted by anticipated interest rate cuts by the FOMC, while the BOJ and ECB are expected to raise rates, creating a poor interest rate differential for the dollar [5] - The euro (EUR/USD) rose by +0.30% due to dollar weakness, although gains were limited by a significant drop in the German Mar ZEW survey expectations of economic growth, which fell to an 11-month low [6][7] Group 3 - The yen (USD/JPY) experienced a slight increase of -0.03% supported by Japan's Jan tertiary industry index posting its largest increase in 5.25 years, although gains were constrained by rising crude oil prices [8]

Economic Indicators - The ADP weekly employment change for the four weeks ending February 28 increased by +9,000, marking the smallest increase in five weeks, indicating a slowdown in hiring by US employers [2] - US February pending home sales unexpectedly rose by +1.8% month-over-month, contrary to expectations of a -0.6% decline [3] - The German March ZEW survey expectations of economic growth fell by -58.8 to an 11-month low of -0.5, which was weaker than the expected 39.2 [6] Monetary Policy Expectations - The two-day FOMC meeting begins today, with market expectations for the Fed to maintain the federal funds target range at 3.50%-3.75% [3] - Swaps markets are pricing in a 1% chance of a -25 basis point rate cut at the upcoming FOMC meeting, with expectations for a rate cut of at least -25 basis points by 2026 [4] - Swaps are also discounting a 2% chance of a +25 basis point rate hike by the ECB at Thursday's policy meeting [6] Currency Movements - The dollar index (DXY00) is down by -0.12%, influenced by falling T-note yields and a weak employment report [1] - The euro (EUR/USD) is up by +0.17%, supported by the dollar's weakness, although gains are limited due to negative economic news from Germany [5] - The yen (USD/JPY) is down by -0.06%, with slight gains supported by Japan's strong tertiary industry index, but limited by rising crude oil prices [7]

Economic Indicators - The dollar index rose by +0.51%, reaching a 3.5-month high, driven by increased liquidity demand and higher T-note yields [1] - US weekly initial unemployment claims fell by -1,000 to 213,000, indicating a stronger labor market than the expected increase to 215,000 [2] - January housing starts unexpectedly rose by +7.2% month-over-month to 1.487 million, surpassing expectations of a decline to 1.341 million [3] - The January trade deficit narrowed to -$54.5 billion, better than the expected -$66.0 billion [3] Interest Rate Outlook - Swaps markets are pricing in a 1% chance of a -25 basis point rate cut at the next FOMC meeting on March 17-18, with expectations of a rate cut in 2026 [4] - The dollar's strength is being challenged by a poor outlook for interest rate differentials, as the FOMC is expected to cut rates while the BOJ and ECB are anticipated to raise rates [4][6] Currency Movements - EUR/USD fell by -0.45% due to dollar strength, influenced by comments from the EU's economy chief regarding inflation and GDP impacts from geopolitical tensions [5] - USD/JPY rose by +0.30%, with the yen hitting an 8-week low against the dollar, affected by rising crude prices and higher T-note yields [7]

Economic Indicators - The dollar index (DXY00) increased by +0.34%, driven by a stock slump that heightened liquidity demand for the dollar and higher T-note yields that strengthened interest rate differentials [1] - US weekly initial unemployment claims fell by -1,000 to 213,000, indicating a stronger labor market than the expected increase to 215,000 [2] - January housing starts unexpectedly rose by +7.2% month-over-month to an 11-month high of 1.487 million, surpassing expectations of a decline to 1.341 million [3] - The January trade deficit narrowed to -$54.5 billion, better than the expected -$66.0 billion [3] Interest Rate Outlook - Swaps markets are pricing in a 0% chance of a -25 basis point rate cut at the next FOMC policy meeting on March 17-18, with expectations of a rate cut of at least -25 basis points in 2026 [4] - The outlook for interest rate differentials is poor for the dollar, as the FOMC is expected to cut rates while the BOJ and ECB are anticipated to raise rates by at least +25 basis points in 2026 [4] Currency Movements - The EUR/USD pair decreased by -0.37% due to dollar strength, influenced by comments from the EU's economy chief regarding potential inflation and GDP impacts from geopolitical tensions [5] - The USD/JPY pair increased by +0.08%, with the yen falling to an 8-week low against the dollar, affected by rising crude prices and higher T-note yields [6]

Economic Indicators - The US February ADP employment change increased by +63,000, surpassing expectations of +50,000 [2] - The US February ISM services index unexpectedly rose by +2.3 to 56.1, better than the anticipated decline to 53.5, marking the strongest pace of expansion in 3.5 years [3] - The Eurozone January PPI rose by +0.7% month-over-month and fell by -2.1% year-over-year, stronger than expectations of +0.2% month-over-month and -2.6% year-over-year [5] - The Eurozone January unemployment rate fell by -0.2 to a record low of 6.1%, better than expectations of 6.2% [6] Currency Movements - The dollar index (DXY00) is down by -0.13%, pressured by a rally in stocks following a report on potential discussions to end the war involving Iranian operatives [1] - The EUR/USD is up by +0.16%, supported by the weakness in the dollar and positive Eurozone economic reports [5] - The USD/JPY is down by -0.30%, with the yen strengthening due to a rise in Japan's February consumer confidence index to a 6.75-year high [7] Central Bank Outlook - The FOMC is expected to cut interest rates by about -37 basis points in 2026, while the Bank of Japan (BOJ) is anticipated to raise rates by +25 basis points in the same year [4] - Swaps markets are discounting a 0% chance of a -25 basis point rate cut by the European Central Bank (ECB) at its next policy meeting on March 19 [6]

Group 1: Dollar Index and Market Expectations - The dollar index (DXY) rose by +0.61% on Tuesday, reaching a 3.25-month high, driven by soaring oil prices which increased inflation expectations and reduced the likelihood of additional Fed rate cuts [1] - Market expectations for Fed easing have decreased, with money markets now pricing in 37 basis points of Fed rate cuts this year, down from 60 basis points last Friday [1] - A slump in stocks on Tuesday has increased liquidity demand for the dollar [1] Group 2: Federal Reserve and Interest Rates - NY Fed President John Williams indicated that further Fed interest rate cuts may be necessary if inflation slows after the impact of tariffs has diminished [2] - Kansas City Fed President Jeff Schmid emphasized that inflation has been above the Fed's target for nearly five years, suggesting a need for vigilance [3] - Swaps markets are currently pricing a 2% chance of a -25 basis point rate cut at the next policy meeting on March 17-18 [3] Group 3: Eurozone Economic Indicators - The EUR/USD fell to a 3.25-month low, down by -0.56%, as the dollar's strength negatively impacted the euro [5] - A +24% surge in European natural gas prices to a 3-year high poses risks to economic growth and inflation in the Eurozone, which are negative factors for the euro [5] - The Eurozone's February CPI rose by +1.9% year-on-year, exceeding expectations of +1.7%, while core CPI rose by +2.4% year-on-year, stronger than the anticipated +2.2% [5] - Swaps are discounting a 0% chance of a -25 basis point rate cut by the ECB at its next policy meeting on March 19 [5] Group 4: Japanese Yen Performance - The USD/JPY rose by +0.09%, with the yen falling to a 5-week low against the dollar due to rising crude oil prices, which negatively affect Japanese economic growth [6] - An unexpected increase in Japan's January jobless rate has also been bearish for the yen [6] - Higher T-note yields on Tuesday have put additional pressure on the yen [6]

Group 1: Dollar Index and Market Expectations - The dollar index (DXY) has increased by +1.29%, reaching a 3.25-month high, driven by rising oil prices which have surged to an 8.5-month high, thereby boosting inflation expectations and reducing the likelihood of additional Fed rate cuts [1] - Market expectations for Fed easing have decreased, with money markets now pricing in 37 basis points of Fed rate cuts this year, down from 60 basis points last Friday [1] Group 2: Federal Reserve Commentary - NY Fed President John Williams indicated that further Fed interest rate cuts may be necessary if inflation slows down after the impact of tariffs has diminished [2] - Kansas City Fed President Jeff Schmid emphasized that inflation has been above the Fed's target for nearly five years, suggesting a need for vigilance [3] Group 3: Eurozone Economic Indicators - The Eurozone's February CPI rose by +1.9% year-on-year, surpassing expectations of +1.7%, while the core CPI increased by +2.4% year-on-year, exceeding the forecast of +2.2% [6] - A significant surge of +24% in European natural gas prices to a 3-year high poses risks to economic growth and inflation in the Eurozone, negatively impacting the euro [5] Group 4: Currency Movements - The EUR/USD pair has decreased by -1.30%, reaching a 3.25-month low, primarily due to the dollar's strength [5] - The USD/JPY has risen by +0.27%, with the yen falling to a 5-week low against the dollar, influenced by rising crude oil prices and an unexpected increase in Japan's jobless rate [7]

Economic Indicators - The dollar index rose by +0.97% on Monday, reaching a 5-week high, driven by a surge in oil prices to an 8.25-month high, which boosted inflation expectations and reduced the likelihood of additional Fed rate cuts [1] - The US February ISM manufacturing index fell by -0.2 to 52.4, which was stronger than the expected 51.5, while the ISM prices paid sub-index increased by +11.5 to a 3.5-year high of 70.5, exceeding expectations of 60.0 [2] Currency Movements - The EUR/USD fell by -1.08% on Monday, marking a 5-week low, as the dollar's strength negatively impacted the euro, compounded by a significant decline in German retail sales and a surge in European natural gas prices [4] - German retail sales in January fell by -0.9% month-over-month, the largest decline in 19 months, which was weaker than expectations of no change [5] - The USD/JPY rose by +0.89% on Monday, with the yen dropping to a 3-week low against the dollar due to rising crude oil prices and higher T-note yields [5] Market Expectations - Swaps markets are pricing in a 2% chance of a -25 basis point rate cut by the Fed at the upcoming policy meeting on March 17-18, while the FOMC is expected to cut rates by about -50 basis points in 2026 [3] - The ECB is anticipated to leave rates unchanged in 2026, with only a 1% chance of a -25 basis point cut at its next meeting on March 19 [5]