The US dollar remained resilient and was poised to close the week higher, amid a risk-off sentiment driven by escalating trade tensions.
US President Donald Trump’s recent announcement on his intention to impose a 25% tariff on Mexico and Canada, effective from 4 March, and a 10% additional tariff on Chinese imports, has led to heightened market volatility.
Further concerns arise from the proposed 25% tariffs on European cars, with the European Union threatening retaliation, amplifying fears of a trade war.
Economic data released yesterday reinforced the Federal Reserve’s hawkish stance. The US economy grew 2.3% in Q4, aligning with expectations, while durable goods orders surged 3.1%.
Comments from Federal Reserve Bank of Philadelphia President Patrick Harker and Federal Reserve Bank of Cleveland President Beth Hammack reaffirmed the Fed’s commitment to strict monetary policy in light of persistent inflation pressures.
Meanwhile, the US treasury yields remain mixed, with the 10-year note nearing 4.2% as longer maturities decline. The prevailing risk-off sentiment should keep yields under pressure as investors flock to safe-haven assets. Looking forward, all eyes are now on today’s PCE numbers. Strong data should provide support for yields and reinforce a hawkish Fed, while weaker data could weigh on the greenback.
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