Market liquidity was low on Monday due to a light calendar and mixed risk news, despite heavy selling in equities. Talks of a US recession, fears of a government shutdown by the March 14 deadline, and weak US Employment Trends data weighed on the US Dollar. However, stronger inflation expectations from the New York Fed and market consolidation ahead of Wednesday’s US inflation data limited the Dollar's drop, showing a 'Doji' candlestick on the US Dollar Index (DXY).
In addition to US concerns, news about Moscow halting flights after a large Ukraine drone attack stalled US-China trade talks, and US tariff issues added to market uncertainty but did not boost the US Dollar. The negative sentiment affected major currencies, while Gold and Crude Oil saw a brief rebound on Tuesday. Cryptocurrencies recovered from recent lows, though equities remained weak after Wall Street closed down and Asia-Pacific shares followed suit.
The weaker US Dollar, optimism about German economic growth, and positive UK data helped EURUSD and GBPUSD stay firm, though they lacked strong upward momentum. German Bundesbank President Joachim Nagel presented a 12-point plan to boost growth, while UK consumer spending slowed in February, according to the British Retail Consortium (BRC) and Barclays. Notably, UK employment, inflation, and activity data have been stronger than in the US, raising doubts about the Bank of England’s (BoE) dovish stance and supporting GBPUSD buyers of late.
Unlike EURUSD and GBPUSD, USDJPY sellers remain in control, pushing the pair to a fresh five-month low before bouncing off 146.53. The rebound can be linked to softer-than-expected Q4 Japan GDP growth and mixed comments from Japan’s Economic and Finance Ministers. However, a hawkish Bank of Japan (BoJ) stance and Japan’s stronger economic performance compared to the US keep sellers optimistic, especially with the JPY benefiting from haven demand amid global uncertainty.
AUDUSD is on a four-day losing streak, driven by mixed consumer and business confidence data from Australia. At the same time, NZDUSD drops for the third day despite strong Q4 Manufacturing Sales from New Zealand. USDCAD pauses its two-day run-up as US-Canada tensions and a bounce in WTI Crude Oil test the pair traders. Additionally, reduced optimism about China and growing US-China tensions, along with expectations of more rate cuts from the RBA, RBNZ, and BoC, also weigh on the Australian, New Zealand, and Canadian Dollars.
Gold ends a three-day losing streak, recovering amid mixed sentiment and a weaker US Dollar. However, its bounce lacks strong momentum due to a light calendar and market consolidation ahead of Wednesday’s US inflation data. Similarly, WTI Crude Oil rebounds from heavy selling, despite a generally bearish outlook, supported by OPEC+ plans to increase oil supplies and concerns about lower energy demand from major consumers amid economic pessimism.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) halt their losing streak on Tuesday, bouncing off their lowest levels since late 2024 amid market consolidation. Even so, rising risk-aversion, fading optimism over US President Trump's crypto stance, long liquidations of industry leaders, and increased ETF outflows have recently weighed on both Bitcoin and Ethereum.
US JOLTS Job Openings for February will be the key event on Tuesday's economic calendar, but it’s unlikely to support a US Dollar rebound given recent weak US employment data. However, a shift toward optimism regarding the US government shutdown and increased risk-aversion could help the Greenback recover some losses ahead of Wednesday’s US CPI data. This, though, may not impact USDJPY sellers, as upbeat Japan data and the Yen’s haven appeal persist. Gold and Crude Oil might lose their recoveries, while the Antipodean currencies could face further downside. EURUSD and GBPUSD may see a pullback, and cryptocurrencies and equities could stay under bearish pressure, but major moves are less likely.
May the trading luck be with you!
