On Monday, the US dollar index fell 0.48% to 106.78. The Canadian dollar and Mexican peso both dropped to their lowest points since February 3, impacted by US President Trump's announcement of a plan to impose a 25% tariff on Canada and Mexico. Meanwhile, the euro rebounded due to improved prospects for peace in Ukraine, and increased market focus on US economic data exerted pressure on the dollar.
The US dollar rose 0.4% against the Canadian dollar to 1.4523 CAD; it climbed 0.9% against the Mexican peso to 20.7165 pesos. Trump stated that tariffs on the two countries would begin on Tuesday and emphasized "no room for agreement," but did not provide specific implementation details. This statement caused market concerns over heightened tensions in trade relations between the US, Canada, and Mexico, resulting in pressure on the Canadian dollar and peso.
Meanwhile, the USD/JPY pair fell 0.26% to 150.23 yen. The US February ISM Manufacturing Purchasing Managers Index (PMI) dropped to 50.3, falling short of expectations and January's 50.9, indicating a slowdown in manufacturing expansion. This data supported the euro, as markets anticipated that the Federal Reserve's pace of interest rate hikes might slow.
The euro rose 0.89% against the dollar to 1.0468 USD, although it did not surpass the intra-day high, it remained significantly above last Friday's low of 1.0359 USD. Ukrainian President Zelensky was warmly received in the UK, while his meeting with Trump last Friday failed to reach any agreement, causing the euro to drop to a 16-day low last week. Optimism about the Ukraine situation rebounded as UK Prime Minister Starmer stated that European leaders had agreed to draft a peace plan to be submitted to Washington.
On Monday, the Kremlin stated that someone must force Zelensky to accept a peace agreement, and Eurozone countries might increase fiscal spending as a result, boosting economic growth. Analysts believe that signs of easing in the Ukrainian war would aid Europe's economic recovery, thereby supporting the euro.
Additionally, Eurozone inflation data also affected market sentiment. Data released by Eurostat on Monday showed that Eurozone consumer prices in February rose 2.4% year-on-year, lower than the previous 2.5% but higher than market expectations of 2.3%. This data indicates that inflation has not decreased as much as expected, reducing the likelihood of the European Central Bank cutting rates. Although the market generally believes that the ECB will not take rate-reducing measures in the near future, inflation is still moving towards the ECB's 2% target.
This week, market focus will shift to Thursday's European Central Bank policy meeting and Friday's US employment report. Investors are observing whether the ECB will make new policy adjustments in response to the current inflation and economic conditions, while the performance of US non-farm payroll data could also have a significant impact on the dollar's movement.
