Today’s market buzz was all about the U.S. Consumer Price Index (CPI) report, which didn’t disappoint in capturing traders’ attention. Meanwhile, updates about tariffs still managed to stir up some movement in the risk markets.
The Bank of Canada was also at the forefront of economic news, as it delivered the anticipated interest rate cut while highlighting concerns over trade uncertainties.
Let’s dive into the key headlines and economic reports you should be aware of.
Headlines:
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President Trump’s 25% tariffs on steel and aluminum imports have officially come into effect.
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The European Union fired back with a statement outlining further retaliatory trade measures, impacting 18 billion euros worth of goods. They mentioned a possible reimposition of previously suspended tariffs, scheduled for April 1.
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OPEC+ reported a notable increase in crude oil production by 363,000 barrels in February, driven mainly by Kazakhstan.
- News from the Associated Press indicated that Canada is set to announce over $20 billion in tariffs in response to today’s U.S. tariffs on Canadian aluminum and steel.
Moving on to data, the U.S. CPI for February 2025 showed a year-over-year growth of 2.8%, which was slightly below the forecasted 2.9% and previous 3.0%. Core inflation was steady at 3.1% as expected, though this was down from the previous 3.3%.
The Energy Information Administration reported Crude Oil Stocks Change for March 7, 2025, at 1.45 million barrels, which was below the anticipated 2 million but up from the previous 3.61 million.
The Bank of Canada cut its policy rate by 25 basis points to 2.75%. This was expected, yet the central bank signaled a tighter inflation outlook moving forward. Governor Macklem emphasized that they must ensure rising prices do not lead to persistent inflation.
Broad Market Price Action:
Risk sentiment held surprisingly firm during the Asian and London trading sessions despite the implementation of Trump’s steel and aluminum tariffs. European stock indices showed solid gains, brushing aside the EU’s announcement of further trade countermeasures.
In the U.S. session, all eyes were on the CPI release, which came in softer than expected. Headline inflation eased from 3.0% to 2.8% year-on-year, and the core figure nudged up just by 0.2% monthly against an anticipated 0.3% rise. Notably, a sharp 4% drop in airfare prices helped soften the inflation reading, even as shelter costs remained high, driving almost half of the monthly increase.
Despite the softer inflation data, Treasury yields climbed, with the 10-year yield rising by 2 basis points to 4.316%. Major U.S. indices ended the day mixed; tech-heavy Nasdaq jumped 1.22%, while the Dow dipped 0.20% into the negatives. The S&P 500 posted a modest gain of 0.49%, demonstrating varying market reactions.
Crude oil rallied strongly, climbing 2.22% to settle at $67.72 per barrel after the EIA announced a smaller than expected stockpile increase. Safe-haven gold edged up 0.63%, reaching $2,933.70, and bitcoin maintained its upward trajectory, trading at $82,180 by the session’s end.
FX Market Behavior: U.S. Dollar vs. Majors:
The U.S. dollar showed mixed results following the release of cooler inflation data and the Bank of Canada’s rate cut decision, despite gaining ground during the Asian session while risk appetite inched higher.
A bit of selling pressure hit as the London markets opened positively despite the EU’s announcement of further countermeasures responding to Trump’s tariffs. Meanwhile, USD/JPY surged upwards.
The Canadian dollar was under upward pressure after the Bank of Canada’s rate cut, which was anticipated. Yet, the market seemed to latch onto the central bank’s more hawkish tone on inflation.
By the end of the day, the dollar had mixed results, retaining gains against the euro and the Japanese yen but losing ground to other major currencies.
Upcoming Potential Catalysts on the Economic Calendar:
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Eurozone industrial production figures are due at 10:00 am GMT.
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Canada will release its building permits data at 12:30 pm GMT.
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The U.S. is set to announce its headline and core Producer Price Index (PPI) at 12:30 pm GMT, along with the initial jobless claims.
- The New Zealand BusinessNZ manufacturing index is expected at 9:30 pm GMT.
Focus now shifts to the upcoming U.S. PPI report, where traders are eager to see if inflationary pressures are genuinely easing or if costs are climbing on the back of higher tariffs.
Also, keep an eye on the weekly initial jobless claims figures. They’re crucial as market participants are closely tracking U.S. jobs data to anticipate any shifts in the Federal Reserve’s policy stance. And as always, stay alert for any tariff-related developments.
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