Financial markets are experiencing a period of relative calm as investors await upcoming announcements from the European Central Bank (ECB). This follows a day of erratic trading, and with the highly surveilled February employment report set for release on Friday, market participants are closely monitoring other economic indicators. Notably, initial jobless claims and unit labor costs data for the fourth quarter are expected to be key focus points in the US economic calendar.
The US Dollar (USD) has shown signs of weakness against its major peers, despite a strong report from the ISM Services PMI. President Trump has granted a one-month exemption for the US automotive sector from recently implemented tariffs of 25% on imports from Canada and Mexico. In an additional move to ease trade tensions, it has been reported that the President is contemplating the exclusion of specific agricultural products from these tariffs. These factors have revitalized risk sentiment, contributing to gains of over 1% for major Wall Street indexes, while the USD Index has slid more than 1%, reaching its lowest point since early November.
The Canadian Dollar has been strengthening steadily, causing USD/CAD to decline for the second consecutive day, with expectations of a move toward 1.4300. Similarly, the USD/MXN pair saw a decline of approximately 1% before stabilizing around 20.4000 on Wednesday.
As anticipation builds for the ECB’s policy meeting, expectations point toward a 25 basis points rate cut. Following the release of the policy statement, ECB President Christine Lagarde is set to address the market and discuss future policy directions. The EUR/USD pair has seen significant upward movement, trading at its highest level in four months, just above 1.0800, with Eurostat’s January Retail Sales data expected to be released during European hours.
The GBP/USD pair is maintaining a tight trading range near 1.2900, having risen about 2.5% throughout the week. Meanwhile, Australian trade data has shown a 1.3% increase in exports for January, while imports dipped by 0.3%. After a strong surge on Wednesday, the AUD/USD pair is consolidating around the 0.6350 mark.
Following a brief recovery, USD/JPY has reversed direction, losing 0.6% on Wednesday but remains stable above the 149.00 level. In commodity markets, gold prices have struggled to gain traction amid a buoyant risk environment, with XAU/USD remaining steady near $2,920.
