The U.S. dollar was poised for a steady finish to the week but on track for a quarterly loss, as concerns over tariffs dampen U.S. economic growth prospects. The fear of slowed growth has led to lower U.S. yields, a pullback in stocks, and a weakening currency. Meanwhile, the euro saw its largest quarterly rise in over a year, bolstered by peace prospects in Ukraine, a weakening dollar, and stronger German yields. At just below $1.08, the euro has appreciated over 4% since the start of 2025.
The Japanese yen was slightly stronger, set to close the quarter with a gain of nearly 4%, despite persistent inflation pressures in Tokyo. The Scandinavian currencies performed the best among the G10, with the Swedish crown and Norwegian krone gaining nearly 11% and 9%, respectively, on expectations that central banks in these countries will refrain from aggressive rate cuts. The British pound held steady at $1.2940, marking a 3.5% gain for the year so far.
As traders await Friday’s U.S. inflation data, the focus is on the February core PCE inflation reading, the Federal Reserve’s preferred gauge. Economists are expecting a 0.3% month-on-month increase. A softer-than-expected figure could put more downward pressure on the dollar and U.S. interest rates. At the same time, market uncertainty is heightened by U.S. President Donald Trump’s planned announcement of sweeping tariffs, including a 25% levy on imported cars set to take effect on April 3.
Despite the U.S. tariff measures, which have hit several trade partners, the Canadian dollar has remained relatively stable, rising 0.5% against the U.S. dollar this year. Meanwhile, the Australian and New Zealand dollars both showed mixed performances, with the Australian dollar weakening slightly but still set for a quarterly rise of around 2%. The New Zealand dollar experienced a similar trend, slipping 0.4% but on track for a quarterly gain of approximately 2.5%. Traders remain cautious, adopting a wait-and-see stance amid the evolving geopolitical and economic landscape.
Source: Reuters