As we kick off the week, the U.S. dollar is weaker across the board, with most major currencies gaining ground. Markets remain focused on upcoming tariff decisions, alongside broader economic and geopolitical developments.

Market Overview

• EUR/USD: Up 0.97%, leading gains against the dollar.
• GBP/USD: Sterling is up 0.86%, showing resilience.
• USD/CAD: Down 0.43%, reflecting broad dollar weakness.

Key Themes Driving the Market

 

Tariff Watch: Countdown to Implementation

The March 4th deadline for U.S. tariffs is rapidly approaching, with markets awaiting further clarity on their size and scope. Any last-minute comments or modifications from the Trump administration could drive significant FX volatility in the next 24 hours.

Sterling Holds Firm Despite Global Uncertainty

• GBP/USD remains robust, even as the market digests discussions on European defense spending.
• Some of last week's month-end flows that caused temporary wobbles in Sterling have now been reversed, supporting its rally.

Geopolitical Focus: Zelensky-Trump Meeting & European Defense Stocks

• Over the weekend, the Zelensky-Trump meeting drew attention, with market participants watching for any shifts in geopolitical alliances.
• European defense stocks surged, and EUR/USD has gained as a result— potentially signaling confidence in the region’s stability.

Economic Data & Fed Commentary

• U.S. ISM Manufacturing PMI and Construction Spending data will be released today.
• St. Louis Fed President Moussalem is scheduled to speak later in the session, though market focus remains on tariffs.
• One of the major investment banks has revised its U.S. dollar appreciation forecast lower, citing short-term euro strength and lower expectations for USD/CNH (dollar vs. offshore yuan).

Looking Ahead

• Tariffs remain the primary market driver—any official statements from the U.S. administration today will be key.
• The dollar’s weakness to start the week suggests that markets may price in reduced expectations for aggressive U.S. tariffs.
• Euro and Sterling strength could continue if risk sentiment holds, but any surprises on the tariff front could quickly change direction.

Conclusion

Markets are opening the week with a weaker U.S. dollar and a risk-on tone, driven by geopolitical developments, tariff expectations, and revised currency forecasts. Traders will be closely watching for last-minute tariff decisions, as they will be the biggest market mover in the short term.