The market spotlight was mainly on the U.S. CPI report for today, although tariffs-related updates still rocked some risk flows.
The Bank of Canada (BOC) also took center stage with its decision to cut interest rates as expected and highlighted trade-related uncertainty.
Here are the latest headlines and economic reports you need to take note of.
Headlines:
- Trump’s 25% tariffs on steel and aluminum imports already in effect
- EU issued a statement detailing further trade countermeasures targeting 18 billion EUR worth of goods, including potential reimposition of previously suspended tariffs, to take effect April 1
- OPEC+ crude output rose 363K in February, led by Kazakhstan
- AP reported that Canada will announce more than $20 billion in tariffs in response to today’s U.S. tariffs on Canadian aluminum and steel
- U.S. Consumer Price Index growth rate for February 2025: 2.8% y/y (2.9% y/y forecast; 3.0% y/y previous); Core read came in at 3.1% y/y (3.1% y/y forecast; 3.3% previous)
- EIA Crude Oil Stocks Change for March 7, 2025: 1.45M (2M expected, 3.61M previous)
- Bank of Canada cut policy rate by 25 basis points to 2.75% as expected but signaled a more hawkish inflation outlook
- During the presser, BOC Governor Macklem reiterated that the central bank must ensure higher prices don’t lead to ongoing inflation
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Risk appetite remained surprisingly resilient during the Asian and London sessions, despite Trump’s steel and aluminum tariffs officially taking effect, with European stock indices mostly posting solid gains even after the EU issued a statement on imposing more trade countermeasures soon.
The focus during the U.S. session was the CPI release, which printed softer than expected results. Headline inflation fell from 3.0% to 2.8% year-on-year while the core figure showed a cooler 0.2% monthly increase against the expected 0.3% gain. A notable 4% decline in airfare contributed significantly to the softer reading, though shelter costs remained sticky, accounting for nearly half of the monthly price increase.
Treasury yields moved higher despite the cooler inflation data, with the benchmark 10-year yield adding 2 basis points to 4.316%. Major U.S. indices closed mixed, with the tech-heavy Nasdaq outperforming significantly (+1.22%) while the Dow industrials slipped into negative territory (-0.20%). The S&P 500 managed a modest gain of 0.49%, reflecting the uneven market response.
Crude oil staged an impressive rally, gaining 2.22% to $67.72 per barrel and extending its climb after the EIA reported a smaller than expected build in stockpiles. Safe-haven precious metal gold added 0.63% to reach $2,933.70 while bitcoin continued its upward momentum, trading at $82,180 by the end of the session.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The dollar, which had been gradually strengthening during the Asian trading session despite a slight pickup in risk-taking, showed mixed performance following the cooler inflation data and the Bank of Canada’s rate cut decision.
A bit of a selloff was seen as London markets opened to an upbeat performance among European equities, even after the EU issued a statement citing further countermeasures on Trump’s 25% tariffs on steel and aluminum, while USD/JPY seemed unstoppable in its ascent.
The Canadian dollar faced upside pressure after the Bank of Canada cut its key policy rate by 25 basis points to 2.75% as expected, despite citing concerns over price pressures and weaker growth due to trade uncertainty and U.S. tariffs, as traders focused on the more hawkish inflationary messaging.
By session’s end, the dollar closed mixed as it held on to gains versus the euro and Japanese yen while closing in the red against the rest of its counterparts.
Upcoming Potential Catalysts on the Economic Calendar:
- Eurozone industrial production at 10:00 am GMT
- Canada building permits at 12:30 pm GMT
- U.S. headline and core PPI at 12:30 pm GMT
- U.S. initial jobless claims at 12:30 pm GMT
- New Zealand BusinessNZ manufacturing index at 9:30 pm GMT
The focus shifts to the U.S. PPI report coming up later today, as traders are keen to find out whether softer inflationary pressures are likely to persist or input costs are starting to pick up on higher tariffs.
Make sure you keep an eye out for the weekly initial jobless claims figure since market participants are also watching U.S. jobs figures closely to gauge potential changes in the Fed’s policy bias. And as always, stay on your toes for tariffs-related headlines as well.
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