Today, global financial markets are focused on trade tariffs and the Federal Reserve meeting. The White House has reiterated its stance on possible tariffs on Canada and Mexico, which could be announced by the weekend. As a result, the Canadian dollar is under pressure, with the Bank of Canada expected to cut rates by 25 basis points and hint at a possible pause. Meanwhile, the US Federal Reserve is widely anticipated to maintain its current stance, reinforcing its independence. In contrast, the Mexican peso remains strong, showing resilience despite tariff concerns. The US dollar is firm against all G10 currencies except the Japanese yen, while Australia's weaker-than-expected inflation data has increased expectations for a rate cut by the Reserve Bank of Australia next month. Sweden’s Riksbank also reduced rates by 25 basis points, signaling a potential end to its easing cycle.

Asia Pacific Markets

In the Asia Pacific region, the Japanese yen has shown some stability following firmer US bond yields. The dollar recently reached a monthly low against the yen but has since held within the JPY155.00-80 range. A breakout above JPY156 could push it toward last week's high of JPY156.75, which would strengthen the dollar’s technical outlook. If this scenario unfolds, US Treasury yields could climb above 4.60% again.
Meanwhile, the Chinese yuan faced pressure, with the offshore yuan weakening by 0.3% against the dollar, marking its largest single-day decline this month. Despite this, the dollar has remained below the recent high. The onshore yuan closed slightly below CNY7.2450 before the extended Lunar New Year holiday, and while traders are cautious about significant movements, further dollar strength could limit their options.

European Markets

The market anticipates a 25 basis point rate cut from the European Central Bank, regardless of the Fed’s decision. The euro has struggled, stalling near $1.0535 and hovering around $1.04 in European trading. A break below this level could trigger a move toward the $1.0355-$1.0380 range.
In the UK, the British pound recently reached $1.2525 but lost momentum, pulling back to around $1.2415. The Bank of England is expected to resume rate cuts next week, with a quarter-point reduction priced in by the market. By year-end, nearly three rate cuts are anticipated, totaling approximately 74 basis points.

American Markets

The outcome of today’s Federal Reserve meeting is widely expected: the central bank will maintain its current policy stance after cutting rates by 100 basis points in recent months. The market has aligned with the Fed’s guidance, pricing in nearly two rate cuts this year, amounting to about 48 basis points. In December, Fed Chair Jerome Powell acknowledged that some policymakers considered the administration’s fiscal policies when forming their economic outlook, while others did not. Since then, the primary development has been renewed pressure from the president for lower interest rates. However, Powell is expected to defend the Fed’s independence, ensuring that monetary policy decisions remain guided by economic conditions rather than political influence.
In the currency market, the US Dollar Index faces resistance in the 108.20-50 range, reflecting cautious optimism among traders.