The US dollar showed strength in the latter half of last week, despite declining interest rates driven by concerns over economic growth. The postponed tariffs on Canada and Mexico—initially delayed a month ago—could be enforced as early as tomorrow, with levies of 25% and 10% on various goods. Tariffs on Chinese imports have already been applied at 10%, with additional increases expected soon. The impact of these trade measures is becoming a central issue for economic stability. The dollar has softened against all G10 currencies, with European currencies leading the advance, supported by rising interest rates and strong equity markets. Meanwhile, most emerging market currencies, especially in Central Europe, are also performing well.

Asia Pacific Markets

China’s manufacturing sector showed slight improvements, with the official PMI climbing to 50.2 and the non-manufacturing PMI increasing to 50.4. The Caixin manufacturing PMI also rose, reaching 50.8.
In Japan, the yen weakened against the dollar, which nearly touched JPY151.00 before consolidating around JPY150.00. The dollar appears to have established a base near JPY148.50, with resistance seen at JPY151.50 and JPY152.50. Japan’s manufacturing PMI inched up to 49.0, though it remains below the expansion threshold of 50. The country's employment data for January is expected to show stability.

European Markets

The euro declined to $1.0360 last week after failing to hold above $1.0530. It has since rebounded, with short-term resistance expected between $1.0450 and $1.0465. Inflation in the eurozone slightly eased, with annual CPI decreasing to 2.4% from 2.5%. This decline strengthens expectations of an upcoming rate cut by the European Central Bank, which is set to release new economic projections. Meanwhile, the eurozone’s manufacturing PMI improved to 47.6, up from an initial estimate of 47.3.
The British pound reached a two-month high of $1.2715 last week but then fell to $1.2560, slightly above its 20-day moving average. It has started the week on a stronger note, pushing toward $1.2650. UK economic data showed stable mortgage approvals and consumer credit, while the final manufacturing PMI stood at 46.9, slightly higher than the initial estimate.

American Markets

The US dollar has experienced a recovery, driven by renewed tariff concerns and despite falling bond yields. The Dollar Index had advanced 1.5% over three days before declining. It closed above its 20-day moving average for the first time in three weeks, testing a key retracement level. However, concerns about US economic growth are intensifying. The Atlanta Fed significantly revised its Q1 GDP forecast downward, from 2.4% to -1.5%. Real personal spending fell 0.5% in January, the sharpest drop since February 2021. Despite this, upcoming data—such as manufacturing PMI, ISM, and auto sales—may offer signs of stabilization. The key focus for the week is Friday’s employment report, where job growth is expected to be in line with January’s numbers. While economic weakening seems likely, the decline remains gradual for now.