The US 10-year yield has declined to a fresh two-month low of approximately 4.33%, continuing its downward trend ahead of a $70 billion five-year note auction. This follows strong demand for two-year floating-rate notes. The yield, which reached a peak near 4.80% in mid-January, is now approaching its 200-day moving average of 4.25%. The US dollar initially strengthened after President Trump reaffirmed planned tariffs on Mexico and Canada, though a separate official suggested no specific timeline had been established. However, the dollar’s gains were limited, with mixed performance across currencies. Most emerging market currencies, particularly outside Central Europe, weakened.

Asia Pacific Markets

The Japanese yen saw volatility as the US dollar moved between JPY148.65 and JPY150.30 before stabilizing near JPY149.85. The dollar’s ability to strengthen further depends on breaking the JPY150.40–JPY150.75 range. Meanwhile, US 10-year yields, which have fallen significantly since January, provided little support for the greenback. Japan’s economic focus this week is on Friday’s data releases, expected to show softer Tokyo CPI, a recovery in retail sales, and a continued decline in industrial production. Analysts anticipate the Bank of Japan’s next rate hike by July, though markets do not fully price it in until October.
In China, the economic calendar remains light until the weekend’s PMI release, which is expected to show slight improvement.

European Markets

The euro, after briefly reaching $1.0530, pulled back, forming a potential bearish signal. It found support near $1.0450, with further downside targets at $1.04 and $1.0380. The Eurozone reported a decline in January car registrations by 2.6%, following December’s 5.1% surge. Wage growth in the Eurozone also slowed, falling from 5.4% in Q3 to 4.1% year-over-year. In Germany, discussions are underway to approve a €200 billion defense package before the new parliament convenes in March. This has led to slight underperformance in German Bunds.
Meanwhile, the British pound reached $1.2690 before declining to nearly $1.2610, with key support around $1.2600. UK data releases are minimal this week, but Prime Minister Starmer’s upcoming visit to Washington draws attention.

American Markets

The US dollar index initially fell to a new low but rebounded, forming a potentially bullish signal. However, it faced resistance near 106.80. The greenback saw temporary gains after Trump reiterated tariff plans on Mexico and Canada, though many view this as a negotiation strategy. Reports suggest Mexico may be pressured into imposing tariffs on Chinese goods to prevent US trade penalties. Key economic reports today include various Fed surveys, December house prices, and consumer confidence data from the Conference Board, which will be closely watched after a sharp decline in the University of Michigan index. Sentiment fell to its lowest level since November 2023 at 64.7. However, economic data appears secondary to tariff concerns. Early estimates for February’s non-farm payrolls suggest little change from January’s 143,000 jobs, with the unemployment rate expected to hold steady at 4.0%.