The US dollar, which faced challenges yesterday, is showing strength against most major currencies today, with the Japanese yen being a notable exception. A higher-than-expected inflation report from Tokyo had little effect on the Bank of Japan’s outlook, but a decline in US 10-year bond yields supported the yen. Meanwhile, the British pound benefited from stronger-than-anticipated retail sales and a rare trade surplus. 
Global stock markets remain under pressure following US auto tariffs, with notable declines in Tokyo, Taiwan, and South Korea. European markets are also down for the third consecutive session. Meanwhile, gold continues its rally, reaching a new record high above $3,086, while oil prices are set for a third weekly gain, with WTI crude hovering near $70 per barrel.

Asia Pacific Markets

The Japanese yen showed resilience today despite the dollar reaching a multi-week high yesterday. A firmer-than-expected Tokyo inflation report and a pullback in US bond yields helped the yen regain ground, with the dollar falling to JPY150.35. Inflation remains a concern in Japan, with food prices surging, yet market expectations for Bank of Japan policy remain unchanged.
Meanwhile, the Australian dollar continues to trade within a narrow range, fluctuating between $0.6280 and $0.6330. Investors are looking ahead to next week’s key economic data, including retail sales and trade figures, as well as a central bank meeting on April 1. Although no policy changes are expected, markets remain sensitive to forward guidance, especially with an election set for May 3 and speculation about potential interest rate cuts later in May.

European Markets

The euro, which briefly climbed above $1.08 yesterday, faced renewed selling pressure today. Inflation data from France and Spain showed weaker-than-expected price increases, reinforcing expectations that the European Central Bank may cut interest rates as early as next month. The probability of a rate reduction has now climbed to 85%, up from 60% last week.
Meanwhile, the British pound recovered from a two-and-a-half-week low after stronger-than-expected retail sales data. Retail sales volumes grew by 1% in February, following an upwardly revised 1.4% gain in January. Additionally, the UK reported its first trade surplus, excluding precious metals, since 2021. Despite these positive data points, the pound still faces resistance at the $1.3000 level, which limited gains last week.

American Markets

The US dollar index is holding steady after failing to gain much from initial market reactions to the new US auto tariffs. The index remains above 104.00. Investors are awaiting the latest US inflation data, but the market impact is expected to be limited, as recent CPI and PPI reports have already provided insights. The Federal Reserve remains focused on the effects of new tariffs, with market expectations for rate cuts slightly shifting. Currently, traders are pricing in around 65 basis points of cuts for the year, down from 70 basis points last week. Personal spending data is also in focus, with forecasts indicating a strong rebound in February following a decline in January.