- Data on Friday revealed 151,000 new jobs in the US in February.
- Fed Chair Jerome Powell maintained his cautious tone during a speech on Friday.
- The euro held near a four-month high hit last week after fiscal reforms in Germany.
Currency futures extended gains against the dollar, which fell after downbeat nonfarm payrolls data on Friday. At the same time, the greenback fell as market participants worried about the impact of Trump’s tariffs on the US economy. Meanwhile, safe-haven currencies like the yen soared.
US employment (Source: Bureau of Labor Statistics)
Data on Friday revealed 151,000 new jobs in the US in February. This figure was an improvement from the previous but smaller than the forecast of 159,000. At the same time, the unemployment rate rose to 4.1%, above estimates of 4.0%. The poor numbers indicated cracks in the economy that will increase pressure on the Fed to lower borrowing costs.
Previous reports have shown that the economy is slowing down. By Friday, market participants were pricing three rate cuts this year. This week, traders will monitor consumer and wholesale inflation figures for more clues on Fed rate cuts.
Meanwhile, Fed Chair Jerome Powell maintained his cautious tone during a speech on Friday. Powell reiterated the need for patience amid tariff uncertainty. Trump’s trade policies could be inflationary. Therefore, if the central bank cuts rates too soon, policymakers might have to reverse and start hiking when inflation spikes.
Last week, Trump caused turmoil in the markets when he implemented tariffs but later suspended some. China suffered an additional 10% tariff that intensified the trade war with the US. Meanwhile, Trump suspended the 25% tariff on Canada and Mexico for another month. The uncertain outlook for tariffs pushed traders to safe-haven currencies like the yen and the Swiss franc.
The Canadian dollar weakened as traders dumped the currency as tariffs clouded the outlook for Canada’s economy. At the same time, economic data revealed slower-than-expected job growth. Moreover, market participants expect the Bank of Canada to lower borrowing costs again this week.
Meanwhile, the euro held near a four-month high hit last week after fiscal reforms in Germany. The country announced a 500 billion euro fund for infrastructure and security. The news boosted the outlook for the Eurozone economy. Additionally, it increases the chances that inflation will be higher. As a result, the ECB might assume a more gradual pace of monetary easing moving forward.
