Dollar Gains as Trump Confirms Tariffs; Euro and Gold Slide

The US dollar ended the week on a strong note, buoyed by President Trump’s confirmation of 25% tariffs on Mexico and Canada.

However, weaker economic data kept the currency under pressure for the month. Meanwhile, the euro slipped below $1.04 ahead of the ECB meeting, where another rate cut is anticipated. The yen weakened slightly but maintained a 4% monthly gain, supported by expectations of a BOJ rate hike, despite uncertainty surrounding Trump’s trade policies.

In commodities, gold is on track for its first weekly loss in nine, pressured by a stronger dollar and trade tensions, though it remains higher for the month. Silver tumbled nearly 4% amid concerns over slowing demand, while Hecla Mining reported a 13% increase in silver production in 2024. The British pound fell below $1.27 as investors balanced US tariffs and Bank of England policy, with markets pricing in 59 basis points of rate cuts.

US Treasury yields declined, with the 10-year yield dropping to 4.25% and the 2-year yield settling at 4.05%. European and UK bond yields also moved lower, while Japan’s 10-year yield ended a seven-week rally, retreating to 1.37%.

EU CPI (January)

Eurozone inflation climbed to 2.5%, the highest level since July 2024, primarily driven by a surge in energy prices to 1.9%. Core inflation remained unchanged at 2.7% for the fifth consecutive month, while consumer prices declined by 0.3% month-over-month.

German GDP (Q4)

The German economy contracted by 0.2% in the fourth quarter, marking six consecutive quarters of negative growth. Exports declined by 2.2%, while imports rose by 0.5%. Weakness in household consumption and manufacturing weighed on growth, though construction investment showed signs of recovery.

US CB Consumer Confidence (February)

Consumer sentiment deteriorated, with the Conference Board’s Consumer Confidence Index falling by 7 points to 98.3, reflecting weaker expectations for business conditions and the labor market.

US New Home Sales (January)

New home sales declined 10.5% to a three-month low of 657,000, missing forecasts. Higher mortgage rates and extreme weather conditions contributed to the drop, with the sharpest declines recorded in the South, Midwest, and Northeast.

US Durable Goods Orders (January)

Durable goods orders increased by 3.1%, rebounding from a 1.8% decline in the previous month and surpassing expectations of a 2% rise.

US GDP (Q4)

The US economy expanded by 2.3% in the fourth quarter, slowing from 3.1% growth in Q3. Consumer spending remained strong at 4.2%, while fixed investment dropped 1.4%, led by a sharp contraction in equipment investment.

Initial Jobless Claims

US jobless claims surged by 22,000 to 242,000, the highest level in over two months, pointing to a gradual softening in the labor market. Claims filed by federal employees under UCFE totaled 614.

German CPI (February)

Inflation in Germany was estimated at 2.3% year-on-year, with consumer prices rising 0.4% from January. The EU-harmonized inflation rate stood at 2.8%.

Core PCE Price Index (January)

The Personal Consumption Expenditures (PCE) price index increased by 0.3%, bringing annual inflation to 2.5%, while the core PCE measure climbed to 2.6%.

Currencies

The US dollar strengthened as Trump’s tariffs on Mexico, Canada, and China neared implementation, despite soft economic data. The euro fell below $1.04, as markets anticipated an ECB rate cut. The yen slipped slightly but maintained a 4% monthly gain, fueled by expectations of a BOJ rate hike. The British pound dipped below $1.27, as markets remained cautious about BoE rate cut expectations.

Commodities

Gold recorded its first weekly decline in nine weeks, weighed down by a stronger dollar and looming trade tariffs, though it remains positive for the month. Silver declined by 4%, facing demand concerns, while Hecla Mining reported a 13% increase in silver output in 2024.

Equities

US stock indices ended the week lower, with the Nasdaq falling 4.5%. Despite strong earnings from Nvidia, the company’s stock plunged 10%, dragging down tech giants like Apple, Microsoft, and Amazon. Among the few gainers were Amgen and Starbucks.