The US dollar ended the week higher, supported by the Federal Reserve’s upward revision to inflation forecasts. However, Thursday brought a slight pullback as concerns over economic growth and proposed tariffs from President Trump weighed on sentiment.
The euro depreciated following the announcement of a 25% US tariff on non-American cars. Additionally, the ECB cut interest rates by 25 basis points and left the door open to further easing.
The Japanese yen weakened to 151 per dollar, despite Tokyo’s core CPI rising to 2.4% and the BOJ maintaining a hawkish tone. Heightened risks to Japan’s auto exports stemming from US trade policy pressured the currency.
The British pound saw modest gains, supported by expectations of prolonged higher interest rates, even as inflation softened and 2025 growth was revised down to 1%. February’s 2.8% CPI aligned with BOE projections, while the Spring Statement emphasized tighter fiscal discipline.
Gold reached an all-time high of $3,080 per ounce, driven by escalating trade tensions, strong central bank purchases, and persistent ETF demand. The metal is poised for its strongest monthly performance since March 2024.
Silver climbed above $34, marking its highest level since October 2024. Investors sought safe-haven assets amid tariff concerns, and expectations of upcoming Fed rate cuts further supported prices.
Bond markets were relatively stable this week. Japan’s 10-year yield rose to 1.58%, the highest in 16 years. In contrast, European 10-year yields declined, and US 2-year and 10-year yields also retreated slightly toward the end of the week.
The index declined to 49.8 in March from 52.7 in February, missing the 51.8 forecast and signaling a contraction. Output reversed February’s gains, and new orders stagnated. Export sales saw a smaller decline, supported by demand from the EU and Canada. Employment dropped for the first time since October. Input costs surged to a 31-month high, while output prices rose at the fastest pace in over two years. Business confidence, however, remained strong.
The services PMI improved to 54.3 from 51, surpassing the 50.8 consensus. Activity rebounded after a 15-month low in February, thanks to stronger demand and better weather. Export orders fell again, but employment edged higher. Input costs reached an 18-month high, and output prices rose slightly. Optimism softened, marking the second-lowest business confidence reading since late 2022.
Consumer sentiment weakened, with the index falling to 92.9 from 98.3, the lowest level since February 2021.
New home sales increased by 1.8% to 676,000 units in February, recovering some ground after January’s sharp decline. Demand was supported by lower mortgage rates and warmer weather. However, sales were weaker in the West and Northeast. The median price was $414,500, and inventory levels remained elevated, equivalent to 8.9 months of supply.
Inflation eased to 2.8% in February from 3.0% in January, below market expectations but in line with BOE projections. Falling clothing and housing prices led the decline, while food inflation remained steady. Core inflation dropped to 3.5%, and monthly CPI rose 0.4%.
Durable goods orders rose 0.9% to $289.3 billion, contrary to forecasts of a 1% decline. Growth was led by transportation, especially motor vehicles and defense aircraft. However, core capital goods orders excluding aircraft slipped 0.3%, suggesting business investment remained cautious amid tariff uncertainty.
Fourth-quarter GDP was revised upward to a 2.4% annualized pace from 2.3%. Net trade contributed positively, driven by a sharper decline in imports. Personal consumption rose by 4%, while fixed investment contracted less than anticipated. Residential investment expanded by 5.5%.
Initial claims fell by 1,000 to 224,000, while continuing claims declined by 25,000. Fewer government program claims indicate that many laid-off workers are still covered by severance arrangements and have yet to file for unemployment.
The UK economy grew 0.1% in the fourth quarter, matching previous estimates. Services and construction expanded, while manufacturing contracted. Household consumption and public sector spending both posted modest gains.
Core PCE inflation rose 0.4% month-over-month and 2.8% year-over-year in February, exceeding expectations and reinforcing concerns about sticky inflation.
US equities were mixed for the week. The Dow Jones Industrial Average rose by 0.75%, while the S&P 500 slipped 0.2%, and the Nasdaq remained flat. Among tech stocks, Apple, Amazon, and Meta posted gains of around 4%, while Nvidia declined by a similar margin.
Markets opened the week cautiously as investors braced for President Trump’s upcoming tariff announcement.
Detail Markets Volatile as Global Trade Tensions Escalate (03.28.2025)Financial markets turned cautious on Friday as global trade tensions intensified following the U.S. administration’s announcement of sweeping new tariffs on imported vehicles.
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