The US "big thunder" is about to detonate, and the US-European trade war begins

On Wednesday, the US dollar index rose slightly with the U.S. Treasury yield, after it fell for a while after the U.S. released inflation data. As tariff concerns continue to sweep the entire market, traders continue to focus on the risks facing economic growth and inflation.

The dollar index (DXY), which tracks the dollar against six major currencies, rose 0.14% to 103.59, ending its seven consecutive trading days of decline. It fell to an intraday low after the release of US CPI data.

U.S. President Trump's unpredictability on tariff issues has put the negotiations between the United States and trading partners in a deadlock, further deepening investor uncertainty.

The EU threatens to impose counter-tariffs on U.S. goods worth 26 billion euros next month in response to Trump's avatradescn.comprehensive tariffs on steel and aluminum imports. In response, Trump threatened to fight back.

The U.S. Consumer Price Index (CPI) rose 2.8% year-on-year in February, slightly lower than expected 2.9% and lower than 3.0% in January. Excluding the volatile food and energy prices, the core CPI year-on-year growth rate fell to 3.1% from 3.3% in January.

KlarityFX Executive Director Amarjit Sahota said: "The core focus of the market is still the trade war, not only limited to North American trading partners, but also involves Europe and China."

Asian Market

Bank of Japan Governor Kazuo Ueda talked aboutThe recent rise in bond yields and noted that "I have not seen a big difference between our views and the market's views."

Ueda emphasized in his speech at Congress that the "big determinant" of long-term interest rates is the market's expectations of the central bank's short-term policy interest rates.

He added that “it is natural for long-term interest rates to change in a way that reflects such market forecasts.” His avatradescn.comments avatradescn.come as Japan's benchmark 10-year bond yield surged to a 16-year high of 1.575% on Monday.

In addition, Japan's latest inflation data showed that the annual wholesale inflation rate slowed slightly in February. The avatradescn.commodity price index of enterprises that tracks the prices of goods and services charged by enterprises rose by 4.0% year-on-year, in line with market expectations, lower than the year-on-year increase of 4.2% in January.

European Market

ECB President Christine Lagarde emphasized the “exceptionally high” level of global uncertainty in his speech yesterday, highlighting the challenges posed by shifts in trade policy and geopolitical tensions.

She noted that the index measuring uncertainty in trade policy is currently close to 350, more than six times the average since 2021. Geopolitical risk indicators are at the highest level since the Cold War, except during wartime and major terrorist attacks.

In this context, Lagarde stressed that the main focus of the ECB remains to maintain price stability in the medium term, and stressed that this avatradescn.commitment is “more important than ever” in an unpredictable economic environment.

To achieve this, Lagarde stressed the need to “flexibly respond to new shocks” while maintaining a structured policy framework to prevent “short-sighted responses and unbridled discretion.”

She also pointed out the importance of avatradescn.combining agility with clarity and said that while the ECB may not always be able to determine the exact path to interest rates, it ensures “our response function is clear.”

U.S. market

The Bank of Canada generally expects a 25 basis point rate cut, bringing the overnight interest rate to 2.75%. The Bank of Canada stressed in its statement that rapidly developing trade policies are injecting "more uncertainty than usual" into the economic outlook.

The central bank acknowledged that escalating trade tensions and new U.S. tariffs could curb economic growth while increasing inflationary pressures. It stressed that monetary policy “cannot offset the impact of the trade war.”

Nevertheless, the Bank of Canada notes that it is avatradescn.committed to preventing rising prices from driving sustained inflation. Members of the Management avatradescn.committee will carefully monitor downward pressure on inflation by weak economic growth and upward pressures caused by increased costs associated with tariffs and other trade barriers.

U.S. consumer inflation slowed more than expected in February. Overall CPI rose only 0.2% month-on-month, lower than the expectation of 0.3%. The core CPI, which excludes food and energy, also rose 0.2% month-on-month, lower than expected 0.3%.

On the year-on-year calculation, inflation fell from 3.0% in January to 2.8%. The core CPI fell from 3.3% year-on-year to 3.1%, the lowest level since April 2021. The slowdown in price pressure shows that deflation momentum is gradually recovering after months of high core readings.

The above content is all about "[Ava Ava Foreign Exchange Market Review]: The "big thunder" in the United States is about to explode, and the US-European trade war begins". It is carefully avatradescn.compiled and edited by the Avatrade Foreign Exchange editor. I hope it will be helpful to your transactions! Thanks for the support!

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