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At 15:38 GMT, U.S. Dollar Index Futures are trading 106.300, down 0.256 or -0.24%.
Euro Surges on Rate Differentials and Ukraine Developments
The euro climbed 0.89% to $1.0468, extending gains after a stronger-than-expected inflation report and narrowing yield spreads between the U.S. and eurozone bonds. The latest Eurostat data showed consumer price inflation in the euro area at 2.4% year-on-year in February, slightly above the 2.3% forecast but inching closer to the ECB’s 2% target.
Geopolitical developments also provided support for the euro. Hopes for a Ukraine peace deal gained traction after European leaders proposed a plan to present to Washington, which lifted investor sentiment. Meanwhile, reports that Germany may establish new defense and infrastructure funds worth hundreds of billions of euros further boosted optimism about future growth prospects in the region.
Tariffs Hit the Canadian Dollar and Mexican Peso
The Canadian dollar and Mexican peso both fell to one-month lows following Trump’s announcement that 25% tariffs would take effect on Tuesday. The U.S. dollar rose 0.4% against the loonie to 1.4523 and gained 0.9% against the peso to 20.7165.
Despite the sharp initial reaction, analysts noted that the sell-off in both currencies was relatively modest given the scale of the tariffs. Hopes remain that negotiations could lead to an eventual resolution, limiting prolonged damage to trade relations. However, Canada and Mexico have already announced retaliatory measures, which could escalate tensions further.
Weak U.S. Data and Falling Yields Pressure the Dollar
Concerns about the impact of tariffs on the U.S. economy were reinforced by weak economic data. The ISM manufacturing PMI for February came in at 50.3, below expectations and lower than January’s 50.9 reading, signaling softer growth momentum.
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