US Dollar Rises Early Friday Before Personal Income, Spending, Prices, Advance Trade Data

rallied Thursday as United States President Donald Trump outlined a tariff schedule that explicitly includes duties on Canada and Mexico from next Tuesday, said ING.

The pair is currently embedding around 2% of risk premium, according to the bank's short-term fair value model. That is above the 1.5 standard deviation, but still well below the nearly 4% peak risk premium that was embedded in on Feb. 3.

Back then, ING published a note to discuss its view on the Canadian dollar (CAD or loonie) under the assumption that 25% tariffs would go ahead. Most of those considerations stand, and depending on how long tariffs remain in place, a move to 1.50 is a definite possibility, stated the bank.

The difference this time is that markets are treating Trump's tariff threat with more skepticism, refusing to price in the full tariff effect and partly betting on another last-minute deal, pointed out ING.

The bank still sees upside risks to on Friday unless there are any reports of a de-escalation. ING sees 1.45 as the level that would mark a shift to markets pricing in the tariff risk as a base case.

If duties are levied on Tuesday, then ING will look at 1.480 as the key resistance to be tested.

The continued forceful tariff threat by the United States has been a wake-up call for , said ING.

The bank noted that it had never argued that a global trade war had been fully factored into global foreign exchange markets and retained a view that could move to the 1.00/1.02 area in Q2 if tariffs come in more broadly and the European Central Bank cuts the deposit rate to 1.75%.

Any news of Canada and Mexico cutting a deal with the U.S. could see Thursday's losses turning around, stated ING. However, for the time being, the threat of tariffs and their impact on global growth is euro negative. The bank expects investors to be adopting more defensive positions into next Tuesday's event risk. U.S. tariffs against Canada, Mexico and China are slated to be implemented on Tuesday.

Friday's eurozone calendar is focused on the German consumer price index, some final gross domestic product readings and a European Central Bank survey of inflation expectations.

The bank sees a short-term window for to move lower and thinks that 1.0400/0420 intra-day resistance can hold and a move below 1.0370 opens up 1.0330 and potentially even 1.0280 ahead of next Tuesday.

The continued measure of United Kingdom Prime Minister Keir Starmer's relatively warm relationship with President Donald Trump can be marked by the fact that when tariff noise picks up, trades lower, pointed out ING. Whether the U.K. and the U.S. can secure a new trade deal remains to be seen, but certainly, the U.K. is less exposed to tariffs than its European counterparts, ING said.

It's hard to argue against testing major lows at 0.8225 next week, added the bank.

ING is bearish on , however. Later in March, the refocus on the domestic U.K. story — and probable government spending cuts — could send all the way back to 1.22/23.

Societe Generale in its early Friday economic news summary pointed out:

— Risk-off led by United States Tech, tariff escalation. Nvidia in bear market, U.S. two-year approaches 4.0%, support 10s 4.20%/4.15%. Bund 10-year support 2.35%. offered below 1.04, USD/CNH skips above 7.30.

— The U.S. raises tariffs by an additional 10% on China, 25% on Canada and Mexico effective next Tuesday — energy imports taxed at 10%. U.S./United Kingdom working on trade agreement, President Trump says tariffs wouldn't be necessary.

— France's HICP slows to 0.9% year over year in February from +1.8% in January, below forecast. The consumer price index services moderate to 2.1% year over year.

— Tokyo's CPI slows to 2.9% year over year in February from 3.4%. Core CPI moderates to 2.2% from 2.5% on electricity and natural gas subsidies.

— Day ahead: Trump/ Ukraine President Zelensky to sign minerals deals at 5 p.m. CET. France ratings update after market close (S&P, AA-). U.S. PCE, SocGen forecast headline +0.3%, core +0.2%. Italy, Germany CPI, European Central Bank one- and three-year CPI expectations. Canada and India Q4 gross domestic product.

— Nikkei -2.9%, EUR 10-year IRS -3bps at 2.32%, Brent crude -0.9% at $73.4/barrel, Gold -0.8% at $2,860/oz.

The euro weakened below $1.04, touching its lowest level since February 12th, as investors assessed economic data ahead of next week’s European Central Bank policy meeting and reacted to US President Donald Trump announcing that a 25% tariff on Mexican and Canadian goods will take effect Tuesday, along with an additional 10% duty on Chinese imports.

Trump also plans to impose a 25% tariff on EU imports, including cars and other goods.

On the economic front, France’s inflation rate dropped more than expected to a four-year low of 0.8% in February, while regional German data indicated easing inflationary pressures.

Meanwhile, inflation in both Italy and Spain accelerated to 1.7% and 3%, respectively, in line with expectations.

The ECB is widely expected to cut interest rates for a fifth consecutive time on Thursday and signal further reductions amid slowing inflation and weak economic growth.

The U.S. dollar will likely strengthen further if President Trump's latest tariff threats materialize, says Chang Wei Liang of DBS. The DXY U.S. dollar index surged past 107 overnight after the President Trump said the planned 25% tariffs on imports from Canada and Mexico will take effect on March 4, along with another 10% levy on Chinese goods. Both the Canadian dollar and the Mexican peso weakened against the greenback, though Chang notes that their declines weren't significantly larger than those of other currencies. "Trump's inconsistent messaging on the timing of tariff implementation and conditionalities around them have made markets more reluctant to position aggressively to these threats," the forex and credit strategist says. The DXY dollar index rises 0.1% to 107.37. USD/CAD is flat at 1.4437; USD/MXN is 0.1% lower at 20.4310, according to LSEG. (farah.elias@wsj.com)

The British pound changed hands at $1.26 on Friday, trading just below a more than two-month high hit above $1.27 on February 26, as investors weighed upcoming US tariffs and Bank of England (BoE) policy signals.

President Trump confirmed 25% tariffs on imports from Mexico and Canada, along with a 10% duty on Chinese goods, will take effect next week.

However, he suggested a potential tariff-free trade deal with the UK and hinted at new levies on the EU. The pound remains supported by expectations that the BoE will cut rates less aggressively than other central banks.

Markets are pricing in 59 basis points of BoE rate cuts for 2025.

BoE Deputy Governor Dave Ramsden, speaking in South Africa, highlighted uncertainty around the UK labor market and global risks.

While he remains cautious about rapid policy easing, he acknowledged the need for flexibility, stating that the pace of rate cuts may "quicken" if conditions warrant.