ECB Interest Rates, U.S. Jobless Claims, U.S. Trade Balance

The US dollar fell once against most major currencies on Wednesday, with the USDX down by another 1.18% to hit levels last seen in November. The U.S president offered a one-month exemption for automakers to its recently imposed tariffs on Canadian and Mexican goods. This could raise hopes that agricultural products might also receive similar treatment. This shift in policy sparked a wave of optimism, fuelling speculation that the US tariff agenda wouldn't be as aggressive as initially feared.

Wall Street sentiment was somewhat positive on Wednesday as investors grew optimistic about potential tariff negotiations with the U.S. administration. This positive sentiment was bolstered by the White House's announcement of a one-month exemption from the 25% tariffs on vehicle imports from Mexico and Canada, providing some relief to global markets. This shift in policy was followed by a recovery in U.S. markets, with the US 500 closing 0.19% higher, the US 30 rising by 0.33%, and the US Tech 100 gaining 0.13%, all following previous sessions of sharp losses.

Corporate news highlighted a strong performance in the automotive sector, where General Motors, Ford, and Stellantis shares surged by 7.16%, 5.7%, and 6.07%, respectively. Looking ahead, the focus shifts to today's earnings reports, with investors anticipating quarterly results from Broadcom, Costco, and Merck.

Thursday's market attention will center on the ECB meeting, where another interest rate cut is widely anticipated. Over the past nine months, the ECB has aggressively lowered borrowing costs in response to declining inflation and sluggish economic growth, implementing five rate reductions since June. The market has already factored in a further 25 basis point decrease in the deposit rate, bringing it to 2.5%. Consequently, investors will closely watch ECB President Christine Lagarde's post-decision remarks, seeking further clarity.

Some price action could also be observed upon the release of the weekly jobless claims and the U.S. trade balance due later in the day as well as the Non-Farm Payrolls, U.S. unemployment rate and a speech by Fed Chairman Powell due on Friday.

EUR/USD

The EUR/USD surged more than 1.60% on Wednesday, approaching the 1.0800 level, as market sentiment improved following another shift in US President Donald Trump’s tariff strategy. Trump opted to delay automotive sector tariffs, reducing fears of escalating trade tensions.

Meanwhile, the European Central Bank (ECB) is expected to cut interest rates by 25 basis points on Thursday, bringing the Main Refinancing Rate to 2.65% and the Deposit Facility Rate to 2.5%. Despite sluggish economic growth in the Eurozone, rate traders have lowered expectations for further cuts this year due to persistent inflation.

In the US, the ADP Employment Change for February showed just 77K new jobs, missing the 140K forecast. However, since 2022, ADP data has been an unreliable predictor of Nonfarm Payrolls. Markets now await Friday’s NFP report, with expectations of 160K job additions in February.

Gold

Gold prices remained firm on Wednesday, as speculation swirled that US President Donald Trump may roll back some tariffs, particularly on automobiles linked to the USMCA trade deal. However, uncertainty persists, keeping bullion prices in a tight range.

The Federal Reserve’s Beige Book highlighted modest economic growth but rising prices, reinforcing inflation concerns amid ongoing trade policies. Meanwhile, ADP data showed a sharp slowdown in private hiring for February, though the ISM Services PMI indicated continued business expansion.

Bitcoin

Bitcoin extended its rebound on Wednesday, surging 3.80%, amid growing speculation about U.S. President Donald Trump’s plans for a strategic crypto reserve ahead of a White House summit. Risk appetite was also boosted by Trump’s partial tariff concessions for Canada and Mexico, though trade tensions with China remained.

Despite last week’s dip below $80,000 due to concerns over slowing U.S. growth and trade uncertainties, Bitcoin has regained momentum, tracking a broader recovery in global markets.

U.S. Commerce Secretary Howard Lutnick confirmed that Trump will unveil details of the Bitcoin reserve at Friday’s summit, alongside plans for crypto regulation. The U.S. President has identified Bitcoin, Ether, Solana, Cardano, and XRP as reserve candidates, but uncertainty lingers over whether it will be formed through executive order or Congress.

WTI Oil

Oil prices fell for the fourth consecutive session on Wednesday, pressured by a larger-than-expected rise in U.S. crude stockpiles and concerns over OPEC+’s decision to increase output in April.

Earlier in the session, Brent hit its lowest level since December 2021, and WTI touched its weakest since May 2023, before recovering slightly after U.S. Commerce Secretary Howard Lutnick suggested potential tariff relief on Canadian energy imports. However, Trump’s 25% tariffs on Canada and Mexico remain in place.

Adding pressure, U.S. crude inventories surged by 3.6 million barrels, far exceeding forecasts. Meanwhile, Canada, China, and Mexico retaliated against U.S. tariffs, raising concerns over slower economic growth and weaker oil demand.

OPEC+ will increase output by 138,000 barrels per day from April, the first step in gradually reversing nearly 6 million bpd of production cuts. Markets remain cautious amid uncertain demand outlooks.

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