Dispute Between US and Ukraine Leaders, Euro Under Pressure
Last Friday (March 1), during a meeting at the White House, a heated argument broke out between Ukrainian President Zelensky and US President Trump, drastically lowering the market's expectations for a Russian-Ukrainian peace agreement, leading to a significant decline in the euro. After the talks, Zelensky left the White House early and did not sign the planned US-Ukraine joint resource development agreement.
Market analysts pointed out that this conflict has increased global political uncertainty, heightening investor risk aversion. "The market is currently driven by multiple uncertainties, and the US-Ukraine disagreement adds additional instability. Previously, there was hope for a possible truce between Russia and Ukraine, but that hope may now be shelved."
As a result, the euro rapidly fell after the meeting, at one point dropping to $1.0359 in intraday trading, reaching its lowest level since February 12. It closed at $1.0367 in the New York market, with a daily decline of 0.29%.
Dollar Volatile Upward, Market Focuses on Fed Policy
Although the dollar weakened initially in early trading last Friday, it was boosted by the latest economic data and market risk aversion, closing up by 0.23% at 107.61. Last week, the dollar gained 0.9%, but it still fell by 0.8% overall in February, marking the largest monthly decline since September last year.
The US recently released its January Personal Consumption Expenditure (PCE) price index, which rose 0.3% month-on-month, with a year-on-year increase of 2.5%, aligning with market expectations and lower than December's 2.6%. However, consumer spending, which accounts for more than two-thirds of the US economy, unexpectedly fell by 0.2%, while December data was revised up to show 0.8% growth. This data raised concerns about economic growth slowing while reinforcing expectations of a Federal Reserve rate cut.
According to the CME FedWatch Tool data, the market now expects a 79.1% probability that the Fed will cut rates by at least 25 basis points at its June meeting, up from 70% the previous trading day.
Main Currency Movements: Pressure on CAD and Peso, Yen Volatility Increases
Against the backdrop of a stronger dollar, other major currencies fell. The Canadian dollar fell 0.14% against the US dollar, trading at 1.45 CAD; the Mexican peso fell 0.3% against the US dollar, trading at 20.557 pesos.
The dollar rose 0.53% against the yen, trading at 150.59, although it has cumulatively fallen nearly 3% against the yen this month. Investors widely expect the Bank of Japan to raise rates this year, making the yen relatively strong. The British pound fell 0.23% against the dollar, trading at $1.2568, with its movements mainly influenced by the UK's economic outlook and expectations of the Bank of England's policy.
Market Outlook: Geopolitics and Fed Policy to Dominate Market
Recently, the dispute between US and Ukrainian leaders has further intensified global market uncertainty, with investors closely monitoring the future developments of the Russia-Ukraine conflict. Additionally, changes in Fed monetary policy will continue to dominate market sentiment, particularly the focus on whether or not there will be a rate cut in June.
In the short term, market sentiment will continue to be influenced by risk aversion demand, with the dollar index possibly remaining volatile, while the volatility of risk assets like the euro may increase. Over the coming weeks, investors need to closely watch US-Ukraine relations, OPEC+ energy policies, and various central banks’ monetary policy dynamics to assess further market directions.
