Last Friday, the slightly inferior non-farm data continued to support the Fed's expectations of multiple rate cuts this year. The US dollar index fell for five consecutive days, hitting a four-month low. As of now, the US dollar is quoted at 103.86.
Non-farm-US non-farm employment in February was 151,000, slightly lower than market expectations, and the unemployment rate was 4.1%, the highest since November 2024. After the data was released, traders no longer bet on the Fed's rate cut in May, and now expect to wait until June to resume rate cuts, but still expect the Fed to cut interest rates by about 75 basis points this year.
Fed-Powell: No rush to cut interest rates before the impact of Trump's policies becomes clearer; the impact of tariffs this time may be different; will not overreact to one or two economic data that are higher or lower than expected. The zero interest rate lower bound may no longer be the baseline, and what is important is long-term inflation expectations. Trump: The Fed's vice chairman for supervision will be appointed soon.
US trade policy-Trump will reduce the potash fertilizer tax rate on Canada and Mexico from 25% to 10%. The United States will impose new tariffs on Canadian lumber and dairy products. The tariffs will be fully implemented on April 2, and the tariffs may rise over time. US Secretary of Commerce: India's tariff policy should be reduced; Trump will not ease up on tariffs related to medicines.
Russia-Ukraine situation-The Russian army said it has switched to a full-scale offensive in Kursk Oblast, and the enemy is abandoning its position. Trump: I think Zelensky will sign a resource agreement. The United States has been reported to have notified its allies: it plans to stop participating in the planning of future military exercises in Europe after 2025. Musk said he would not cut off Starlink service to Ukraine. British media said the EU is ready to allow Ukraine to enter the single market in a peace agreement. Trump: Consider imposing large-scale sanctions and tariffs on Russia until a ceasefire. It is reported that Putin responded positively to Trump's ceasefire call for the first time and is willing to agree to a ceasefire under certain conditions. Later, other news came that the US government is studying to relax sanctions on Russia's energy industry.
Middle East situation-Israel will send a delegation to Qatar on March 10 to promote ceasefire negotiations in Gaza. Hamas called for the immediate start of the second phase of ceasefire negotiations. The leader of the Yemeni Houthi organization said on the 7th: If Israel still prevents relief supplies from entering Gaza after four days, it will resume maritime operations against Israel. Trump: Very interesting things will happen in Iran in the next few days. The United States urged Iran to negotiate with the United States on the nuclear issue, otherwise it may face military action. Iran's Supreme Leader Khamenei: Tehran will never accept demands to reduce Iran's nuclear program.
U.S. Treasury Secretary Bensont: Strong dollar policy has not changed; the agreement with Ukraine is still changing; will observe the progress of any future Bitcoin acquisitions.
In the early hours of Sunday, the U.S. Secret Service shot and killed a man with a gun near the White House. Trump was not in the White House at the time.
The leaders of the German CDU/CSU and SPD said they had completed preliminary negotiations to form a coalition government.
The Federal Reserve recently expressed concerns that the slowdown in inflation was not as large as expected. The data may continue to reflect this, especially given evidence that the prospect of tariffs has led to price increases. "Business surveys suggest some companies are preempting tariffs by raising prices," ING economists said in a note. "Food prices have also been rising, while energy prices could further fuel inflation." Nevertheless, the data may have limited impact on U.S. interest rate expectations amid growing concerns about the impact of Trump's policies, especially tariffs, on the economy. "In an environment of government tightening, markets currently appear more focused on growth concerns and the threat that spending power could be squeezed if prices do respond to tariffs," ING said. U.S. money markets currently expect the Federal Reserve to cut rates three times this year, by 25 basis points each. ING believes that "a month-on-month increase in inflation of 0.3% is unlikely to change this situation." As doubts about the strength of the U.S. economy begin to grow, the University of Michigan's preliminary March consumer survey, released on Friday, March 14, may also be important in gauging confidence amid tariff uncertainty and government sector layoffs.
We expect the dollar index to continue to be sold off, and the market sees the euro as an increasingly viable "dollar alternative", making the dollar more sensitive to negative shocks from the United States.
We extend the euro's long target against the dollar from 1.08 to 1.12. For investors, European fiscal news makes the euro a clear and credible investment option outside the dollar. If the euro is technically overbought against the dollar, it will increase the risk of consolidation in the recent correction to the low of 1.0630, but we believe that investors will actively buy on dips.
The existence of clearer dollar alternatives makes the dollar more vulnerable and sensitive to US shocks; slowing US economic data and fiscal consolidation are one of the risks. The strengthening euro boosted other European currencies, and we extended the long target of GBP/USD to 1.33.
Powell brought a sense of calm to a market that has been volatile. He said the economy is in good shape and inflation remains anchored. What Powell did today was to give the market a direction, which has been lacking important direction due to the Trump administration's back-and-forth on tariffs. His calmness and composure are much better than the Trump administration's tough tone around tariffs, government efficiency departments, and government spending. Investors are looking for something that will give them a better understanding of the situation. The picture that Powell painted is very clear, the uncertainty of tariffs is real, and the market may react violently to the news, but the impact on the economy may be much smaller. The market is more worried about the economic impact that tariffs may cause rather than fewer rate cuts. Investors find comfort in Powell's belief that the economy is in good shape.
The report showed an increase of 151,000 jobs, slightly lower than the expected 160,000. This is a moderate slowdown, not a major slowdown. The unemployment rate rose slightly to 4.1%, but it is not worrying. However, the downward revision to the previous report shows that job growth is weaker than initially expected. In other words, the economy is still adding jobs, but not as fast as before.
Although the overall data does not foreshadow an economic downturn, some subtle changes suggest that the job market may be weakening under the surface. 1. Fewer and fewer people are participating in the labor market. A decline in the labor force participation rate means that fewer people are actively looking for work. If people stop searching, they will not be counted as unemployed even if they are not working. 2. Fewer working hours = less income. When companies reduce working hours rather than lay off employees, it is an early warning sign of slowing economic activity. Fewer jobs means lower take-home pay, which reduces spending power.
A large part of the job growth came from state and local government hiring, which added 11,000 jobs. However, the federal government actually cut 6,700 jobs. A major problem here is that many state and local government positions were funded by stimulus funds during the COVID-19 pandemic. Now that these funds have run out, it is uncertain whether these jobs can be saved in the future.
1. The layoffs announced in recent months have not yet fully shown up in the data. Layoffs usually take time to be reflected in official data. Some major layoffs announced earlier this year may not appear in the report until the next few months.
2. Hiring is slowing in some industries. Many industries, including technology, retail and financial services, are hiring less. While they aren't necessarily actively laying off workers, they are hiring fewer people, which is gradually weakening job growth.
3. One major source of new workers - immigration - has slowed. In the past, the influx of workers helped offset the impact of a slowing economy, but that trend has changed.