North American Summary and Highlights 3 March

North American session

EUR/USD and GBP/USD extended gains on expectations of higher defence spending, EUR/USD briefly touching above 1.05 and GBP/USD moving above 1.27. USD/JPY saw early gains above 151 but fell back to 150.20 by midday. The reversal was assisted by ISM manufacturing data which while near consensus on the headline at 50.3 showed weakness in the detail, particularly new orders at 48.6. This was despite a rise in prices paid to 62.4, the highest since June 2022. 

Late comments from Trump that 25% tariffs on Canada and Mexico would be implemented as scheduled on Tuesday sent USD/CAD, which had earlier seen a brief move below 1.44, well above 1.45.  This sent equities, already hit by the ISM data, sharply lower, and USD/JPY plunged to a low of 149.10. AUD/USD, which had previously seen highs above .6250, fell to near .62. EUR/USD and GBP/USD saw only a modest reaction to the announcement, edging off their highs but remaining well up on the day.    

European morning session 

A choppy session saw initial JPY gains followed by EUR gains and JPY losses. USD/JPY initially traded down to 150 from an open around 150.50 but then moved back up to 150.90. EUR/USD traded lower from 1.04 to 1.0390 but then moved up strongly to 1.0445. GBP was the strongest performer on the morning, with EUR/GBP edging lower to 0.8255. The CHF followed a similar trajectory to the JPY, with EUR/CHF initially dropping from 0.9390 to 0.9370 before bouncing to 0.9420 by the end of the morning. 

These moves in JPY and CHF crosses reflected similar action in equity indices, which initially dipped lower but finished the session higher. Data was generally on the strong side, with Eurozone CPI data coming in above consensus at 2.4% y/y despite the weaker French CPI data released last week. UK money data was also on the strong side, with lending and M3 data both above expectations. There were also modest upward revisions in manufacturing PMIs in both the Eurozone and the UK.