As we close out another eventful week, major currencies have traded in wide ranges, with shifting sentiment driving volatility.

Market Overview

• EUR/USD: Up 0.4%, boosted by reports of a German debt agreement.
• GBP/USD:Flat to down 0.05%, pressured by weak UK GDP data.
• USD/CAD:Down 0.2%, reflecting improved trade sentiment.
• USD/MXN:Lower by 0.6%, as the Mexican peso outperforms on the day.

Key Drivers:German Debt Agreement Lifts Euro

• The euro surged to session highs following reports that German political parties reached an agreement on a debt package.
• This early-session strength has helped push EUR/USD higher, making it the strongest performer of the morning.

Sterling Struggles on Weak UK GDP

• The UK economy unexpectedly shrank in January, with GDP contracting by 0.1%.
• Weakness in manufacturing and construction contributed to the decline.
• Sterling has backed off in response, trading slightly lower on the day.

Tariffs & Trade: Mixed Signals

• USD/MXN remains stable, as Mexico has kept a relatively quiet stance on tariff retaliation, helping support sentiment.
• Canadian-U.S. trade tensions may be easing, as reports suggest positive discussions between Canadian delegates and U.S. officials.
• However, fresh tariff concerns are emerging, with the U.S. threatening a 200% tariff on beverage products from Europe as part of retaliatory measures.
• These ongoing tariff and trade uncertainties are fueling intraday market volatility across multiple asset classes.

Looking Ahead: University of Michigan Sentiment Data

• Today’s key data release is the University of Michigan Consumer Sentiment Index, due later this morning.
• A quiet day on the economic front otherwise, with markets likely to focus on trade-related headlines heading into the weekend.

With tariff concerns, economic data surprises, and shifting sentiment, markets remain highly reactive. Traders will be closely watching for any last-minute headlines that could impact market direction before the weekend.