Tariffs are back in focus after President Trump announced plans to impose 25% tariffs on car, semiconductor, and medicine imports by April 2nd. This adds to an already packed tariff calendar:

• Reciprocal tariff investigations due by early April
• Steel and aluminum tariffs set for March 12th
• Tariff delays on Canada and Mexico expiring March 4th

With these upcoming deadlines, market participants are closely monitoring how trade policy evolves.

Market Overview

Despite the renewed focus on tariffs, the dollar remains firm but trading relatively quietly across G10 currencies:

• EUR/USD: Down 0.12%, showing mild dollar strength.
• GBP/USD: Off 0.15%, after a hotter-than-expected UK inflation print.
• USD/CAD: Flat, up 0.03%, as markets digest Canada’s latest CPI data.
• USD/JPY: The exception, with the yen gaining 0.2%, signaling some risk aversion.

Key Economic Data: UK & Canada CPI

UK Inflation Surprises to the Upside:

January CPI rose to 3% (vs. 2.8% expected), up from 2.5% in December. This unexpected jump may weigh on rate-cut expectations from the Bank of England.

Canada CPI Edges Higher:

January CPI increased 0.1%, bringing annual inflation to 1.9% (up from 1.8% in December). Bank of Canada Decision - March 12: Economists remain split between a rate cut and a pause. If tariffs escalate, Canada may loosen credit conditions, making a rate cut more likely.

FOMC Minutes & Fed Policy Outlook

The FOMC minutes from the January meeting will be closely watched today. The Fed kept rates unchanged, and Powell’s press conference highlighted three key takeaways:

1. Current policy is still restrictive – meaning the Fed does not believe it has over-tightened yet.
2. The Fed is in no rush to cut rates, especially without clear guidance on trade policy from the White House.
3. If inflation continues to ease, the Fed may eventually consider cuts, but the bar for action remains high.

Market Sentiment & Uncertainty

Despite strong market moves over the past few months, traders are taking a more cautious stance as tariff policies, inflation, and interest rates remain uncertain. Volatility has eased, with many market participants waiting for clarity before making major moves.

Conclusion

While tariff tensions and inflation surprises are shaping the narrative, central banks remain in a holding pattern, awaiting clearer signals. The Fed, Bank of Canada, and Bank of England all face policy dilemmas that could shift market direction in the coming weeks. For now, caution dominates as markets digest economic data and policy risks.