Forexlive Americas FX news wrap 5 Mar: Tariff reprieve possible.EUR moves higher.USD lower

• New RBNZ Governor Hawkesby: We will never get it exactly right on policy
• BofA: FX positioning shifts—USD longs Cut, JPY and EUR positions increase
• Crude oil settles $1.95 lower at $66.31
• Beige Book: Economic activity ‘rose slightly’ since mid-January
• White House says Trump is open to hearing about additional tariff exemptions
• Lutnick: There is going to be a short period of time where there are high prices on items
• Trump posts about Canada, says call with Trudeau ended in ‘somewhat’ friendly matter
• Former Morgan Stanley Michael Grimes expected to lead US Sovereign Wealth Fund
• US weighs one-month delay of Canada-Mexico tariffs on autos
• NY Fed report shows rapidly rising inflation expectations among businesses this year
• European close: Germany jumps, erasing yesterday’s decline
• EIA weekly US crude oil inventories +3614K vs +341K expected
• WTI crude oil falls below $66 for the first time since September
• The 200-day moving averages are in play for both the S&P and the Nasdaq indices
• BOE’s Bailey: I think it’s less-likely we get second-round effects due to a soft economy
• US factory orders for January 1.7% versus 1.6% expected
• US February ISM services 53.5 vs 52.6 expected
• US February S&P Global final services index 51.0 vs 49.7 prelim
• BOE’s Greene: It’s less likely that persistent inflation will fall on its own
• Canada Q4 labor productivity +0.6% vs -0.4% prior
• Lutnick: Some April 2 tariffs will be right away, others will a month or two
• ADP February US employment +77K vs +140K expected
• Kickstart the FX trading day with a technical look at EURUSD, USDJPY and GBPUSD

The USD moved lower with the EURUSD reaching a 4-month high after moving above its 200 day MA for the first time since November 6. The EUR was the strongest of the major currencies today with solid gains vs all the major currencies:

• USD, +1.53%
• JPY, +0.97%
• GBP 0.77%
• CHF +1.72%
• AUD +0.56^
• CAD +1.28%
• NZD +0.45%

The USD was one of the weakest with declines vs all the major currencies with the exception of the CHF:

• EUR -1.53%
• JPY, -0.54%
• GBP -0.77%
• CHF +0.21%
• CAD -0.32%
• AUD -1.02%
• NZD -1.12%

In Europe, the markets are cheering on the unity and realization that austerity has it’s limits. With risk from Russia and the relations with the US defense support supposedly on the decline, Germany’s incoming Chancellor Friedrich Merz has proposed a plan to ensure sustained defense funding. Specifically, he reached an agreement with the center-left SPD to exempt defense spending above 1% of GDP from Germany’s constitutional balanced-budget rule. This move would secure military funding beyond 2027.

Merz’s plan signals a willingness to borrow significantly for defense, despite previously campaigning on fiscal responsibility. However, to secure the deal, he conceded to €500 billion in public-works spending over 10 years, a major win for the SPD. With coalition negotiations ongoing, it remains uncertain whether he can offset costs through welfare reforms.

In other news in the US session:

• ADP employment rose 77K vs 140K estimate. The data does not include public sector employment changes which is weakening due to the DOGE cuts. Friday, the BLS data will be released with Non Farm payroll estimated at 159K.
• US S&P Global PMI services came in stronger than the preliminary at 51.0 vs 49.7. The composite imprived to 51.6 vs 50.4 preliminary but was lower than last month at 52.7
• The ISM services PMI came in at 53.5 vs 52.6 last month. Employment improved to 53.0 vs 52.3. New orders also improved to 52.2 vs 51.3 but prices paid moved higher to 62.6 vs 60.4 last month.
• Factory orders (and Durable goods orders (final) were marginally better than expectations.

Tariff fears continued today, but reports of a potential 1-month reprieve from tariffs helped to give stocks a boost. There were other reports of a call between Trump and Canada PM Trudeau which took some of the fear away from the markets.

Later in the afternoon, the Federal reserve released the Beige Book of economic trends in the economy. The anecdotal report sees slight economic growth since mid-January, with six districts unchanged, four showing modest growth, and two contracting. Consumer spending was weak, with strong demand for essentials but price sensitivity for discretionary items. Manufacturing saw slight gains, though tariff concerns weighed on sentiment. Banking was mixed, residential real estate faced inventory constraints, and construction declined modestly, partly due to tariff concerns on materials. Agriculture weakened in some districts.

In the labor market, employment rose slightly, with job growth in healthcare and finance but declines in manufacturing and transport. Labor supply improved, but immigration uncertainty raised concerns. Wage growth slowed, with easing wage pressures in several districts.

Prices rose moderately, though some districts saw an acceleration. Input costs remained high, especially in manufacturing and construction, while food and transportation costs also increased. Many firms struggled to pass costs to consumers, but tariff concerns led some to raise prices preemptively.

IN other markets today, the US stock market closed higher led by the Nasdaq index. The index opened and was trading below its 200-day MA at 18385.97 for the morning. However, hope from tariff postponements helped to push indices higher and the price back above the key 200 day MA. Staying above that MA will be needed to give the buyers hope.The Nasdaq closed up 1.46%

For the S&P, it tried to work it’s way to its 200 day MA at 5728.56, but bottomed at 5742 and closed up 1.12% at 5842.63. The Dow closed up 485 points or 1.14% at 43006.59.

In the US debt market, the yields were dragged higher by higher European rated. The US 10 year rose 6.9 basis points to 4.278%, but that paled in comparison to the European ratas which saw:

• Germany 29.3 basis points
• France of 26.1 basis points
• Spain up 24.8 basis points
• Italy up 27.5 basis points

European stock indices also rose sharply:

• German DAX +3.38%
• France’s CAC +1.56%
• Spain’s Ibex +1.40%
• Italy’s FTSE MIB +2.08%

This article was written by Greg Michalowski at www.forexlive.com.