KUWAIT: The US Dollar Index (DXY) remained relatively stable for the week, hovering at around 103 levels, as global trade uncertainty kept investors cautious. US stocks, however, experienced steep declines, with the S&P 500 entering correction territory, the Dow Jones dropping 3.07 percent for the week, and the Nasdaq Composite losing 2.43 percent. These declines were largely triggered by President Trump’s aggressive tariff policies, including a proposed 200 percent tariff on European alcohol, which raised concerns over retaliatory measures and economic instability. Treasury yields also fell, reflecting growing investor pessimism despite positive economic reports on inflation and joblessness.

US job openings rose by 232,000 to 7.74 million in January 2025, exceeding the expected 7.65 million and up from 7.51 million in December. Key increases were seen in retail trade (+143,000), finance and insurance (+77,000), and health care and social assistance (+58,000), while professional and business services saw a decline (-122,000). Regionally, the largest gains were in the West (+90,000) and Northeast (+82,000). Meanwhile, hires increased by 19,000 to 5.39 million, and total separations rose by 170,000 to 5.25 million.

Inflation eases in February

In February 2025, the US annual inflation rate eased to 2.8 percent from 3 percent in January, coming in below the expected 2.9 percent figure. Energy cost declined with gasoline and fuel oil prices falling, while natural gas prices surged. Inflation slowed in categories such as shelter, used cars and trucks, and transportation, though food inflation slightly accelerated to 2.6 percent. The Consumer Price Index (CPI) rose 0.2 percent month-over-month, down from January’s 0.5 percent, which was the highest since August 2023. Core inflation also cooled, with annual core inflation dropping to 3.1 percent, the lowest since April 2021, while monthly core inflation fell to 0.2 percent, both below expectations.

Producer prices stagnate

Producer prices in the US remained unchanged in February 2025 from the previous month, following an upwardly revised 0.6 percent rise in January and missing forecasts of a 0.3 percent gain. This marks the lowest rate in seven months, driven by a 0.2 percent decline in service prices, the sharpest drop since July 2024, led by a 1.4 percent fall in margins for machinery and vehicle wholesaling. Prices also fell in food and alcohol retailing, automobile retailing, apparel, chemicals, and real estate loans. However, goods prices increased by 0.3 percent for the fifth consecutive month, mainly due to a 53.6 percent surge in egg prices. Year-over-year, producer prices rose 3.2 percent, below the 3.7 percent recorded in January and the 3.3 percent forecast. While core PPI declined 0.1 percent month-over-month and 3.4 percent annually. The US Dollar index closed the week at 103.72.

Bank of Canada cuts rates

The Bank of Canada cut its key interest rate by 25bps to 2.75 percent in March, marking a total reduction of 225bps since June 2024. While the economy grew more than expected in Q4, growth is expected to slow due to rising trade tensions with the US. The bank highlighted that shifting US tariff threats are weakening consumer confidence and investment expectations. Inflation, which has been below 2 percent for months, is expected to rise toward 2.5 percent as tax credits expire, though core inflation is projected to slow gradually, driven by easing shelter costs. The USDCAD pair closed the week at 1.4369.

Lagarde warning

In her recent interview with the BBC, ECB President Christine Lagarde warned that Trump’s escalating trade war could severely harm global economic growth and inflation. She stressed that such protectionist measures create uncertainty, dampen business activity, and force the EU to respond, despite preferring dialogue. Lagarde dismissed Trump’s claim that the EU was formed to harm the US, highlighting historical cooperation. She also addressed inflation challenges, noting that unpredictable global trade shifts, military spending, and climate disruptions make economic stability harder to maintain. While the ECB is considering interest rate cuts as inflation cools, she cautioned that new shocks could disrupt this plan, prompting the ECB to shift its communication strategy to focus on real-time economic indicators rather than fixed forward guidance. The EUR/USD currency pair closed the week at 1.0879.

UK economy contracts

The UK economy contracted by 0.1 percent month-over-month in January 2025, following a 0.4 percent growth in December and falling short of market expectations for a 0.1 percent increase. The decline was driven by a 0.9 percent drop in the production sector, with manufacturing shrinking 1.1 percent, most notably in basic metals (-3.3 percent) and pharmaceuticals (-3.1 percent), while mining and quarrying fell 3.3 percent due to a 3.7 percent contraction in crude petroleum and natural gas extraction. Construction also declined 0.2 percent. However, the services sector grew by 0.1 percent, supported by administrative services and retail trade at 1.9 percent and 0.7 percent respectively. Despite the monthly contraction, GDP grew 0.2 percent over the three months leading to January.

UK retail sales slows

UK retail sales grew by 0.9 percent year-on-year in February 2025 as per data from the British Retail Consortium, slowing sharply from January’s 2.5 percent rise and missing the 2.4 percent forecast, as consumers cut back amid the cost-of-living crisis. Non-food sales stagnated compared to February 2024, while food sales rose 2.3 percent, down from last year’s 5.6 percent gain. Valentine’s Day spending provided a temporary boost, particularly for jewelry, watches, and fragrances, which reversed last year’s declines. Online sales, especially in computing and electronics, helped support the sector, while furniture sales also returned to growth. The GBP/USD currency pair closed the week at 1.2932.

Australia’s Westpac-Melbourne Institute Consumer Sentiment Index rose 4 percent in March to 95.9, its highest level in three years, driven by the Reserve Bank of Australia’s interest rate cut and easing cost-of-living pressures. Confidence improved broadly, particularly in the labor market, though inflation remains the top concern, followed by budget issues, employment, and interest rates. Despite the gains, lingering worries about global economic conditions persist, with US tariff disputes and geopolitical tensions contributing to uncertainty.

The AUD/USD currency pair closed the week at 0.6323.

Kuwait

Kuwaiti dinar

USD/KWD closed last week at 0.30805.