Forex News

• US S&P Global Manufacturing PMI and Services PMI both declined slightly in February.
• US Dollar Index clings to small daily gains near 98.00.

Business activity in the US private sector expanded at a slightly softer pace in February than in January, with the S&P Global's preliminary Composite Purchasing Managers' Index (PMI) edging lower to 52.3 from 53.

In this period, the Manufacturing PMI declined to 51.2 from 52.4, while the Services PMI retreated to 52.3 from 52.7. Both of these figures came in slightly below analysts' estimates.

"A combination of weakened demand, high prices, and adverse weather colluded to dampened business activity in February, resulting in the slowest expansion of output for ten months," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

"Customer demand growth has softened, with orders even falling in factories, curbing jobs growth to a crawl across both manufacturing and services," Williamson added.

Market reaction

The US Dollar Index showed no immediate reaction to this report and was last seen rising 0.12% on the day at 97.95.

National Bank of Canada’s Ethan Currie notes that Canada’s apparent export diversification away from the United States in 2025 was heavily driven by Gold shipments, masking weaker underlying trade gains. The report stresses that Canada’s relative tariff advantage hinges on the upcoming USMCA review, while sector‑specific U.S. tariffs now dominate Canada’s effective tariff rate profile.

Gold-driven exports and USMCA risk focus

"In Canada, trade diversification to other partners has, on the surface, made up for less U.S.-bound exports. However, that’s largely a gold story, without which rerouted trade is not nearly as standout."

"That didn’t move the U.S. deficit much in 2025, but it did impact trade compositions, especially in Canada, where total exports struggle to advance on the year even as diversification plays out. That diversification is likely overstated too, as gold exports—predominantly already shipped overseas—benefitted from surging prices in the year."

"The legality of tariffs has been challenged, posing downside risks to global tariff rates. Certain sectors remain exposed to targeted levies, while many countries are patiently waiting for a trade deal to form. In Canada, an upcoming review of the USMCA agreement is paramount to maintain a relative tariff advantage."

"As USMCA exemptions were introduced, firms rushed to claim compliance. Now, sector-specific tariffs make up the bulk of Canada's tariff rate"

"In Canada, a review of the USMCA—which allows for a relatively favourable tariff rate on the global stage—will be a key input in economic forecasts."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• EUR/USD holds modest losses as weak US GDP clashes with firm inflation data.
• US Q4 GDP slows sharply to 1.4%, missing expectations
• Core PCE inflation accelerates, keeping Fed easing bets in check.

The Euro (EUR) trades little changed against the US Dollar (USD) on Friday as investors digest the latest batch of US economic data. At the time of writing, EUR/USD hovers near 1.1763, recovering modestly from an intraday low of 1.1743, but remains on track for a weekly loss.

The pair struggles for clear direction as a weaker-than-expected US Gross Domestic Product (GDP) for Q4 contrasts with firmer-than-anticipated Personal Consumption Expenditures (PCE) inflation data.

Advance estimates showed the US economy grew at an annualized rate of 1.4% in Q4 2025, slowing sharply from 4.4% in the previous quarter and missing the 3.0% consensus forecast. However, the GDP Price Index held steady at 3.7%.

Meanwhile, inflation data reinforced the view that price pressure remains sticky. Core PCE, the Federal Reserve’s (Fed) preferred inflation gauge, rose 0.4% MoM in December, accelerating from 0.2% previously and beating expectations of 0.3%. On an annual basis, Core PCE climbed 3.0%, above the 2.8% prior reading and exceeding the 2.9% forecast.

Headline PCE inflation also firmed in December. The PCE Price Index rose 0.4% MoM, accelerating from 0.2% in November and exceeding the 0.3% consensus. The annual rate ticked higher to 2.9% from 2.8%.

The data briefly stirred short-term volatility in the US Dollar. The US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, is hovering around the 98.00 mark after dipping to an intraday low near 97.80.

The soft growth print points to slowing economic momentum, while sticky inflation keeps the Fed’s cautious policy stance intact. Minutes from the Fed’s January monetary policy meeting, released earlier this week, showed policymakers remain concerned about persistent inflationary pressure, limiting the scope for near-term easing. Officials also noted that further rate hikes could be warranted if inflation fails to move sustainably toward the 2% target.

However, the data did little to materially shift market expectations, with traders continuing to price in two rate cuts later this year. According to the CME FedWatch Tool, the first reduction in borrowing costs is still largely anticipated in June.

Separately, preliminary S&P Global Purchasing Managers Index (PMI) data showed the Composite PMI edged down to 52.3 in February from 53.0 previously, while the Manufacturing PMI slipped to 51.2 from 52.4 and the Services PMI eased to 52.3 from 52.7.

Traders now await the University of Michigan (UoM) Consumer Sentiment Index and inflation expectations data due later in the American session.

Commerzbank’s Dr. Vincent Stamer notes that the Euro area composite PMI rose to 51.9 in February, recovering about half of its recent decline and remaining in a range historically consistent with moderate growth. Sentiment improved particularly in manufacturing, while services edged higher. The bank expects the Euro area economy to grow again this year, though less strongly than Germany.

Composite PMI signals ongoing moderate expansion

"The composite purchasing managers' index for the manufacturing and the services sectors in the euro area rose from 51.3 to 51.9 points in February."

"The composite purchasing managers' index for the euro area rose to 51.9 points in February, up from 51.3 points in January."

"Following declines in the two previous months, the indicator has thus stabilized (Chart 1)."

"It also remains in a range in which the euro area economy has mostly grown moderately in the past."

"The same applies to the economy in the euro area, although growth rates here – unlike in Germany – are unlikely to be higher than last year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

According to the US Department of Commerce, headline Personal Consumption Expenditures (PCE) inflation came in at 2.9% YoY in December. Core PCE, which strips out food and energy costs, ran a touch firmer at 3.0% YoY, suggesting underlying price pressures are still proving a bit sticky.

On a monthly basis, the headline and core PCE rose by 0.4%, both prints coming in above initial estimates.

Market reaction

The US Dollar Index (DXY) remains on a positive footing, trading close to the 98.00 region, or four-week tops, in the wake of the release.