On March 2, data released by Japan's statistics department last Friday showed that the core Consumer Price Index (CPI) for the Tokyo area rose 1.8% year-on-year in February, down from 2.0% in January. This marks the first time since October 2024 that the figure has fallen below the Bank of Japan's 2% policy target. The primary reason for this deceleration was a government subsidy program for residents, which led to a sharp 9.2% annual decline in energy prices. However, several economists noted that underlying inflationary pressures, excluding energy, remain robust. Service prices, which are closely linked to wage growth, continue to rise. Overall, this data does not significantly alter market expectations for the Bank of Japan's monetary policy direction. Market pricing currently indicates a nearly 60% probability of a rate hike by the Bank of Japan in April, according to data from money market brokers Tokyo Tanshi. Retail sales and industrial production data released on the same day also pointed to overall resilience in the Japanese economy, further supporting the case for interest rate increases.
Separately, data from Statistics Canada on Friday revealed that the Canadian economy contracted in the fourth quarter of 2025, significantly underperforming market expectations, as businesses drew down inventories heavily instead of producing new goods. The data showed that Canada's Gross Domestic Product (GDP) shrank at an annualized rate of 0.6% from October to December, compared to a revised growth rate of 2.4% in the previous quarter. Economists had generally forecast the economy to remain flat in the fourth quarter. Statistics Canada stated that this result brought the full-year economic growth rate for 2025 to 1.7%, the slowest annual pace of expansion since the economic downturn caused by the pandemic in 2020. Although exports, household consumption, and government investment provided some support to the economy, they were insufficient to offset the significant drag from the sharp reduction in inventories.
Key data to be watched today includes Germany's January Real Retail Sales Month-on-Month, the Eurozone's February SPGI Manufacturing PMI Final, the UK's February SPGI Manufacturing PMI Final, the US January Durable Goods Orders Monthly Rate Revised, the US February SPGI Manufacturing PMI Final, and the US February ISM Manufacturing PMI.
Gold / USD Gold advanced significantly last Friday, reaching a fresh four-week high. Persistent geopolitical tensions, which fueled safe-haven demand, were the primary driver supporting gold's continued ascent. Additionally, a decline in US Treasury yields also provided some support for the precious metal. Furthermore, concerns over uncertainty regarding US tariffs contributed to gold's strength. During the Asian session, gold opened higher and continued to climb, influenced by escalating tensions in the Middle East which boosted safe-haven sentiment. The pair is currently trading around 5350. Resistance can be seen near the 5400 level today, while support is found near 5300.
USD / JPY The USD/JPY pair moved with a downward bias last Friday, closing slightly lower on the daily chart. The pair was pressured by a softening US Dollar Index. Additionally, better-than-expected CPI data from Japan released during the session exerted further downward pressure. Renewed expectations for a Bank of Japan interest rate hike also weighed on the pair. In early Asian trading, USD/JPY edged higher amid safe-haven flows triggered by Middle East tensions. The pair is currently trading around 156.80. Resistance is seen near the 157.50 area today, with support around 156.00.
USD / CAD The USD/CAD pair trended lower last Friday, hitting a fresh nine-day low, with the pair currently trading near 1.3650. The decline was attributed to a weaker US Dollar Index, which was itself pressured by investor concerns over US tariff uncertainty. A significant rally in crude oil prices, supported by supply concerns, was another major factor weighing on the pair. Furthermore, robust economic data from Canada released during the session added to the downward pressure. Resistance is anticipated near the 1.3750 level today, while support rests around 1.3550.