Archives April 2025

Written by the Market Insights Team

Are tariffs priced in?

Kevin Ford – FX & Macro Strategist

Considering that tariffs currently in place include 25% on steel and aluminum, 25% on non-CUSMA/USMCA-compliant goods, 10% on Canadian energy, 20% on Chinese imports—and a 25% tariff on autos expected to take effect tomorrow—much of the tariff story appears to be priced into the foreign exchange (FX) markets. Interestingly, the muted reaction in FX over recent weeks might suggest that markets do not anticipate these tariffs to persist long-term. The Canadian dollar, often regarded as a gauge of U.S. trade policy uncertainty, has traded within a narrow range and remains virtually unchanged year-to-date. Could it be that FX markets are mispricing today’s event?

One perspective is that the limited market reaction may stem from optimism that reciprocal tariffs could be eased relatively fast through diplomatic efforts, with the expectation that these tariffs will be reciprocally reduced once agreements are reached. However, President Trump’s insistence on the permanence of auto tariffs poses a direct threat to Ontario’s manufacturing sector—one of the pillars of the Canadian economy. The greatest risk for the Loonie lies in a prolonged trade war, making it challenging to determine whether tariffs are fully priced into current valuations. Should tariffs persist at or above 25% across the board, the USD/CAD could weaken, testing levels around 1.45 against the U.S. dollar. Conversely, a lower tariff rate, or tariffs contained to specific sectors, might see the CAD strengthen to test the 1.42 level.

On April 2^nd, markets will focus on the size of the tariffs and their geographical and sectoral distribution. Post April 2^nd, attention will shift to how countries respond—whether through retaliation, diplomatic efforts, or other measures. Markets will also observe how willing the U.S. administration is to use reciprocal tariffs as leverage to secure long-term trade agreements or economic interests that align with U.S. priorities. For Canada, the timing is problematic, as President Trump has indicated he won’t engage in negotiations until Canadians have elected their new Prime Minister on April 28^th. This uncertainty casts a shadow over the Loonie’s outlook, with this week’s macro reports overshadowed by developments in U.S. trade policy.

So far, markets have responded to the uncertainty with caution, with equities being the most sensitive to the news. The VIX, a key volatility indicator, has surged 24% year-to-date, reflecting heightened investor anxiety. Gold has climbed 18% year-to-date, maintaining its status as a safe-haven asset. The fly-to-quality has also had an effect on the Nasdaq and Bitcoin, which have declined around 10% year-to-date.

Historically, April has been the weakest month for the US dollar, with an average negative return of -0.5% over the past 20 years. However, the short-term bullish perception of tariffs may overshadow this seasonal pattern, as the escalating trade wars could significantly influence the dollar’s trajectory on “Liberation Day”, and set the tone for Q2.

Does an awful April await the dollar?

George Vessey – Lead FX & Macro Strategist

Over the last 20 years, April has been the US dollar’s worst month of the year, averaging a negative return of -0.5%. Though seasonality trends will play second fiddle to trade wars, the broader economic and geopolitical landscape doesn’t bode well for the buck either.

The world waits on tenterhooks ahead of the White House’s announcement on a new set of tariffs on imported goods, which have the potential to reshape global trade and disrupt economic activity. The “blurred visibility’’ approach from Trump on tariffs brings a huge amount of unpredictability – and as a result, it’s difficult for companies to plan ahead with spending and hiring decisions. If the haphazard manner in which the White House has imposed its levies continues, it would likely aggravate the situation and potentially impede economic activity. Indeed, yesterday’s data offered a mix of weaker activity data, cooling labour market signals and surging price pressures.

The ISM manufacturing PMI fell to 49 in March from 50.3 previously, below forecasts of 49.5. The reading pointed to the first contraction in factory activity in three months. The details were also ugly. New orders, employment and production all contracted too, whilst price pressures soared to the highest since June 2022. All this suggests that tariff fears are hurting the US manufacturing sector and consistent with early stages of stagflation. This is negative for risk assets.

Nervous investors are hoping for more clarity on tariff policy, but there’s a chance that uncertainty extends beyond today, which is likely why FX traders are in a wait-and-see mode. Currency markets have been relatively calm over the past few days and implied volatility gauges somewhat subdued in light of circumstances. We think an escalating tariff narrative could provide dollar respite early on due to global risk aversion boosting safe haven flows, but rising US growth scares will come back to haunt the buck. A downtrend would also correlate with the dollar’s path during Trump’s first term. Back then, the dollar index depreciated around 15% from peak to trough during 2017-2018.

What we do know is that the Trump administration is aiming for a challenging trifecta: a weaker USD, lower yields, and a robust stock market. Historically, achieving this rare combination requires highly disinflationary policies to push yields and the USD lower, alongside a supportive Federal Reserve to bolster equity market sentiment. However, the current policy mix – marked by geopolitical shifts, tariffs, and macroeconomic uncertainty – may succeed in weakening the USD and lowering yields, but risks undermining economic growth and stock market performance in the process. This delicate balance highlights the complexities of navigating such ambitious goals without triggering broader financial instability.

Betting on euro strength despite tariff threat

George Vessey – Lead FX & Macro Strategist

European risk assets have been performing relatively well since Trump’s election, with EUR/USD up around 4% and the Euro Stoxx 50 up 8%. The German equity benchmark is up a whopping 13% – turbocharged by the historic German fiscal package. In the run-up to Trump’s announcement today, sentiment has turned more pessimistic though and the European Union said it’s ready to retaliate if necessary if reciprocal tariffs are imposed.

Tariffs risk reigniting inflationary pressures in the short term. Longer-term though, a trade war may weaken growth, turning into a disinflationary force for Germany and the eurozone. Germany’s 10-year Bund yield has fallen to a four-week low below 2.7%, reflecting investor caution amid escalating tensions. Money markets currently price an 77% chance of an ECB rate cut in April, but policymakers remain divided. More policy easing could weigh on the euro via falling relative yield spreads, but given the huge fiscal stimulus plans, the impact on growth and therefore need for aggressive monetary easing may be constrained.

This could be why FX options traders are still more optimistic on the euro’s outlook further down the line. So-called risk reversals, a closely watched barometer of positioning, show investors are the most bullish on the euro over the next month since late 2020. That’s despite the fact the common currency is already enjoying its best start to a year since 2016 and also suggests markets are wagering that a trade war will be more detrimental to the US than Europe.

Sterling looks sturdy

George Vessey – Lead FX & Macro Strategist

In contrast to the US dollar, seasonality plays in sterling’s favour. The pound has delivered the best average monthly returns versus the dollar in the past 20 years in April, and this is thanks in part to UK fiscal year-end flows and portfolio rebalancing. GBP/USD has consolidated around the $1.29 handle for the past four weeks, with no reversal signal identified on the charts yet. As long as the pair holds above the 200-day moving average (currently around $1.28), the path of least resistance should remain to the topside. The pair is up 7% from year-to-date lows of $1.21 and less than 4% away from its 2024 high.

As the pound starts April with support from favourable rate differentials and optimism around seasonality trends, there are doubts emerging that the UK will sidestep the worst of Trump’s looming tariff barrage. The Trump administration has not confirmed which countries will be hit, although it has trailed today’s announcement as a sweeping one. This has somewhat dashed hopes that the UK might float under the radar, though negotiating some sort of deal remains plausible, especially thanks to relatively modest bilateral trade with the US.

For this reason, sterling is being dubbed a tariff hedge of sorts. If Trump’s tariff plans roil global markets, sterling won’t be immune, but it seems to have a few supports that can act as a shield. In a full-blown risk-off move, the dollar tends to dominate, but any rebound in the safe haven could be short-lived if the focus shifts back to US recession fears.

FX in wait-and-see mode

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: March 31- April 4

All times are in ET

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

Johnson & Johnson (JNJ) shares tumbled Tuesday after the health care giant failed to reach a settlement in liability cases related to its baby powder and other talc products.

The company said Tuesday that a judge denied its plan to settle thousands of legal claims alleging that its talc products cause ovarian cancer, adding that it will now return to the tort system to litigate and defeat the claims. The failed proposal involved using a “prepackaged bankruptcy plan” for a subsidiary, marking the third attempt the company has used the bankruptcy system in an effort to settle the claims.

Johnson & Johnson shares led S&P 500 decliners on Tuesday, falling 7.6% to close at $153.25. Despite today’s steep drop, Johnson & Johnson shares have gained 6% so far this year as of Tuesday’s close, handily outpacing the S&P 500’s 4% decline over the same period.

Below, we take a closer look at Johnson & Johnson’s weekly chart and use technical analysis to point out key price levels that investors may be watching.

Descending Channel in Focus

Since setting their record high in April 2022, Johnson & Johnson shares have traded lower within an orderly descending channel, tagging the pattern’s upper and lower trendlines on several occasions since that time.

More recently, the Dow component ran into selling pressure near the descending channel’s upper trendline, with the price falling below both the 50- and 200-week moving averages in Tuesday’s trading session.

Today’s drop also coincided with the relative strength index (RSI) plunging below the 50 threshold, signaling accelerating selling momentum.

Let’s identify key support and resistance levels on Johnson & Johnson’s chart worth watching.

Key Support Levels to Watch

Firstly, it’s worth keeping track of the $147 level. This area will likely provide support near a trendline that connects multiple peaks and troughs on the chart stretching between January 2018 and June last year.

Further selling could see a breakdown below the descending channel’s lower trendline and subsequent fall to around $137. Investors may be on the lookout for entry points in this region near a trendline that links the June 2017 peak with a range of comparable price action on the chart through to October 2020.

Major Resistance Levels to Monitor

Upswings in Johnson & Johnson shares could initially meet overhead resistance near the $167 level, currently just above the descending channel’s upper trendline. The stock may encounter selling pressure in this location near the March and September peaks, with the area also roughly aligning with trading activity extending back to February 2021.

Finally, a breakout above this level could see the shares climb to around $180. Investors may look for profit-taking opportunities here near the prominent August 2021 and December 2022 peaks, which both sit slightly below the stock’s record high.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.

New tax regulation in India

As the second largest sender of international students behind China, India is a highly regulated financial services market. As of April 1^st, 2025, the Tax Collection at Source (TCS) rules introduced under India’s Finance Act 2020 have changed, with the government increasing the TCS exemption limit from ₹7 lakh up to ₹10 lakh.

To help our Indian payment partners ensure full compliance with this these changes, we’ve updated our overview of the TCS regulations, originally posted in 2023.

What is Tax Collected at Source?

Tax Collected at Source came into effect across India on 1st October 2020. As of April 1^st 2025, It is payable on cumulative remittances in excess of 10 lakh Indian Rupee (₹10 lakh) per remitter from India within a financial year on cross-border transactions that fall under the Liberalized Remittance Scheme. Education payments fall under the Liberalized Remittance Scheme so are therefore subject to the new TCS tax. At the end of the Indian financial year, TCS can be rebated as part of the payer’s tax return or be used to offset any outstanding taxes owed.

How is TCS applied?

To complete an income tax return in India, an individual requires a Permanent Account Number (PAN) which is issued as a laminated card. When a payer in India initiates a cross-border transaction through an Authorized Dealer (authorized by the Reserve Bank of India to deal in foreign exchange), such as a bank or payment provider, the payer’s PAN card is checked to confirm the cumulative cross-border remittance value that has been sent for the financial year.

• If the remitter has not exceeded the INR ₹10 lakh limit, they do not have to pay the TCS
• If the remitter has exceeded the limit or will exceed the limit, they must pay TCS on the remitted amount above the INR 10 lakh limit

For education payments, there are two applicable TCS rates which apply to the remitted amount above the INR 10 lakh threshold:

Nil if the cross-border payment is funded through an Indian bank loan

5% if the cross-border payment is self-funded (private)

How is this tax collected?

How is this tax collected?

It is the responsibility of the Authorized Dealer in India facilitating the cross-border transaction to remit the tax on behalf of the payer to the tax authority. So, if a student from India makes a payment to your institution, this would be handled by the bank or the Indian payment provider the student uses to transfer their funds.

How is this tax managed if a student from India uses the Convera platform?

We have worked with all our payment partners in India to help ensure these new tax obligations are being met.

ICICI Bank

Collection of TCS is managed by branch staff at ICICI. They will do a PAN look up and ask for a loan sanction letter and then apply TCS, if applicable, when the student visits their local ICICI branch. ICICI will remit the tax to the appropriate authorities.

Convera Agent

Collection of TCS is managed by branch staff at the Convera Agent location. They will do a PAN look up and ask for a loan sanction letter and then apply TCS if applicable. Each Agent will remit the tax to the appropriate authorities.

Domestic payment into our INR bank account

GlobalPay for Students will calculate the TCS amount and add such amount to the amount due. This will be displayed on the student’s payment instructions. The payer must remit the full amount (amount owed to your Institution and TCS). Our banking partner in India will withhold the amount of TCS payable and remit those funds to the tax authority and your institution will receive the full amount owed.

What does my institution need to do?

There is no action for you to take when receiving payments sent through GlobalPay for Students. Our payment partners in India will manage this process for your students, and there is no need to change your billing amounts. If you work with other payment providers, you should check with them on their processes.

What if a student sends a payment direct into our institution’s bank account?

We always advise our education institution partners not to accept or encourage payments by overseas students direct into their bank account. There are several reasons for this:

• Reconciling and matching these payments to the student account creates additional work for your team
• Any delay posting to the student account will impact on student experience
• Publishing or sharing your bank details could expose your institution to fraud
• Payments coming into your account will lack compliance screening (payment providers such as Convera do this for you)

If a student from India does send a payment direct into your bank account from India, the bank in India will also manage the TCS and remittance to the tax authorities.

Work with a trusted partner

When receiving payments from countries around the world, ensure you are working with a provider that has a global network and strong payment partner relationships. This ensures regulations and processes such as TCS in India are managed on your behalf, minimizing interruption to your cashflow and providing students with a stress-free payment process.

Convera is your trusted partner delivering:

• Mobile enabled solution enabling your international students to pay their fees in their local currency quickly and easily online, by bank transfer or by credit card.
• Seamless payment experience for your students and easy reconciliation for your institution.
• 60+ bank relationships and 500+ bank accounts.
• ~200 regulatory licenses.
• Dedicated regional teams focused on local compliance requirements.

Disclaimer:

Convera has based the opinions expressed in this webpage on information generally available to the public, and such information or opinions are strictly for illustrative purposes only. Business between you and Convera shall be governed by the applicable terms and conditions provided to you before you undertake any transaction or commercial relationship with Convera.

Ready to learn more about the latest in cross-border payments? Sign up for the latest currency and FX news to get market insights from our team of experts.

Plus, dive deeper into the trends shaping cross-border payments with our podcast, Converge.

After years of building out the infrastructure and regulatory environment necessary to attain such a status, the UAE, in particular the Emirate of Dubai, really began to emerge as a major cryptocurrency hub in 2025.

Dubai began laying down the groundwork back in 2018, with the establishment of the Dubai Blockchain Centre. At the time, Bitcoin and other major cryptocurrencies were just starting to enter what was coined “crypto winter.” There was high uncertainty over whether this major gamble would pay off.

Flash forward to now, however, and it’s clear that Dubai’s big bet was a prescient move in hindsight. Major cryptocurrency firms like Binance have established operations, becoming licensed operators in the jurisdiction. The crypto leader has even been putting on one of their flagship events in Dubai called Binance Blockchain Week. This event brings together industry titans to celebrate the crypto ecosystem. Binance CMO Rachel Conlan explains the significance of this event, “Binance Blockchain Week is about so much more than just Binance. It’s a celebration of the entire crypto ecosystem and the incredible power of community. This event really shows how crypto is bringing people together from all over the world.”

Conlan continued, “We’re excited to be releasing this docuseries today, which captures the heart and soul of our shared vision for a decentralized future. Binance Blockchain Week has grown significantly since we first organized it back in 2019, and it is humbling to see the event grow alongside our community numbers. Through it all, our mission remains the same: to unite people and provide a welcoming platform for everyone to learn about crypto and blockchain technology.”

Now positioned as the Middle East’s crypto center, Dubai and the UAE seek to further build on this success, through further growth of the country’s retail and institutional cryptocurrency trading volumes, as well as through the integration of blockchain technology into areas beyond finance.

Dubai’s Rise as a Major Crypto and Web3 Hub

With Dubai’s forward-thinking cryptocurrency infrastructure investment attracting major firms, resulting in their establishment of regional offices in the Emirate, it’s no surprise that this in turn has resulted in a massive increase in cryptocurrency trading volume taking place within the UAE.

As detailed in Chainalysis’Geography of Crypto Report 2024, a total of $34 billion worth of crypto transactions occurred between July 2023 and July 2024, representing a 42% increase compared to the preceding twelve-month period. Capital from retail and institutional investors alike are pouring into Dubai-based cryptocurrency trading firms. Decentralized finance (DeFi) platforms located in the UAE are also attracting significant capital inflows.

Per the same report from Chainalysis, just in Q2 2024 alone, DeFi platforms received over $3 billion in value, and during the twelve months ending June 2024, decentralized exchanges (DEXs) experienced a 74% increase in total value received, with this figure rising from $6 billion to $11.3 billion.

With the UAE being one of the few countries considered to offer  “regulatory clarity,” Dubai is not only becoming a major hub for DeFi and cryptocurrency trading; it’s becoming a major hub for Web3 startups and talent as well. Web3 entrepreneurs from overseas, in particular from India, have established and/or moved their operations to this jurisdiction.

Capitalizing on Additional Blockchain Use Cases

Dubai and the UAE’s embracing of the blockchain revolution goes beyond just creating a favorable environment for cryptocurrency firms and Web3 startups to operate. The federal monarchy, especially its largest Emirate, are integrating blockchain technology into the rest of the country’s overall economy.

This of course includes integration into other areas of the financial sector. For example, thanks to the UAE’s clear regulatory framework regarding their use, stablecoins have become a major medium of exchange for a variety of transaction types, including real estate transactions as well as cross-border remittances.

More recent regulatory progress points to further integration between traditional and decentralized finance. Looking beyond the financial services sector, it should also be noted that Dubai Customs has already started to utilize blockchain technology for the purpose of improving efficiency at Dubai’s ports, smoothing out supply chain friction, all while improving compliance and reducing issues like counterfeiting and fraud.

Only time will tell, but Dubai’s successful integration of blockchain into both its financial and shipping sectors could be the prelude to further integration efforts that in turn enable the UAE economy to maximize growth.

What Lies Ahead for UAE’s Crypto Sector in 2025 and Beyond

As recent economic and political events drive further inflow of capital into the cryptocurrency asset class, crypto transaction volumes and assets under management will likely continue to climb among the trading and DeFi firms who have set up shop in Dubai.

Although other jurisdictions, including the United States, are starting to reach “regulatory clarity” status, barring rapid changes in the regulatory and taxation regimes of nearby India and other major economies, Dubai and the UAE remain well-positioned to continue attracting overseas companies and talent.

The UAE and Dubai have seen respective efforts produce the desired results, namely the establishment of this area as one of the epicenters of cryptocurrency. From here, both the federation and its largest Emirate have the opportunity to further capitalize on the rise of blockchain technology, through the integration of it into other areas of the economy, as seen in both the financial services and supply chain sectors.

Updated on April 1st, 2025 by Nathan Parsh

Many investors find high-yielding stocks appealing because of the income they produce. This is why Real Estate Investment Trusts, or REITs, are so popular among dividend growth investors. REITs are required to pass along the majority of their income in the form of dividends.

SL Green Realty Corp (SLG) is a good example of a high-yielding REIT. The stock currently pays a 5.3% yield and pays a monthly dividend. There are currently fewer than 80 monthly dividend stocks.

You can download our full list of monthly dividend stocks (along with price-to-earnings ratios, dividend yields, and payout ratios) by clicking the link below:

The currently high dividend yield offers a substantial boost to expected total returns, making SLG an appealing investment option for income investors.

This article will analyze the investment prospects of SL Green in further detail.

Business Overview

SL Green Realty is an integrated that is focused on acquiring, managing, and maximizing the value of Manhattan commercial properties. It is Manhattan’s largest office landlord, with a market capitalization of $4.2 billion, and currently owns 54 buildings totaling 31 million square feet.

On January 23rd, 2025, SLG reported financial results for the fourth quarter of fiscal year 2024.

Nevertheless, due to a large gain ($0.36 per share) from debt extinguishment, funds from operations (FFO) per share more than doubled over the prior year’s quarter, from a depressed level of $0.72 to $1.81. This beat analysts’ estimates by $0.34. That said, its same-store net operating income dropped 2.7% over the prior year’s quarter.

The pandemic severely hit SLG, which has led many tenants to adopt a work-from-home model.

Office space occupancy in New York remains near historic lows, creating an unprecedented tenant-friendly environment. The exceptionally high FFO per share of $8.11 in 2024 resulted from some non-recurring gains. We project that FFO will decline significantly to $5.40 in 2025.

The trust’s occupancy rate edged up sequentially from 90.1% to 92.5% in Q4. Overall, occupancy rates are well below their pre-pandemic high.

Source: Investor Presentation

Office REITs have been hit especially hard in this environment as employees are working more from home relative to pre-pandemic levels, which has hurt demand for office REITs. This will be something investors will want to monitor as higher occupancy rates generally lead to improved fundamentals.

Growth Prospects

SLG benefits from long-term rental rate growth in Manhattan, one of the most popular commercial areas in the world. The REIT pursues growth by acquiring attractive properties and raising rental rates in its existing properties.

It also signs multi-year contracts (7-15 years) with its tenants to secure reliable cash flows. However, due to the ongoing downturn in the office REIT industry, SLG has seen its funds from operations per share grow at just 2.7% over the last decade.

Due to the pandemic’s impact on its business, the REIT’s funds from operations decreased in the three years prior to 2024. The pandemic has subsided, but the REIT has not begun to recover from the work-from-home trend yet.

Due to a high comparison base formed by the non-recurring gain from debt extinguishment this year, we expect FFO per share to increase at an annual rate of just 1% over the next five years.

Dividend and Valuation Analysis

SLG pays dividends monthly. At a current monthly rate of $0.2575 per share, SL Green has an annualized dividend payout of $3.09 per share, representing a 5.3% current yield.

While the dividend has been reduced recently, it looks sustainable at the current level, even considering interest rate headwinds and the still ongoing headwinds from increased working from home for this office REIT.

We expect SL Green to produce $5.40 of funds from operations per share in 2025, giving the stock a projected dividend payout ratio of 57% for the year. This is a relatively low payout ratio for a REIT. The trust has seemed to manage its business well, and management is experienced.

SLG has a decent balance sheet and a healthy BBB credit rating. It can also maintain its 5%+ dividend, which is well covered by cash flows. Thus, SLG is suitable for income-oriented investors who can patiently wait for the REIT’s recovery from the pandemic.

On the other hand, we note that SLG issued a large amount of debt to buy new properties last year and carries $4.2 billion of long-term debt on its balance sheet, which is more than 100% of the stock’s current market capitalization. We will continue to monitor the debt situation closely.

Final Thoughts

SL Green is a high-yielding REIT that is facing headwinds to its business. The COVID-19 pandemic caused increased working from home, which remains a headwind for Manhattan office occupancy rates.

On the other hand, SL Green also has some long-term growth potential given that it is concentrated in a high-demand area of New York City and since it continues to upgrade its portfolio over time via regular transactions.

The high dividend yield could allow for highly compelling total returns going forward. However, SL Green can’t be described as an especially low-risk stock due to the aforementioned headwinds for its business.

Don’t miss the resources below for more monthly dividend stock investing research.

And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.

Written by the Market Insights Team

US President Trump will unveil sweeping tariffs against US trading partners today. It isn’t a binary event though, a range of tariff policies could be announced, and the repercussions could prove hard to predict long after. Trump expects to bring “liberation” for the US economy, but amidst the spike in trade policy uncertainty, signs of slower growth, upward pressure on inflation and souring risk sentiment dominate. The 4% drop in US equities and the US dollar this year point to a more pessimistic outlook.

Does an awful April await the dollar?

George Vessey – Lead FX & Macro Strategist

Over the last 20 years, April has been the US dollar’s worst month of the year, averaging a negative return of -0.5%. Though seasonality trends will play second fiddle to trade wars, the broader economic and geopolitical landscape doesn’t bode well for the buck either.

The world waits on tenterhooks ahead of the White House’s announcement on a new set of tariffs on imported goods, which have the potential to reshape global trade and disrupt economic activity. The “blurred visibility’’ approach from Trump on tariffs brings a huge amount of unpredictability – and as a result, it’s difficult for companies to plan ahead with spending and hiring decisions. If the haphazard manner in which the White House has imposed its levies continues, it would likely aggravate the situation and potentially impede economic activity. Indeed, yesterday’s data offered a mix of weaker activity data, cooling labour market signals and surging price pressures.

The ISM manufacturing PMI fell to 49 in March from 50.3 previously, below forecasts of 49.5. The reading pointed to the first contraction in factory activity in three months. The details were also ugly. New orders, employment and production all contracted too, whilst price pressures soared to the highest since June 2022. All this suggests that tariff fears are hurting the US manufacturing sector and consistent with early stages of stagflation. This is negative for risk assets.

Nervous investors are hoping for more clarity on tariff policy, but there’s a chance that uncertainty extends beyond today, which is likely why FX traders are in a wait-and-see mode. Currency markets have been relatively calm over the past few days and implied volatility gauges somewhat subdued in light of circumstances. We think an escalating tariff narrative could provide dollar respite early on due to global risk aversion boosting safe haven flows, but rising US growth scares will come back to haunt the buck. A downtrend would also correlate with the dollar’s path during Trump’s first term. Back then, the dollar index depreciated around 15% from peak to trough during 2017-2018.

What we do know is that the Trump administration is aiming for a challenging trifecta: a weaker USD, lower yields, and a robust stock market. Historically, achieving this rare combination requires highly disinflationary policies to push yields and the USD lower, alongside a supportive Federal Reserve to bolster equity market sentiment. However, the current policy mix – marked by geopolitical shifts, tariffs, and macroeconomic uncertainty – may succeed in weakening the USD and lowering yields, but risks undermining economic growth and stock market performance in the process. This delicate balance highlights the complexities of navigating such ambitious goals without triggering broader financial instability.

Betting on euro strength despite tariff threat

George Vessey – Lead FX & Macro Strategist

European risk assets have been performing relatively well since Trump’s election, with EUR/USD up around 4% and the Euro Stoxx 50 up 8%. The German equity benchmark is up a whopping 13% – turbocharged by the historic German fiscal package. In the run-up to Trump’s announcement today, sentiment has turned more pessimistic though and the European Union said it’s ready to retaliate if necessary if reciprocal tariffs are imposed.

Tariffs risk reigniting inflationary pressures in the short term. Longer-term though, a trade war may weaken growth, turning into a disinflationary force for Germany and the eurozone. Germany’s 10-year Bund yield has fallen to a four-week low below 2.7%, reflecting investor caution amid escalating tensions. Money markets currently price an 77% chance of an ECB rate cut in April, but policymakers remain divided. More policy easing could weigh on the euro via falling relative yield spreads, but given the huge fiscal stimulus plans, the impact on growth and therefore need for aggressive monetary easing may be constrained.

This could be why FX options traders are still more optimistic on the euro’s outlook further down the line. So-called risk reversals, a closely watched barometer of positioning, show investors are the most bullish on the euro over the next month since late 2020. That’s despite the fact the common currency is already enjoying its best start to a year since 2016 and also suggests markets are wagering that a trade war will be more detrimental to the US than Europe.

Sterling looks sturdy

George Vessey – Lead FX & Macro Strategist

In contrast to the US dollar, seasonality plays in sterling’s favour. The pound has delivered the best average monthly returns versus the dollar in the past 20 years in April, and this is thanks in part to UK fiscal year-end flows and portfolio rebalancing. GBP/USD has consolidated around the $1.29 handle for the past four weeks, with no reversal signal identified on the charts yet. As long as the pair holds above the 200-day moving average (currently around $1.28), the path of least resistance should remain to the topside. The pair is up 7% from year-to-date lows of $1.21 and less than 4% away from its 2024 high.

As the pound starts April with support from favourable rate differentials and optimism around seasonality trends, there are doubts emerging that the UK will sidestep the worst of Trump’s looming tariff barrage. The Trump administration has not confirmed which countries will be hit, although it has trailed today’s announcement as a sweeping one. This has somewhat dashed hopes that the UK might float under the radar, though negotiating some sort of deal remains plausible, especially thanks to relatively modest bilateral trade with the US.

For this reason, sterling is being dubbed a tariff hedge of sorts. If Trump’s tariff plans roil global markets, sterling won’t be immune, but it seems to have a few supports that can act as a shield. In a full-blown risk-off move, the dollar tends to dominate, but any rebound in the safe haven could be short-lived if the focus shifts back to US recession fears.

FX in wait-and-see mode

Table: 7-day currency trends and trading ranges

Key global risk events

Calendar: March 31- April 4

All times are in BST

Have a question? [email protected]

*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.