The week kicked off with key U.S. macro data releases, though tariff developments remained in the spotlight. President Trump hinted that new trade deals could be finalized as early as this week, yet simultaneously imposed tariffs on the cinema industry, leaving analysts scrambling to assess their potential impact in the coming weeks.
Meanwhile, the ISM Services PMI surprised to the upside, rising to 51.6 in April from a nine-month low of 50.8 in March, exceeding forecasts of 50.6. New orders and inventories accelerated, reaching 52.3 and 53.4, respectively, while business activity held in expansion territory at 53.7. However, price pressures remain a concern—prices charged, as measured by the ISM Manufacturing PMI Price Index, climbed for the fifth straight month. Despite this, the increase has yet to be reflected in the PPI index.
The U.S. dollar, as measured by the DXY Index, has begun the week flirting with the 100 level, though softness remains the consensus in FX markets. The recent market dynamic, rising treasury yields, declining stocks, and a weaker dollar, continues to challenge traditional correlations. The U.S. stock market’s 9-day rally came to an abrupt halt yesterday as renewed tariff concerns rattled investors. Treasuries remain caught between expectations of a potential Fed easing cycle in the second half of 2025 and the pressure of a rising term premium. Adding to the mix, falling commodity prices are amplifying concerns over global economic growth.
What could derail the optimism in markets? Pharma and semiconductor tariffs remain on the table for the U.S. administration, though they likely won’t be implemented before the 90-day reciprocal tariff pause ends. With the administration looking to secure trade deal wins to boost poll numbers, any immediate action on sectoral tariffs could be delayed, but backing down entirely would risk appearing weak after previous commitments.
Markets will also be watching port traffic closely, as cargo shipments from China to the U.S. are expected to stay low. Additionally, retail reaction to the expiration of the de minimis exemption will be a key focus. The exemption, which allowed duty-free imports of goods under $800, expired on May 2nd, triggering a 145 percent tariff on all products ordered directly from China-based retailers. In 2023, nearly one billion low-cost packages worth over 66 billion dollars entered the U.S., with 67.4 percent coming from China, making the policy shift highly consequential for consumers and businesses alike.
Taiwanese dollar surges as “appreciation by stealth” mooted
The US dollar was weaker across Asia to start the week as a historic sell-off in the USD/TWD pair, causing the Taiwanese dollar to surge higher, led the greenback lower.
The USD/TWD fell 3.7% on Friday – the market’s biggest one-day fall since 1988, according to the Wall Street Journal – and was followed by a 2.4% loss on Monday sending the pair to the lowest level since 2022.
Reuters reported there was no clear catalyst for the fall in the pair but a lack of USD buyers was seen in the market. Notably, Asian markets were quieter on Monday, with holidays in Japan, Hong Kong and South Korea.
The move corresponded with US-Taiwan trade talks and could be a sign the Taiwan government was allowing the TWD to rise – essentially an “appreciation by stealth” move. The Taiwanese central bank rejected the claims saying it was not involved in trade talks and “doesn’t manipulate foreign exchange rates”.
The USD was lower across Asia with the AUD/USD rising to five-month highs while the USD/CNH fell to 11-month lows.
The USD/HKD – managed in a tightly-controlled peg by the Hong Kong Monetary Authority – fell to the lowest level since 2020.
Loonie lags G10 peers in 2025
Kevin Ford – FX & Macro Strategist
USD/CAD had an impressive April but continues to lag behind its G10 peers, making it the worst-performing currency among major economies in 2025. Does this suggest room for further recovery? Much will depend on today’s meeting between President Trump and newly elected Prime Minister Mark Carney, where trade negotiations, including potential progress on the CUSMA/USMCA renegotiation, could shape the trajectory of the Loonie. While less immediately influential for FX markets, Friday’s Canadian labor market data for April will provide additional insights into the country’s economic momentum.
Canada’s macro outlook remains weak, with the latest data confirming a fifth consecutive month of contraction in the private sector. The S&P Global Composite PMI fell to 41.7 in April from 42 in March, marking the steepest decline since June 2020. Both manufacturing and services saw similar slowdowns, while new orders dropped sharply, leading to a fourth consecutive month of job cuts. Future expectations improved slightly but remained historically low. On the price front, input cost inflation eased to a three-month low but stayed elevated, while weakening demand resulted in the first decline in output charges in over four years.
Dovish signals point to BOE’s May rate cut
We anticipate a 25bp rate cut by the Bank of England at its May meeting on Thursday.
Given the relatively dovish remarks made by several Monetary Policy Committee members after the tariff announcements in early April, there is a chance that there will be more dissent from committee members.
Because of the conflicting evidence that has been made public after the March meeting, cautious rate cuts are still necessary.
Despite acknowledging the impact of trade policy uncertainties, we believe that recommendations will not alter.
While an upward revision to the BoE’s Q1 GDP outlook may be followed by downward revisions for coming quarters, a combination of lower energy costs, higher sterling, and a lower starting point for the Bank’s inflation predictions supports downward revisions to the Bank’s CPI profile.
We believe that the risks of more aggressive easing have increased.
GBP/USD have surged and returned more than 6% YTD gains. However, it has recently corrected by 1% from its near seven-month highs of 1.3444 – a potential sign of reversal.
The next key support for GBP/USD lies at the 21-day EMA of 1.3232, followed by 50-day EMA of 1.3055.
*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 quothave 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.
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Taiwanese dollar surges as “appreciation by stealth” mooted
The US dollar was weaker across Asia to start the week as a historic sell-off in the USD/TWD pair, causing the Taiwanese dollar to surge higher, led the greenback lower.
The USD/TWD fell 3.7% on Friday – the market’s biggest one-day fall since 1988, according to the Wall Street Journal – and was followed by a 2.4% loss on Monday sending the pair to the lowest level since 2022.
Reuters reported there was no clear catalyst for the fall in the pair but a lack of USD buyers was seen in the market. Notably, Asian markets were quieter on Monday, with holidays in Japan, Hong Kong and South Korea.
The move corresponded with US-Taiwan trade talks and could be a sign the Taiwan government was allowing the TWD to rise – essentially an “appreciation by stealth” move. The Taiwanese central bank rejected the claims saying it was not involved in trade talks and “doesn’t manipulate foreign exchange rates”.
The USD was lower across Asia with the AUD/USD rising to five-month highs while the USD/CNH fell to 11-month lows.
The USD/HKD – managed in a tightly-controlled peg by the Hong Kong Monetary Authority – fell to the lowest level since 2020.
Dovish signals point to BOE’s May rate cut
We anticipate a 25bp rate cut by the Bank of England at its May meeting on Thursday.
Given the relatively dovish remarks made by several Monetary Policy Committee members after the tariff announcements in early April, there is a chance that there will be more dissent from committee members.
Because of the conflicting evidence that has been made public after the March meeting, cautious rate cuts are still necessary.
Despite acknowledging the impact of trade policy uncertainties, we believe that recommendations will not alter.
While an upward revision to the BoE’s Q1 GDP outlook may be followed by downward revisions for coming quarters, a combination of lower energy costs, higher sterling, and a lower starting point for the Bank’s inflation predictions supports downward revisions to the Bank’s CPI profile.
We believe that the risks of more aggressive easing have increased.
GBP/USD have surged and returned more than 6% YTD gains. However, it has recently corrected by 1% from its near seven-month highs of 1.3444 – a potential sign of reversal.
The next key support for GBP/USD lies at the 21-day EMA of 1.3232, followed by 50-day EMA of 1.3055.
AUD supported as Labor landslide keeps stimulus in place
The Aussie extended gains on Tuesday as the market continued to feel the impact of the weekend’s election. Australia’s Labor Party, led by Anthony Albanese, secured a decisive victory, winning at least 82 seats and potentially up to 90, a significant jump from 77 in 2022.
This majority strengthens Labor’s position in the Senate, likely enabling the passage of key policies, including doubling the tax rate on superannuation earnings above AUD 3 million and AUD 18 billion in household tax cuts.
Fiscal policy will remain highly stimulatory, supporting economic growth.
As a result, the Reserve Bank of Australia has lagged other central banks in cutting rates, but is expected to cut rates by 25bps in May, with further reductions totaling 100bps in 2025.
In Europe, the Australian dollar has struggled in 2025 as trade tensions weighed on the currency. This weakness saw the GBP/AUD hit ten-year highs while the EUR/AUD hit five-year highs.
However, both markets reversed sharply in April potentially setting up further losses for GBP/AUD and EUR/AUD from recent highs.
USD plunges in Asia
Table: seven-day rolling currency trends and trading ranges
*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.
Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Taiwanese dollar surges as “appreciation by stealth” mooted
The US dollar was weaker across Asia on Monday as a historic sell-off in the USD/TWD pair, causing the Taiwanese dollar to surge higher, led the greenback lower.
The USD/TWD fell 3.7% on Friday and was followed by a 2.4% loss on Monday – sending the pair to the lowest level since 2022.
Reuters reported there was no clear catalyst for the fall in the pair but a lack of USD buyers was seen in the market.
The move corresponded with US-Taiwan trade talks and could be a sign the Taiwan government was allowing the TWD to rise.
The USD was lower across Asia with the AUD/USD rising to five-month highs while the USD/CNH fell to 11-month lows.
Fed rate cuts priced out after US jobs
The USD’s losses came in spite of a shift in Federal Reserve pricing after Friday’s US nonfarm payrolls exceeded forecasts.
The OIS market saw a dramatic repricing as a result of the data, going from 41 basis points of cumulative cuts for the July FOMC last Wednesday to 27 basis points as of this writing.
The cumulative cuts for December FOMC are currently priced at 93 basis points.
On Thursday, the FOMC will make its most recent policy announcement.
Looking at APAC FX, USD/SGD is now circa 1% higher from monthly Sept 2024 lows of 1.2789, given the election performance of People’s Action Party.
Given USD/SGD is now at its low end of 30-day trading range, USD buyers may look to take advantage.
Next resistance at 21-day EMA of 1.3144.
AUD supported as Labor landslide keeps stimulus in place
The Aussie extended gains on Monday as the market continued to feel the impact of the weekend’s election. Australia’s Labor Party, led by Anthony Albanese, secured a decisive victory, winning at least 82 seats and potentially up to 90, a significant jump from 77 in 2022.
This majority strengthens Labor’s position in the Senate, likely enabling the passage of key policies, including doubling the tax rate on superannuation earnings above AUD 3 million and AUD 18 billion in household tax cuts.
Fiscal policy will remain stimulatory, supporting economic growth.
Meanwhile, the Reserve Bank of Australia is expected to cut rates by 25bps on 20 May, with further reductions totaling 100bps in 2025.
AUD/USD is now at the top end of its 30-day trading range providing opportunity for USD buyers.
Near term support at its 200-day EMA of 0.6409 holds for now.
USD plunges in Asia
Table: seven-day rolling currency trends and trading ranges
*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.
After a dramatic April in currency markets, businesses with global currency exposures enter May facing uncharted territory. The first 100 days of President Trump’s second term have brought renewed focus to tariffs and trade, raising important questions for businesses managing cross border payments and foreign exchange risk.
The worst-case scenario seems to have been avoided, however a 10% universal tariff and sectoral charges will take their toll on the global economy. Even with the 90-day pause, the current escalation would bring global tariffs back to levels last seen in the early 1930s.
With a potential reordering of the global economic system placing currency risk front and centre, download this month’s Global FX Outlook for key insights to help inform your FX hedging strategy and keep your business steady.
Dollar weakness signals a paradigm shift
April marked a turning point for the greenback, with the US Dollar Index down 5%, dropping below 100 for the first time since 2022. Once a safe haven, the dollar has become more risk sensitive as inconsistent policy from the Trump administration undermines global investor confidence.
This may not be a temporary wobble. With the dollar down more than 8% year-to-date, analysts are comparing this moment to structural downturns seen in 1986 and 1973, years tied to major shifts in the global monetary system. Talk of de-dollarization is increasing, with foreign reserves shifting and investors reducing exposure to US assets. Skepticism about the dollar’s dominance will likely remain a key theme throughout the year.
Major currencies strengthen
As the dollar has weakened, other major currencies have rallied:
EUR/USD has risen over 14% from recent lows, with some analysts eyeing a return to $1.20 by year-end.
GBP/USD climbed around 4%, trading at levels not seen in three years as dollar softness persists.
AUD/USD rebounded 9% following earlier declines, benefiting from improved risk sentiment and a weaker greenback.
These moves highlight how global markets are repositioning, with many investors reassessing the relative strength of economies and the stability of their policy environments.
US exceptionalism is fading
Expectations for US rate cuts are rising as markets price in a weakening economic outlook. A deteriorating growth picture, combined with trade-induced shocks and political uncertainty, has shaken faith in the US as the engine of global stability. Recent moves in bond markets, especially the sharp sell-off in Treasuries, long considered one of the world’s safest assets, suggest waning confidence in US fiscal and monetary stability.
Risk sentiment rocked
Heightened volatility, and risks tied to geopolitical uncertainties and tighter financial conditions remain significant challenges, which sent our global risk sentiment index to multi-year lows. Investors are on edge as inconsistent messaging from the White house erodes trust in US policy, and escalating trade war tensions and even fears about the US central bank’s independence, also undermine confidence in US assets.
Watch a recap of the Global FX Outlook for May
Watch our market analyst team present a short overview of this month’s outlook to help your business stay ahead of the game.
The dollar’s decline suggests that beyond market jitters, the global system is under strain. Businesses managing exposure to foreign currencies must stay agile, rethink their hedging strategies, and monitor evolving risks as this new FX landscape takes shape.
Want more insights on the topics shaping the future of cross-border payments? Tune in to Converge, with new episodes every Wednesday.
Latest US job report cements no rate cuts this week
Kevin Ford – FX & Macro Strategist
The labor market tends to be a lagging indicator during periods of economic softening. After the latest nonfarm payroll (NFP) report, the pressing question is whether this will be the last strong jobs report before tariff impacts begin to take hold. Here are the key takeaways from the latest data:
A 58K downward revision to the previous two months stands out, continuing the trend of negative adjustments. April may follow suit.
Part-time jobs have made up a sizable portion of overall payroll gains over the past three months, raising concerns about labor market stability.
Health care added 51K jobs, while manufacturing lost 1K, slightly better than expected but coming off two consecutive months of gains.
Federal government jobs fell by 9K in April, bringing the total decline since January to 26K.
Hourly wage growth slipped to 0.2 percent on a three-month average—the lowest since the pandemic and below 2019 levels—suggesting weakening labor demand.
One thing seems certain after this: the Fed won’t be cutting interest rates at this week’s meeting.
What’s up with the markets?
Kevin Ford – FX & Macro Strategist
Why is the VIX at 23, practically at the same level before Liberation Day? Why are investors still willing to pay the same price for stocks as they did 30 days ago, despite current level of tariffs and the worries about slowdown in the economy? Is this recovery irrational?
On one hand, markets are welcoming the first glimpses of de-escalation in the trade war between US and China, and this time, it’s confirmed that China might soften its stance, although with conditions.
But there’s another angle to this surprising rebound in sentiment. A month ago, the worst-case scenario was a big question mark, an unknown variable looming on the horizon. Today, that uncertainty has shifted, and markets now have a clear view of the potential downside. The U.S. administration has already begun to retreat from its initial stance. The question is no longer about how severe the tariffs will be, but rather how much of it will be reversed and mitigated.
Markets inherently dislike uncertainty, and the level of ambiguity has diminished compared to March. What was once an unpredictable risk has now become a known challenge, one that investors can assess more rationally. While the situation remains fluid, the prevailing sentiment suggests that conditions may not be as dire as initially feared, leading investors to maintain valuations despite the remaining headwinds. US stocks have embraced the re-certainty from the U.S. administration and major equity indexes have erased all loses following ‘Liberation day’.
The U.S. dollar, meanwhile, hasn’t experienced the same enthusiasm. While it has seen a slight recovery, it has lagged behind the broader rebound and shift in market sentiment. As May begins, the key question is whether the DXY will climb back above 100 and maintain its historical trend of May appreciation or if concerns over de-dollarization and more secular trends will continue to weigh on its performance.
So, what’s the biggest risk ahead? The lagging impact of tariffs on the economy. Markets may be underestimating just how much pressure is coming, with average U.S. tariffs set to jump roughly tenfold compared to 2024. While hard data has held up better than surveys so far, recession risks are growing.
Will the current buy-the-dip momentum carry markets through the summer once tariff effects start hitting growth and inflation? That’s the real test and negative headlines might come sooner than expected. According to the executive director of the Port of L.A., retailers could run out of full inventories in just seven weeks due to U.S.-China trade tensions.
While markets are hopeful that major tariffs will be negotiated down, the U.S. administration seems unlikely to abandon the baseline 10% tariff anytime soon.
De-escalation hopes help Loonie
Kevin Ford – FX & Macro Strategist
Our initial assessment that USD/CAD would drift toward 1.39 as the U.S. dollar rebounded on risk-on sentiment turned out to be off the mark. Instead, tariff-related headlines have helped the Loonie hold the 1.38 level and even test a potential breakout lower.
Canadian Prime Minister Mark Carney is set to meet U.S. President Donald Trump in Washington on Tuesday to discuss trade relations and broader bilateral ties. However, for USD/CAD to sustain its downward trajectory and break below key levels, it will likely take more than preliminary discussions,
The Loonie has also found support following China’s indication that it is assessing the possibility of initiating trade talks with the U.S.
Reviewing monthly prices, for the Loonie to sustain momentum below the 20-month SMA at 1.382, will require solid and concrete work in the tariff front with a clearer timeline for renegotiating the CUSMA/USMCA trade deal.
As a final note, one of the most notable developments in FX markets this past week has been the sharp appreciation of the Taiwanese dollar. Single-session rallies of this magnitude against the U.S. dollar have not been seen since the late 1980s and this is the biggest daily drop against the CAD ever. Unlike previous spikes, this movement does not come after central bank intervention or external pressures. The surge appears to be driven by genuine investor demand for Taiwanese assets amid improving economic conditions, as well as optimism that trade tensions may be easing.
*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 quothave 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.
Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
China trade news lifts Aussie, CNY
The Australian dollar was higher on Monday morning helped by a potential thawing in trade relations between the US and China while a strong win for Australian prime minister Anthony Albanese’s Labor party also boosted sentiment.
The AUD/USD was up 0.8% on Friday and has followed this gain with another 0.3% lift on Monday. The moves have driven the AUD/USD to the highest level in five months.
In other markets, Friday’s comments from China’s Commerce Ministry, saying it was open to trade takes if the US showed “sincerity”, helped currencies around the region.
Most notably, the USD/CNH plunged, down 0.9%, as it dropped to six-month lows.
The NZD/USD was also higher, up 0.7%.
In Singapore, the USD/SGD dropped below the 1.3000 level, helped by the trade news while a strong election performance from the long-established People’s Action Party government also lifted the SGD.
Australian trade numbers also help AUD
The Aussie was also helped by better trade data.
Australia posted the highest three-month run of exports to the US as President Donald Trump’s tariff policies triggered a rush to buy gold, resulting in a goods surplus of AUD4.1 billion with the US in the three months leading up to March, after a deficit of AUD6.2 billion in the previous year, according to Reuters.
Due to an almost 12% recovery in iron ore and a 26% increase in non-monetary gold shipments, overall exports increased 7.6% m/m in March after declining 3.6% the previous month.
A decline in capital goods was the primary cause of the 2.2% m/m decline in imports.
AUD/USD has bounced off its lows from 0.5915 on 9 April with gains more than 8% since.
The next key support for the pair rests at 21-day EMA of 0.6351.
Central bank decisions and PMIs in focus
Central bank decisions take centre stage this week.
The week features two major central bank meetings, with the Federal Reserve’s FOMC decision and the Bank of England’s policy announcement on Thursday. The Fed is widely expected to maintain its target range at 4.5%, while markets anticipate a potential 25bps cut from the Bank of England to 4.25% from the current 4.50%.
Global PMI readings dominate the calendar. The week brings final April PMI figures across major economies, offering insights into business activity trends. Tuesday features China’s Caixin services PMI, followed by final PMI readings from France, Germany, and the broader Eurozone, alongside the UK’s services PMI. The UK construction PMI on Wednesday completes the global PMI picture, providing a comprehensive view of business conditions across regions.
Industrial production data to gauge manufacturing health. Several key economies report manufacturing output figures, starting with France on Tuesday (consensus +0.3% MoM). Germany follows with factory orders on Wednesday (expected +2.1% MoM) and industrial production on Thursday (forecast +1.0% MoM). The UK rounds out the week with manufacturing and industrial production readings on Friday, providing a comprehensive view of global manufacturing conditions amid ongoing economic uncertainties.
Labor market and trade data provide growth insights. The US trade deficit is expected to narrow slightly to $119.5 billion (from $122.7 billion) when reported Tuesday.
New Zealand employment figures arrive Wednesday morning. Canada’s employment figures cap the week on Friday, with forecasts showing a 25,000 job gain following the previous month’s 32,600 decline. The unemployment rate is anticipated to hold steady at 6.7%. These reports will offer valuable context on economic resilience as central banks weigh policy adjustments.
Aussie higher across markets
Table: seven-day rolling currency trends and trading ranges
*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.
The first 100 days of Trump 2.0 have been explosive, with unprecedented moves across financial markets. April was an historic month of U-turns and flip-flopping on policy by the Trump administration, but recently, the more subdued tone on trade wars has supported risk appetite once again.
China said it is evaluating US officials’ willingness to negotiate trade talks, giving a spark of hope for de-escalating the trade war between the world’s largest two economies.
Market volatility has eased back from multi-year high and US stocks have rebounded impressively. The S&P 500 extended its rally, posting its strongest eight-day winning streak since November 2020.
Ultimately, markets appear to be shrugging off trade war concerns for now, buoyed by optimism that negotiations may ease tensions, plus resilient corporate earnings.
In the macro sphere, data has been mixed. The US economy contracted by 0.3% in the first quarter of 2025, marking its first decline since early 2022. Consumer confidence fell to a 5-year low, but the ISM manufacturing PMI was less downbeat than expected.
Still, growing fears of tariffs triggering a global economic slowdown have led to more monetary easing being priced in by markets. No change from the Fed is expected next week, but at least three cuts are priced in by year-end.
In FX, the more positive risk environment and easing market volatility have reduced more of the risk premium from the USD. The dollar index has modestly rebounded from 3-year lows, but the structural outlooks remains bearish.
Global Macro Wave of macro data points to global slowdown
US Q1 GDP contraction. The US economy contracted by 0.3% in the first quarter of 2025, slightly more than expected, marking its first decline since early 2022. This follows the 2.4% growth recorded in the previous quarter, underscoring a sharp reversal in momentum. A key driver of the slowdown was a staggering 41.3% surge in imports, as businesses rushed to stockpile goods ahead of anticipated tariff hikes. This widened the trade gap, with net exports dragging down GDP by nearly 5 percentage points, the largest impact on record. Government spending also contributed to the downturn, subtracting 0.25% from overall growth, its first negative impact since 2022. Additionally, private expenditure saw a significant decline, as businesses and investors navigated heightened uncertainty throughout the quarter.
PCE and job market. Fed’s preferred measure of inflation for the month of march, came slightly higher than expected, but cooled off. PCE prices in the US increased 2.3% year-on-year in March 2025, the lowest in five months but above market expectations of 2.2%. In February, PCE prices was revised upwardly to 2.7%. On the other hand, weekly jobless claims climbed to their highest level since Feb 2025. Both data points could be read as bad news for the Fed, as stagflation worries mount.
China PMI slows. Manufacturing activity saw a sharper-than-expected drop in April, entering contraction territory, with services growth also falling short. Concerns over the economic fallout from trade tensions persist, as it’s unclear if Beijing and Washington are actively negotiating. For now, Chinese authorities are taking a cautious approach, opting for measured responses rather than aggressive stimulus.
Focus shift. With the US administration reversing course on tariffs last week, markets have refocused on trade impacts on global growth. The sharp decline in commodity prices underscores widespread expectations of an economic slowdown, though the extent and duration remain uncertain. Macro sentiment has weighed more on global debt and commodities than equities. While volatility has eased, uncertainty continues to linger.
Week ahead Central Bank decisions and PMIs in focus
Central bank decisions take center stage. The week features two major central bank meetings, with the Federal Reserve’s FOMC decision on Wednesday and the Bank of England’s policy announcement on Thursday. The Fed is widely expected to maintain its target range at 4.25%-4.5%, while markets anticipate a potential 25bps cut from the Bank of England to 4.25% from the current 4.5%. These decisions will be crucial for currency markets, as investors gauge the diverging monetary policy paths of major economies.
Global PMI readings dominate the calendar. The week begins with final April PMI figures across major economies, offering insights into business activity trends. Monday features US services and composite PMI final readings, followed by China’s Caixin services PMI on Tuesday. European PMIs will be released throughout Tuesday, including final figures from France, Germany, and the broader Eurozone, alongside the UK’s services PMI. Japan’s PMI data follows on Wednesday, with the UK construction PMI completing the global PMI picture.
Industrial production data to gauge manufacturing health. Several key economies report manufacturing output figures, starting with France on Tuesday (consensus +0.3% MoM). Germany follows with factory orders on Wednesday (expected +2.1% MoM) and industrial production on Thursday (forecast +1.0% MoM). The UK rounds out the week with manufacturing and industrial production readings on Friday, providing a comprehensive view of global manufacturing conditions amid ongoing economic uncertainties.
Labor market and trade data provide growth insights. The US trade deficit is expected to narrow slightly to $119.5 billion (from $122.7 billion) when reported Tuesday. Canada’s employment figures cap the week on Friday, with forecasts showing a 25,000 job gain following the previous month’s 32,600 decline. The unemployment rate is anticipated to hold steady at 6.7%. These reports will offer valuable context on North American economic resilience as central banks weigh policy adjustments.
FX Views Risk appetite offers dollar reprieve
USD Risk premium reduced for now. The US dollar index posted its worst monthly performance since late 2022 and has dropped over 9% from its 2025 peak in January. But the mood music on trade has improved slightly of late, which has allowed the US dollar to claw back (albeit modestly) some of its recent losses. Despite US GDP contracting in Q1, and consumer confidence dropping to a 5-year low, the ISM manufacturing report wasn’t as bad as expected. Meanwhile, the slightly more positive risk environment and easing market volatility have reduced more of the risk premium from the dollar’s price. That said, the underlying issue has not gone away. The dollar’s challenges stem less from losing its “exorbitant privilege” and safe-haven status, and more from the looming threat of a sharp US economic slowdown tied to trade disruptions and uncertainty. Dollar price action remains poor for now and a further downturn in core US data could lead to an acceleration of the de-dollarization trend. Then there’s the Fed’s meeting next week, which will reveal whether market expectations for swift rate cuts are justified.
EUR Losing shine, but positive structural shifts. Last month proved to be the best ever April for EUR/USD since the inception of the euro back in 1999, but a new bullish trigger for the euro is needed. The rebound in risk appetite, retreating volatility, month-end flows and hopes that the peak of trade war uncertainty is behind us have weighed on the euro for the week or so. This is despite evidence of contrasting economic signals from the US and Europe. Still, the pair remains circa 9% higher year-to-date, well above long-term moving averages, supported by a more-promising euro-area fiscal and structural domestic outlook as well as the structurally weaker dollar case. The deflationary impact of tariffs on the Eurozone opens the door to more ECB rate cuts, which could limit EUR upside, but what appears to be a more favourable cyclical channel might prove more important for the common currency over the long-term. Indeed, as markets adjust to structural shifts, expectations for EUR/USD reaching $1.20 this year are gaining traction.
GBP Mixed fortunes. GBP/USD scored its biggest monthly gain since November 2023, but GBP/EUR suffered its biggest monthly decline since December 2022 amidst the rapid rotation of flows from the dollar into the euro following Trump’s tariff announcements. This week has been a mixed one for the pound, up most against EUR, NZD and JPY, the latter more than 1% after that dovish Bank of Japan meeting. But GBP/USD is largely unchanged at around $1.33, whilst versus the NOK and AUD, sterling is down on the week. Global risk sentiment continues to dictate sterling’s price action, but the dovish repricing of Bank of England easing bets is limiting its gains. Traders are now pricing in four more quarter-point interest rate cuts from BoE this year ahead of next week’s meeting where a rate cut is fully priced in. GBP/USD could fall slightly below $1.32 and still be above its 21-day moving average in a sign that the uptrend remains intact and with the 14-day relative strength index approaching neutral levels, this type of consolidation/retracement is healthy before attempting another leg higher.
CHF All eyes on SNB’s response. Despite the rebound in global risk appetite this week, the Swiss franc has snapped a 2-week losing streak versus the EUR and USD and posted its best monthly performance versus the buck (+6.6%) since 2015. Without a broader improvement in global risk sentiment, the Swiss franc’s safe-haven status continues to challenge the Swiss National Bank. The sharp rise in the franc is being monitored closely by the SNB as it risks pushing inflation into negative territory. With Swiss inflation already at just 0.3%, tightening financial conditions could amplify deflation risks, presenting a challenging policy dilemma. Two-year yields have dipped back into negative territory, and swaps markets are now fully pricing in a quarter-point rate cut for June. For now, FX intervention seems unlikely to avoid rekindling tensions with the US administration, which previously labeled Switzerland a currency manipulator during Trump’s first term.
CADBreakout below 1.38 fails. The Canadian dollar has found solid support from broader dollar weakness throughout April, gaining around 4% against the greenback, its strongest monthly gain against the US dollar since April 2015. This week, USD/CAD tested a key support level at 1.377, the lowest since October 2024, following optimistic comments from President Trump on renewed trade talks with newly elected Prime Minister Mark Carney. However, CAD struggled to hold below 1.38 as weaker-than-expected macro data weighed on sentiment, reinforcing a bleak outlook for the remainder of the year. The PMI manufacturing index fell to 45.3 in February, marking its third consecutive decline and the weakest reading since May 2020, signaling ongoing stress in factory activity.
The weekly chart shows firm support at the 90-week SMA at 1.379. Over the past two weeks, CAD has fluctuated between a high of 1.3905 and a six-month low of 1.377, establishing key resistance and support zones to monitor in the days ahead. A ‘death cross’ has emerged on daily candles, with the 20-day SMA crossing below the 200-day SMA, indicating a bearish trend. However, price action is expected to remain range-bound, gravitating toward the 1.393 level, especially if dollar weakness fades and renewed demand for the greenback picks up in the coming days.
AUD Inflation surprise fails to derail RBA cut expectations. Australia’s Q1 headline CPI came in at 2.4% year-over-year, slightly above the 2.3% consensus, while the critical trimmed mean measure (which RBA closely monitors) reached 2.9%, exceeding expectations of 2.8%. Despite these upside surprises, markets remain convinced the RBA will proceed with a 25bps rate cut in May, with 26bps of easing already priced in. Technically, AUD/USD continues testing the critical 200-day EMA resistance at 0.6408, a level that has historically capped advances. The next key support for the pair rests at 21-day EMA of 0.6351. Watch for upcoming Judo Bank services PMI and building approvals data, which could influence near-term price action. A solid services print might temporarily delay RBA easing expectations, potentially providing additional short-term support for the currency.
CNYManufacturing weakness emerges as Yuan stabilizes. China’s economy is showing initial impacts from tariff concerns, with April’s official manufacturing PMI disappointing at 49.0, significantly below the 49.7 forecast and previous 50.5 reading. The non-manufacturing PMI also underwhelmed at 50.4, missing expectations of 50.6. Particularly concerning was the manufacturing export orders component, which plummeted from 49.0 to 44.7, highlighting growing external pressures. USD/CNH has corrected over 2% from its daily April 8 peak of 7.4290. The pair now approaches key technical support at the 200-day EMA (7.2537), potentially offering an attractive entry point for USD buyers anticipating the longer-term uptrend to resume. Market focus will shift to upcoming Caixin Services PMI, trade balance, and new loans data. The trade figures will be particularly scrutinized for evidence of export resilience amid growing global protectionist measures and signs of manufacturing weakness already evident in the PMI data.
JPY BoJ caution triggers sharp Yen selloff. Markets interpreted the BoJ’s latest communication as surprisingly dovish, triggering an outsized reaction despite Governor Ueda’s moderately hawkish press conference tone. This disconnect highlights the uncertainty phase markets are navigating, particularly with ongoing US-Japan trade negotiations creating additional complexity. USDJPY’s sharp move higher complicates the picture, as the US administration generally prefers yen strength. This tension might reinvigorate speculation for an earlier rate hike, especially considering Japan’s deeply negative real rates amid the BoJ’s still highly accommodative stance. Technically, USDJPY has broken through the important 144.00 resistance level that capped gains throughout late April, clearing out accumulated JPY long positions. The pair now targets 147.00, with immediate support established at 143.50. This technical breakout appears driven by the BoJ’s downward revisions to growth and inflation forecasts rather than a fundamental shift in policy trajectory. Key upcoming data includes the BoJ monetary policy meeting minutes, au Jibun Bank services PMI, household spending, and foreign reserves reports.
MXNPeso trades at 5-year average. The Mexican Peso has held steady, trading near 19.5, its five-year average, and staying below 20 despite mixed local and US macroeconomic data. While first-quarter growth has been sluggish, agricultural activity has helped the Peso avoid slipping into a technical recession.
Challenges remain, like weaker commodity prices, a slowing outlook from its key trading partner to the north, and expectations of further Banxico rate cuts that could reduce carry appeal. Still, the short-term outlook looks brighter as President Sheinbaum’s trade successes with the US and her calm approach to tariff tensions have helped shift sentiment. This week, Mexico and the US reached two key agreements: one to deliver more water from the Rio Grande basin to Texas farmers, addressing concerns over a decades-old water-sharing pact, and another to tackle the New World screwworm pest, avoiding restrictions on US livestock imports.
The Peso’s recent gains could ease inflation worries, while slower growth may help keep broader price pressures in check. Trump’s softened stance on key policies has also boosted sentiment, with the Peso trading stronger in the near term. President Sheinbaum enjoys high approval ratings, with 67% of Mexicans viewing her leadership positively—outpacing her predecessor. Despite hurdles like tariffs and recession risks, optimism persists, with over half of Mexicans expecting economic improvement in the next six months and confidence high in Sheinbaum’s ability to negotiate better trade deals.
*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.
The Canadian dollar has found solid support from broader dollar weakness throughout April, surging around 4% against the greenback, its strongest monthly gain against the U.S. dollar since April 2015.
This week, USD/CAD tested a key support level at 1.377, the lowest since October 2024, following optimistic comments from President Trump on renewed trade talks with newly elected Prime Minister Mark Carney.
The weekly chart shows firm support at the 90-week SMA at 1.379. Over the past two weeks, CAD has fluctuated between a high of 1.3905 and a six-month low of 1.377, establishing key resistance and support zones to monitor in the days ahead. A ‘death cross’ has emerged on daily candles, with the 20-day SMA crossing below the 200-day SMA. However, price action is expected to remain range-bound, gravitating toward the 1.39 level, especially if dollar weakness fades and renewed demand for the greenback picks up in the coming days.
The CAD struggled to hold below 1.38 as weaker-than-expected macro data weighed on sentiment, reinforcing a bleak outlook for the remainder of the year. The PMI Manufacturing Index fell to 45.3 in February, marking its third consecutive decline and the weakest reading since May 2020, signaling ongoing stress in factory activity.
This comes on the heels of a report recently released by the Financial Accountability Office of Ontario (FAO), detailing the economic effects of U.S. tariffs on steel, aluminum, automobiles, and auto parts, along with Canada’s retaliatory measures. While centered on the province of Ontario, the analysis echoes findings from the Canadian Chamber of Commerce and the Bank of Canada, reinforcing concerns that these tariffs will dampen economic growth, reduce employment, and drive-up consumer prices. FAO projects a modest recession in the province, with the manufacturing sector’s supply chain industries facing the most significant strain. The hardest-hit areas are expected to be labor-intensive services, including trade, transport, and professional services. Windsor and other cities in southern Ontario are likely to bear the brunt of the downturn.
US data downbeat but not dreadful
George Vessey – Lead FX & Macro Strategist
The US dollar and yields tracked higher yesterday following a modest ISM manufacturing data beat but still worrying signs of stagflation. Two-year Treasury yields snapped a 5-day decline, bouncing off 3.6%. The US dollar index extended towards its 21-day moving average in an attempt to break the downtrend it’s been in since early February. But its attempt has proved unsuccessful (for now) ahead of today’s key US jobs report and next week’s Federal Reserve (Fed) meeting.
April’s ISM manufacturing index fell to 48.7, a five-month low, signalling continued contraction in the sector. While the headline number wasn’t as weak as feared, subcomponents showed a mixed picture – prices were higher but less than expected, and orders/employment surprised positively, but both remained below 50, reinforcing stagflation concerns. The sector has struggled under widespread tariffs, with optimism fading since President Trump’s election as businesses face weaker sales and rising costs. The broader economy remains resilient for now, but risks loom, especially after Q1 GDP contracted for the first time in three years due to a record surge in imports tied to trade disputes.
Today, all eyes are on the US jobs report for April, which is unlikely to capture the full employment hit from Trump’s tariff announcements. The unemployment rate is expected to hold steady at 4.2%, whilst the non-farm payrolls consensus is 138k, down from 228k in March. A solid jobs report will mean there’s no urgency for the Fed to cut rates next week, or even to signal an impending move. Still, jobs are starting to be cut in the US as evidenced by the latest Challenger report which shows almost 700k jobs have been cut over the last 6 months. So looking ahead, we expect May’s jobs report to be very weak and pressure will build on the Fed to prioritize the full-employment side of its dual mandate, which could be another drag on the dollar over the coming months.
Euro flirting with key support level
George Vessey – Lead FX & Macro Strategist
The euro is heading for its second consecutive weekly decline against the US dollar, pressured by improved global risk sentiment and subdued volatility amid optimism about potential trade deals. EUR/USD has so far bounced off its 21-day moving average though, in a sign that the recent uptrend remains intact for the time being. Flash Eurozone inflation figures are in the spotlight today, with the headline figure expected to inch closer to the ECB’s 2% target.
Meanwhile, the signing of a long-anticipated mineral agreement between Ukraine and the US failed to provide support, indicating that geopolitical headwinds remain a drag on the common currency. The newly established US-Ukraine investment fund, framed by the Trump administration as both a commitment to sovereignty and a way to secure returns on military aid, hasn’t shifted market sentiment, with the euro down 0.5% – its biggest weekly drop since late March. A solid US jobs report today could drag the pair even lower, with $1.12 a potential target if the 21-day moving average is cleared decisively.
Still, EUR/USD remains circa 9% higher year-to-date, well above long-term moving averages, supported by a more-promising euro-area fiscal and structural domestic outlook as well as the structurally weaker dollar case. The deflationary impact of tariffs on the Eurozone opens the door to more ECB rate cuts, which could limit EUR upside, but what appears to be a more favourable cyclical channel might prove more important for the common currency over the long-term.
Four BoE cuts now priced in
George Vessey – Lead FX & Macro Strategist
It’s been a mixed week for the British pound, up most against EUR, NZD and JPY, the latter more than 1% after that dovish Bank of Japan meeting. But GBP/USD is largely unchanged at around $1.33, whilst versus the NOK and AUD, sterling is down on the week.
Global risk sentiment continues to dictate sterling’s price action so with equities extending their recovery to erase all of their post “ Liberation Day” losses, the pound has enjoyed a rebound against its traditional safe haven peers barring the US dollar. The latest positive news relates to China mulling trade talks with the US. Meanwhile, traders are now pricing in four more quarter-point interest rate cuts from the Bank of England (BoE) this year ahead of next week’s meeting. The expectation of policymakers speeding up the pace of interest-rate cuts comes amidst concerns that weakness in the US economy may spread globally. It’s the first time in seven months that markets imply the benchmark rate falling to 3.5%. Such dovish repricing is a negative catalyst for the pound via the yield channel.
In other news, UK politics have also been back in the spotlight this week. Nigel Farage’s Reform UK secured a narrow victory in the Runcorn and Helsby by-election, winning by just six votes after a recount. This marks a significant setback for Prime Minister Keir Starmer, as Labour had previously held the seat with a 14,696-vote majority in the 2024 general election. The result underscores growing concerns within Labour about the rise of the populist right, with Reform making gains across England.
*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 quothave 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.
The US dollar and yields tracked higher yesterday following a modest ISM manufacturing data beat but still worrying signs of stagflation. Two-year Treasury yields snapped a 5-day decline, bouncing off 3.6%. The US dollar index extended towards its 21-day moving average in an attempt to break the downtrend it’s been in since early February. But its attempt has proved unsuccessful (for now) ahead of today’s key US jobs report and next week’s Federal Reserve (Fed) meeting.
April’s ISM manufacturing index fell to 48.7, a five-month low, signalling continued contraction in the sector. While the headline number wasn’t as weak as feared, subcomponents showed a mixed picture – prices were higher but less than expected, and orders/employment surprised positively, but both remained below 50, reinforcing stagflation concerns. The sector has struggled under widespread tariffs, with optimism fading since President Trump’s election as businesses face weaker sales and rising costs. The broader economy remains resilient for now, but risks loom, especially after Q1 GDP contracted for the first time in three years due to a record surge in imports tied to trade disputes.
Today, all eyes are on the US jobs report for April, which is unlikely to capture the full employment hit from Trump’s tariff announcements. The unemployment rate is expected to hold steady at 4.2%, whilst the non-farm payrolls consensus is 138k, down from 228k in March. A solid jobs report will mean there’s no urgency for the Fed to cut rates next week, or even to signal an impending move. Still, jobs are starting to be cut in the US as evidenced by the latest Challenger report which shows almost 700k jobs have been cut over the last 6 months. So looking ahead, we expect May’s jobs report to be very weak and pressure will build on the Fed to prioritize the full-employment side of its dual mandate, which could be another drag on the dollar over the coming months.
Euro flirting with key support level
George Vessey – Lead FX & Macro Strategist
The euro is heading for its second consecutive weekly decline against the US dollar, pressured by improved global risk sentiment and subdued volatility amid optimism about potential trade deals. EUR/USD has so far bounced off its 21-day moving average though, in a sign that the recent uptrend remains intact for the time being. Flash Eurozone inflation figures are in the spotlight today, with the headline figure expected to inch closer to the ECB’s 2% target.
Meanwhile, the signing of a long-anticipated mineral agreement between Ukraine and the US failed to provide support, indicating that geopolitical headwinds remain a drag on the common currency. The newly established US-Ukraine investment fund, framed by the Trump administration as both a commitment to sovereignty and a way to secure returns on military aid, hasn’t shifted market sentiment, with the euro down 0.5% – its biggest weekly drop since late March. A solid US jobs report today could drag the pair even lower, with $1.12 a potential target if the 21-day moving average is cleared decisively.
Still, EUR/USD remains circa 9% higher year-to-date, well above long-term moving averages, supported by a more-promising euro-area fiscal and structural domestic outlook as well as the structurally weaker dollar case. The deflationary impact of tariffs on the Eurozone opens the door to more ECB rate cuts, which could limit EUR upside, but what appears to be a more favourable cyclical channel might prove more important for the common currency over the long-term.
Four BoE cuts now priced in
George Vessey – Lead FX & Macro Strategist
It’s been a mixed week for the British pound, up most against EUR, NZD and JPY, the latter more than 1% after that dovish Bank of Japan meeting. But GBP/USD is largely unchanged at around $1.33, whilst versus the NOK and AUD, sterling is down on the week.
Global risk sentiment continues to dictate sterling’s price action so with equities extending their recovery to erase all of their post “ Liberation Day” losses, the pound has enjoyed a rebound against its traditional safe haven peers barring the US dollar. The latest positive news relates to China mulling trade talks with the US. Meanwhile, traders are now pricing in four more quarter-point interest rate cuts from the Bank of England (BoE) this year ahead of next week’s meeting. The expectation of policymakers speeding up the pace of interest-rate cuts comes amidst concerns that weakness in the US economy may spread globally. It’s the first time in seven months that markets imply the benchmark rate falling to 3.5%. Such dovish repricing is a negative catalyst for the pound via the yield channel.
In other news, UK politics have also been back in the spotlight this week. Nigel Farage’s Reform UK secured a narrow victory in the Runcorn and Helsby by-election, winning by just six votes after a recount. This marks a significant setback for Prime Minister Keir Starmer, as Labour had previously held the seat with a 14,696-vote majority in the 2024 general election. The result underscores growing concerns within Labour about the rise of the populist right, with Reform making gains across England.
*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.
