The US dollar experienced its largest weekly decline since 2022, driven by a combination of tariff uncertainty, weaker economic data, and rising optimism in European markets following Germany’s historic debt announcement.
On Friday, the US labor market showed signs of softening, with nonfarm payrolls increasing by 151k, falling short of the 160k consensus estimate. While the deviation was not drastic, it added to broader concerns of an economic slowdown. At the same time, President Trump’s decision to postpone tariffs on Canada and Mexico failed to reassure investors, as markets continue to prioritize stability over short-term adjustments.
Investor sentiment toward the US economy has also been tempered by growing recognition that Trump’s second term may not deliver the economic boom some had anticipated. Both the President and Treasury Secretary Bessent emphasized the need for structural reforms, acknowledging that markets and the economy could face turbulence as the administration undertakes an overhaul of government policies. Government spending and employment have become bloated, according to Bessent, and a drawdown in both is needed. Investors will need to come to terms with the fact that there might be no “Trump put” in the end.
US equities ended the week lower, reflecting these concerns, though Federal Reserve Chair Jerome Powell provided a temporary boost on Friday. Powell reassured markets that the economy remains on solid footing and that he is not overly concerned about current conditions. However, his remarks failed to stem the dollar’s continued decline, which extended into the weekend.
While the dollar’s fall is primarily market-driven, history suggests that Trump’s favorability ratings tend to follow a similar trajectory. A strong dollar has often coincided with confidence in his economic policies, while periods of weakness—such as now—signal increasing investor skepticism. This isn’t to say that the dollar dictates poll numbers, but both serve as indicators of market and public sentiment. If the greenback’s slump reflects eroding trust in Trump’s economic agenda, could his approval ratings be next in line for a drop? With trade tensions rising and investors reassessing his second-term outlook, it’s a risk worth watching.
Looking ahead, investors will closely monitor economic data and policy developments, as uncertainty around trade, fiscal reforms, and monetary policy continues to shape market dynamics. The US inflation release will be a key event to watch this week.
Betting on Europe again
Boris Kovacevic – Global Macro Strategist
The euro strengthened last week, benefiting from broad dollar weakness, a shift in investor sentiment, and renewed fiscal optimism in Europe. Germany’s historic debt issuance announcement fueled expectations of stronger growth, while the European Central Bank’s quarter-point rate cut on Thursday was offset by a more cautious policy outlook.
On Saturday, ECB Executive Board member Isabel Schnabel warned that inflation in the Eurozone is more likely to remain above the 2% target for an extended period than to decline sustainably below it. Her remarks suggest growing resistance within the ECB to further rate cuts in the near term. Schnabel’s comments come as policymakers prepare for a pivotal April decision, with divisions emerging over how much further monetary easing is warranted. Meanwhile, Europe’s economic outlook continues to evolve as governments prepare to deploy hundreds of billions of euros in defense and infrastructure spending, particularly in Germany.
The euro saw strong gains last week, rallying 4.4% against the dollar. It was the largest advance since 2009, the year the German debt break had been introduced. However, the currency faced some resistance near $1.0850, as traders reassessed the implications of a hawkish ECB amid an improving economic outlook. Looking ahead, market participants will closely monitor Eurozone inflation data and ECB communications for further clues on monetary policy. With the bloc’s cyclical recovery gaining momentum and inflation risks still elevated, expectations of additional ECB easing are becoming increasingly uncertain.
Pound’s mixed fortunes
George Vessey – Lead FX & Macro Strategist
The pound has been caught in the crossfire of late, weakening against the euro, but strengthening against the US dollar. On the latter, due to US growth scares, more Fed easing being priced in has boosted UK-US rate differentials in the pound’s favour. GBP/USD surged 2.7% last week and above key moving average resistance levels, opening the door to a test of the $1.30 handle in the near-term. The daily chart is flashing overbought though, which suggests a correction lower, or period of consolidation is looming, but from a valuation perspective, GBP/USD is still 4% below its 10-year average of $1.35.
Against the euro though, given the huge spending plans from Europe, the pound suffered its worst week in two years, falling 1.6% before fading around its 50-week moving average, which has supported for over a year now. However, if GBP/EUR struggles to reclaim its 200-day moving average at €1.1929, then more downside could be in the offing, especially as the fiscal divergence between the UK and Eurozone could prove more euro positive due to growth differentials. However, a consolidation in the UK’s fiscal outlook should limit the downside risk in sterling, whilst near-term monetary policies and sterling’s carry advantage due to higher UK yields remains pound positive.
In the spotlight from the UK this week, we have monthly GDP data. The UK economy has been on a fragile footing since the second half of 2024, and January’s GDP should confirm a slowing in momentum from 0.4% m/m to 0.1%. However, the three-month average is expected to pick up from 0.0% to 0.2%. Unless we see any major deviation from the consensus, the data is unlikely to move the needle on Bank of England policy expectations.
*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
Dollar consolidates as markets weigh Trump tariff comments
The greenback traded mixed against major currencies as markets digested US President Trump’s comments on potential tariffs and mixed US employment data.
USD held below the 104.00 level on DXY Index, with momentum suggesting continued range-bound trading ahead of this week’s US inflation data.
The euro approached 1.0900 before softening towards 1.0840 during NY trading, with strong technical resistance limiting upside potential.
Asian currencies showed limited movement, with USD/JPY flat, USD/SGD weakened 0.2%, while USD/CNH gained a modest 0.1%.
US equities finished positive with the S&P 500 rising 0.55% to 5770 and Nasdaq gaining 0.70% to nearly 18200, as Fed Chair Powell maintained an optimistic economic outlook despite the mixed employment report.
Market participants will be watching for this week’s meeting between US and Ukrainian officials in Saudi Arabia.
Economic data to drive Dollar direction
The US dollar will be in focus this week with key inflation data scheduled for release, which could influence Federal Reserve policy expectations.
Consumer Price Index (CPI) data is due on Wednesday, which will be closely watched by market participants for signs of inflation trends. This will be followed by Producer Price Index (PPI) figures on Thursday.
The Job Openings and Labor Turnover Survey (JOLTS) report on Wednesday will provide insight into the US labor market conditions, potentially affecting dollar sentiment.
In Europe, industrial production data is scheduled for release on Friday, which may impact the euro.
The Bank of Canada will make its rate announcement on Thursday, likely influencing CAD movements against major currencies.
Several Asian economies will release important data, with Japanese GDP figures due on Monday.
The UK will publish monthly GDP and industrial production numbers on Friday, which could drive GBP volatility to close the week.
Aussie left behind as commodities gain on tariff worries
The AUD/USD was weaker on Friday even as commodities made further gains with the Aussie’s relationship with the commodity complex continuing to wax and wane in recent months.
The Aussie remains broadly flat in 2025 despite a more than 18% rally in the World Commodity Index since forming a bottom in September last year. The World Commodity Index is up 7.0% in 2025.
Notably, the AUD/USD’s rolling one-month correlation, at -0.105, signals an almost complete lack of relationship between the Aussie and the commodity space. (A reading of 1.0 signals perfect correlation while a reading of -1.0 signals a perfect negative correlation. A reading of zero shows no correlation.)
For now, markets are still being driven by tariff news, with commodities in demand as businesses try to front-run tariffs. For example, US lumber prices are at 30-month highs and copper at 10-months highs with threats of tariffs on both commodities driving activity.
However, this demand might not last and worries about flagging demand could be the driver of a weaker Australian dollar, with the AUD/USD still in a clear long-term downtrend, as signalled by the downward pointing 200-day moving average.
Aussie retreats as China CPI contracts
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.
Trump’s tariff flip-flopping continues to rattle confidence amongst consumers, businesses and financial markets. US policy uncertainty is at its highest level since Covid. The tech-heavy Nasdaq index is now down 10% since hitting record highs last month. The US dollar is on track for its worst week in two years. A weak US jobs report today could further damage the dollar, whilst the euro dominates the FX space on the back of looser fiscal and tighter monetary policy expectations. Given the high noise-to-signal ratio, a scenario-based approach to FX forecasting is more justified than ever.
Tariff pendulum continues to swing
George Vessey – Lead FX & Macro Strategist
Tariffs on, tariffs off, is the name of the game. US President Donald Trump has performed another reversal on tariffs, delaying duties on many goods from Canada and Mexico for a month. This is the second month-long delay Trump granted on his own tariffs and the uncertainty continues to take its toll on financial markets. The tech-heavy Nasdaq index, for example, has fallen 10% from its recent peak, defined as a market correction, whilst the US dollar is on track for its worst week in over two years.
The dollar’s status as a safe-haven asset and reserve currency won’t disappear overnight, but the global shift away from it this week has been eye-opening. The acceleration is mainly a result of Trump’s unpredictable policies undermining confidence in the dollar, but also due to US growth scares and dovish Fed repricing, keeping US yields relatively stagnant compared to G10 peers. On the macro front, the US trade deficit widened to a record high in January, driven by a 10% surge in imports ahead of anticipated tariffs. Additionally, job cuts soared to their highest level since 2020, fuelled by significant layoffs at DOGE. However, initial jobless claims came in below expectations, offering some reassurance.
Today, all eyes are on the US jobs report. The data published last month showed a mixed bag for investors. Hiring slowed but wage growth ticked higher and continued the theme of “heightened inflation anxiety” driven by the tariff war and rising inflation expectations. Headline payrolls came in at 143k, below the 175k consensus. However, upward revisions to the past two months added 100k jobs, and the unemployment rate held at 4.0%. As for today, 170,000 new jobs are expected to have been added in February whilst the unemployment rate is seen holding steady at 4%.
European outperformance rests on stimulus
Boris Kovacevic – Global Macro Strategist
European and Chinese equities have outperformed their US counterparts this week, signaling the emergence of a new macro narrative—one that favors assets in countries benefiting from both fiscal and monetary stimulus. Germany’s commitment to major defense and infrastructure spending, alongside yesterday’s ECB rate cut by 25 basis points to 2.5%, underscores this shift.
The German 10-year yield has surged a historic 42 basis points this week, while the euro’s 4% rally against the dollar marks one of its strongest gains on record. However, both assets retreated slightly after the ECB’s somewhat hawkish press conference, where policymakers debated the need for further easing. Markets now assign a 50% probability to another rate cut in April. The ECB remains data-dependent, but divisions persist over the neutral rate, with slowing disinflation and stronger growth potentially limiting further cuts. Equity outperformance rests on both the fiscal and monetary support continuing in Europe. The hawkish ECB statements explains why the STOXX 600 is on track to record its first loss in ten weeks.
The ongoing tariff saga adds another layer of uncertainty. The Trump administration’s latest delay on Canadian and Mexican tariffs leaves markets guessing about potential levies on European goods—an outcome that could push the ECB toward continued easing, while a tariff-free environment and fiscal expansion would make a pause more justifiable. EUR/USD has found its resistance at the $1.0850 mark and is now dependent on a weak US nonfarm payrolls report to reclimb its weekly high again.
Pound firm versus dollar, fragile versus euro
George Vessey – Lead FX & Macro Strategist
The pound remains buoyant versus the US dollar near $1.29, one cent higher than its 5-year average rate. However, due to the huge spending plans unveiled by Germany and the EU and surging European yields, sterling has wilted 2% against the euro this week so far – on track for potentially its biggest weekly loss in two years. GBP/EUR downside momentum might wane at its 50-week moving average, which has been a crucial support for over a year – currently located at €1.1878.
On the macro front this week, the final UK PMI figures confirmed the private sector economy grew modestly in February. The services PMI was revised lightly lower but still beat initial estimates of 50.8 and offsetting the decline in manufacturing. Late last month, we also saw a leading indicator for UK GDP growth hit its highest level since 2017. That said, the British Chambers of Commerce yesterday slashed its forecast for the UK economy due to the tax and trade “double whammy” afflicting UK businesses. But due to the the deteriorating US growth outlook as well, the growth rate differential is narrowing between the US and UK. It’s also led to a sharp increase in the UK-US rate differential as more Fed cuts are priced in. Both factors have contributed to the pound’s latest upswing versus the dollar.
Sterling has climbed into overbought territory versus the dollar, but the implied probability of GBP/USD touching $1.30 before the end of the month has jumped to over 60% from just 14% one week ago, according to FX options market pricing. Moreover, traders have the highest conviction in five years that more gains are in store for the pound over the coming weeks, though gains will be constrained from 1-month onwards due to elevated uncertainty in trade and foreign policy globally.
*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.
Tariff uncertainty weighs on markets. President Trump has delayed tariffs on Canada and Mexico for another month, adding to market uncertainty. The Nasdaq has entered a correction, down 10%, while the dollar continues its slump.
US dollar weakens. The dollar’s safe-haven appeal remains intact, but confidence is eroding due to Trump’s erratic policies, weaker US growth, and dovish Fed expectations. Meanwhile, US yields are underperforming G10 peers.
US trade deficit. The US trade deficit hit a record high in January as imports surged 10% ahead of anticipated tariffs. Job cuts soared to their highest since 2020, driven by DOGE layoffs, but initial jobless claims came in below expectations
Berlin Wall falls. Germany’s historic infrastructure and defense spending plan, coupled with the ECB’s 25bps rate cut, reinforced the rotation into Europe. The German 10-year yield surged 42bps this week, while the euro posted a 4% rally against the dollar—one of its strongest moves on record.
Risks remain. Investors are still on edge over potential US tariffs on European goods, which could push the ECB toward continued easing. A tariff-free scenario and fiscal expansion would make a pause more justifiable.
Stronger pound. bond yields surged as markets priced in a major fiscal shift, sending UK 10-year yields to one-month highs. The widening UK-US 10-year spread hit an 18-month high, fueling a pound rally against the struggling US dollar.
Global Macro A week where decades happen
Confusion. Tariffs on, tariffs off, is the name of the game. US President Donald Trump has performed another reversal on tariffs, delaying duties on many goods from Canada and Mexico for a month. This is the second month-long delay Trump granted on his own tariffs and the uncertainty continues to take its toll on financial markets. The tech-heavy Nasdaq index, for example, has fallen 10% from its recent peak, defined as a market correction, whilst the US dollar is on track for its worst week in over two years. Overall, it’s a risk-off mood in which Europe is outperforming the US due to uncertainty coming from the Trump administration.
Historic. This is what European investors have eagerly been waiting for. Germany’s likely next coalition of the CDU and SPD is preparing for a major fiscal expansion, potentially widening the deficit to 4% of GDP over the next decade. While details remain unclear and implementation risks are high, the plan aims to bolster military deterrence, drive economic recovery, and reshape Germany’s lagging infrastructure. Around €500 billion could potentially be available for investment over the next ten years.
Double stimulus. European and Chinese equities have outperformed their US counterparts this week, signaling the emergence of a new macro narrative—one that favors assets in countries benefiting from both fiscal and monetary stimulus. Germany’s commitment to major defense and infrastructure spending, alongside yesterday’s ECB rate cut by 25 basis points to 2.5%, underscores this shift. The German 10-year yield has surged a historic 42 basis points this week, while the euro’s 4% rally against the dollar marks one of its strongest gains on record. However, both assets retreated slightly after the ECB’s somewhat hawkish press conference, where policymakers debated the need for further easing.
Week ahead Inflation increase to rattle markets?
Global markets are set for another volatile week as investors assess inflation trends, central bank policies, and key macroeconomic data. The interplay between slowing growth, sticky inflation, and central bank actions remains the dominant theme, shaping expectations for interest rates and asset prices. With crucial inflation readings out of the US, a Bank of Canada rate decision, and fresh growth data from the UK and Germany, this week could provide more clarity on the direction of global monetary policy and economic resilience.
US JOLTs. The US labor market remains a crucial focus for the Fed. January’s job openings came in at 7.6M, slightly below the consensus. While still strong, a further decline in openings could hint at a cooling labor market, reinforcing expectations of future Fed rate cuts.
US Inflation data. Inflation remains the most important macro driver for markets. February’s core inflation is expected to bounce from 3.1% to 3.3%, complicating matters for policy makers at the Fed.
Bank of Canada rate decision. The BoC is expected to cut interest rates by 25 basis points to 2.75%. Investors will be closely watching the statement of the rate decision as a hawkish or dovish tilt can move markets more than the cut itself.
UK GDP. The UK economy has been on a fragile footing, and January’s GDP MoM should confirm a slowing in momentum from 0.4% to 0.1%. This weakness might increase expectations for near-term BoE rate cuts, pressuring the pound. However, persistent inflation concerns could limit downside momentum.
FX Views Investors abandoning the dollar
USD Worst week in over two years. The US dollar has depreciated against 88% of its global peers so far in March. It’s on track for its worst week since November 2022, sliding almost 4% against a basket of major peers as investors shift focus from the inflationary impact of tariffs to the US growth risks. Macro data has been mixed this week, but overall Fed easing bets have increased, keeping US yields near 6-month lows. The dollar’s yield-driven bullish case is therefore weakening. Rate differentials with the Eurozone are the lowest in six months, helping to send the euro 4% higher versus the buck. The dollar’s status as a safe-haven asset and reserve currency won’t disappear overnight, but the global shift away from it this week has been eye-opening. The acceleration is mainly a result of Trump’s unpredictable policies undermining confidence in the dollar, but the increasing risks around stagflation are also erasing the dollar’s high growth advantage. We think the recent move may be overstretched in the very short-term, with the dollar index now in oversold territory, but it’s fair to assume we’ve probably witnessed the peak of the dollar already this year.
EUR Eyepopping surge after fiscal boost. The euro has rocketed over 4% this week versus the US dollar, recording its biggest 4-day advance in a decade. EUR/USD has blown through its 200-day moving for the first time since November 11, and touched its highest level ($1.0871) in four months. The bullish move was initially triggered by the unwinding of Trump trades as investors shifted focus onto US economic growth risks. The euro got another bullish injection when Germany and the EU unveiled huge stimulus plans in the form of defense and infrastructure spending. This sent the 10-year bund yield soaring and the German-US real rate differential jumped to its highest since September, helped also by fading ECB easing bets. In the FX options space, traders have the highest conviction in five years that more gains are in store for the euro, with some hedge funds even wagering on an additional 10% surge, which would match the path of EUR/USD in the aftermath of Trump’s first presidential term. We warn on turning too optimistic too soon though. Europe’s spending plans still need to be approved, and the tariff war has only just begun.
GBP The twofold story. Sterling has capitalised on the dollar’s weakness this week – surging 2.5% and above $1.29 – over one cent higher than its 5-year average rate. The pair has broken above key resistance levels like the closely watched 200-day and 200-week moving averages, which is a bullish signal. Moreover, in FX options markets, short-term risk reversals betting on further sterling strength have surged to their highest in around five years. Although GBP/USD has climbed into overbought zone, suggesting a correction is due, the implied probability of touching $1.30 before the end of the month has jumped to over 60% from just 14% one week ago. Elsewhere, due to the huge spending plans unveiled by Germany, sterling has fallen 2% against the euro this week – on track for its biggest weekly loss in two years. GBP/EUR downside momentum might wane at its 50-week moving average, which has been a crucial support for over a year – currently located at €1.1878. UK growth figures will be in the spotlight next week.
CHF Two more stories to tell.The Swiss franc saw significant volatility this week against both the euro and the US dollar, driven by monetary policy shifts, shifting risk sentiment, and changing rate differentials. Growing speculation that the Swiss National Bank may soon cut rates, amid Switzerland’s low inflation and recent dovish signals, put early pressure on the franc, in particular against the euro. Meanwhile, the European Central Bank’s 25bps rate cut, accompanied by a surprisingly hawkish tone, fueled a rebound in the common currency. This pushed EUR/CHF higher, as traders reassessed the likelihood of further SNB easing relative to the eurozone. At the same time, global macro uncertainty remains elevated, and the franc traditionally benefits from safe-haven flows. However, the broad-based weakness in the US dollar, combined with rising risk appetite in Europe, driven by Germany’s historic debt issuance announcement, triggered major CHF selling against the euro. As a result, EUR/CHF surged to 0.9640€ before retreating to its 50-day moving average at 0.9520€, while USD/CHF dropped around 2.5% this week, marking its worst performance since July.
CNYPBoC pledges to prevent Yuan overshooting. USDCNH has consolidated within a narrow 100-pip range (7.2371/2480), finding support at the 7.2350 level that has held through multiple tests this year. The next significant support sits at the 200-day moving average around 7.2352. Chart shows there may be potential for Yuan to strengthen given the high correlation with EUR. PBoC Governor Pan Gongsheng stated China will “resolutely” prevent yuan overshooting risks, maintaining a consistent FX policy aimed at keeping the yuan “basically stable at reasonable equilibrium.” These comments come amid criticism from US President Trump regarding China’s exchange rate practices. Pan reaffirmed China’s intent to cut reserve requirements and interest rates at appropriate times this year, coordinating with fiscal policy while using various tools to maintain sufficient liquidity. Market participants should monitor upcoming M2 money supply data, new loans figures, and Chinese total social financing for additional directional insights on USDCNH.
JPY Descending channel maintains negative USDJPY outlook. The descending channel pattern in USDJPY actually indicates a potential reversal to the downside after the current uptrend completes, supporting a continued negative outlook. Based on this technical formation, there may be potential for further fall of USDJPY to 145 handle. Next key resistance for USDJPY at 200-day EMA 151.84. BoJ Deputy Governor Uchida indicated that while determining the neutral rate remains challenging, the central bank could proceed with rate adjustments aligned with market expectations while monitoring economic responses. He emphasized that overseas developments remain a key criterion for hike timing. While Uchida views the US economy as generally balanced, he expressed caution regarding global economic uncertainties. Upcoming Japanese current account data, household spending figures, and GDP numbers will provide further directional guidance.
CADRiding the waves of speculation. This week, the announcement of 25% tariffs on all imports from Mexico and Canada triggered notable market movements. The Canadian dollar briefly hovered above the 1.45 level against the US dollar before retreating. Interestingly, the tariffs were accompanied by USD weakness rather than strength, as markets began pricing in the potential for a U.S. economic slowdown—something not seen in the past two years. Since Monday, the USD/CAD has dropped from its weekly high of 1.454 to 1.424, fueled by renewed speculation surrounding an early resolution to trade negotiations, along with some sectors securing exemptions and another one-month delay until April 2nd. These factors have gradually reduced the tariff-related premium weighing on the CAD.
In the near term, technical analysis highlights key support zones at the 60-day and 20-day simple moving averages (SMAs), situated at 1.435 and 1.429, respectively. Investors should also monitor the weekly low of 1.424, a critical level that aligns closely with the 20-week SMA at 1.423.
AUD Technicals signal positive AUD turn. AUSDUSD recovered from 5-year low of 0.61 and now sits at its 50-day EMA 0.6313. Technical signals turned positive with price action closing within the Ichimoku Cloud. The pair appears to be forming a cup and handle bottom pattern, a classic positive formation. This technical setup suggests AUDUSD could continue higher, with the close inside the Cloud potentially leading to a break above it. The next key resistance is at its 200-day EMA of 0.6462. The RBA minutes revealed a more balanced tone than previously thought, acknowledging inflation declined more than expected and wages growth slowed. Officials noted possible additional capacity in the labor market and placed more weight on downside economic risks than in prior assessments. While the RBA maintains inflation targeting as priority, the overall stance appears less hawkish than conveyed in February’s press conference. Watch for Westpac consumer sentiment, business confidence, and private house approvals for next directional cues.
MXNNarrow trading range. Following last Monday’s tariff confirmation, diplomatic efforts to eliminate tariffs have gained momentum. Mexican President Sheinbaum committed to bolstering security cooperation with the U.S., showcased by the extradition of 29 high-ranking drug cartel leaders. Despite this, tariff threats will likely continue to push for an earlier USMCA revision. Banxico’s dovish pivot further underlines a constrained outlook for the Mexican Peso. Rates have rallied amid renewed U.S. growth concerns, though market sentiment remains cautious about short-term risks in local assets. Friday’s MXN CPI data, released ahead of U.S. payrolls, is expected to align with the Central Bank’s projection of CPI staying below 4%, potentially paving the way for a 50-bps rate cut by month’s end.
The Peso trades just below the 20-weekly SMA at 20.37. In the short term, the 20.18 support level is crucial if USD bid resurfaces. A further drop to the 20 level appears overstretched for now.
*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.
Over the past month and a half, discussing markets without touching on politics has been nearly impossible. While we strive for agnostic analysis, it’s worth exploring some of the more speculative market narratives making waves in financial media, especially during times when events unfold rapidly, yet remain unclear and confusing.
We’ve been sifting through the noise trying to uncover signals in a very confusing U.S. trade policy. Drawing from Trump 45’s history, we’ve speculated on the potential dynamics of a regional trade war under Trump 47. Tariffs have been viewed as bargaining tools, revenue generators for Trump’s tax-cut budget, and even tied to the 51st state annexation rhetoric. We’ve also reviewed Trump’s decades-long affinity for tariffs, dating back to the ’80s and how during Trump 45 he linked market performance to his presidency popularity. Yet, one angle—more speculative than analytical—remains unexplored.
The “hard reset” theory suggests that the new U.S. administration could be intentionally engineering a slowdown. By using tariffs, they aim to curb inflation, lower interest rates, and weaken the dollar—all to create a more stable economic landscape for Trump 47’s agenda. While this theory may seem far-fetched, markets are increasingly leaning into the possibility of a slowdown. Stocks have sold off, the dollar has weakened, and expectations for 2025 Fed rate cuts are rising. Skeptics question whether the 3-D chess strategy is too intricate for Trump’s economic cabinet, citing erratic moves on trade policy, while others point to social media hints of an economic reset agenda.
The tariff saga remains as puzzling and elusive as ever, while the Loonie continues to navigate the tides of ambiguous trade policies and the weakening U.S. dollar. Treasury Secretary Scott Bessent, in coordination with the White House, has confirmed that goods compliant with the CUSMA/USMCA trade agreement will be exempt from tariffs until April 2nd. This announcement has triggered notable intraday fluctuations in the Loonie, which traded in a range of 1.437 to 1.424 yesterday. Meanwhile, the DXY index has experienced its steepest weekly decline since November 2022.
Adding to an already volatile week, today’s U.S. and Canadian employment data are set to cap off a week packed with macro data. A weaker U.S. jobs report could amplify bearish sentiment against the USD. However, the recent downward movement appears overextended, and the DXY is likely to stabilize around the 104 level. As markets wrestle with persistent uncertainty, tariffs and evolving trade narratives remain key drivers of sentiment, regardless of how implausible they may appear.
Tariff pendulum continues to swing
George Vessey – Lead FX & Macro Strategist
Tariffs on, tariffs off, is the name of the game. US President Donald Trump has performed another reversal on tariffs, delaying duties on many goods from Canada and Mexico for a month. This is the second month-long delay Trump granted on his own tariffs and the uncertainty continues to take its toll on financial markets. The tech-heavy Nasdaq index, for example, has fallen 10% from its recent peak, defined as a market correction, whilst the US dollar is on track for its worst week in over two years.
The dollar’s status as a safe-haven asset and reserve currency won’t disappear overnight, but the global shift away from it this week has been eye-opening. The acceleration is mainly a result of Trump’s unpredictable policies undermining confidence in the dollar, but also due to US growth scares and dovish Fed repricing, keeping US yields relatively stagnant compared to G10 peers. On the macro front, the US trade deficit widened to a record high in January, driven by a 10% surge in imports ahead of anticipated tariffs. Additionally, job cuts soared to their highest level since 2020, fuelled by significant layoffs at DOGE. However, initial jobless claims came in below expectations, offering some reassurance.
Today, all eyes are on the US jobs report. The data published last month showed a mixed bag for investors. Hiring slowed but wage growth ticked higher and continued the theme of “heightened inflation anxiety” driven by the tariff war and rising inflation expectations. Headline payrolls came in at 143k, below the 175k consensus. However, upward revisions to the past two months added 100k jobs, and the unemployment rate held at 4.0%. As for today, 170,000 new jobs are expected to have been added in February whilst the unemployment rate is seen holding steady at 4%.
European outperformance rests on stimulus
Boris Kovacevic – Global Macro Strategist
European and Chinese equities have outperformed their US counterparts this week, signaling the emergence of a new macro narrative—one that favors assets in countries benefiting from both fiscal and monetary stimulus. Germany’s commitment to major defense and infrastructure spending, alongside yesterday’s ECB rate cut by 25 basis points to 2.5%, underscores this shift.
The German 10-year yield has surged a historic 42 basis points this week, while the euro’s 4% rally against the dollar marks one of its strongest gains on record. However, both assets retreated slightly after the ECB’s somewhat hawkish press conference, where policymakers debated the need for further easing. Markets now assign a 50% probability to another rate cut in April. The ECB remains data-dependent, but divisions persist over the neutral rate, with slowing disinflation and stronger growth potentially limiting further cuts. Equity outperformance rests on both the fiscal and monetary support continuing in Europe. The hawkish ECB statements explains why the STOXX 600 is on track to record its first loss in ten weeks.
The ongoing tariff saga adds another layer of uncertainty. The Trump administration’s latest delay on Canadian and Mexican tariffs leaves markets guessing about potential levies on European goods—an outcome that could push the ECB toward continued easing, while a tariff-free environment and fiscal expansion would make a pause more justifiable. EUR/USD has found its resistance at the $1.0850 mark and is now dependent on a weak US nonfarm payrolls report to reclimb its weekly high again.
Pound firm versus dollar, fragile versus euro
George Vessey – Lead FX & Macro Strategist
The pound remains buoyant versus the US dollar near $1.29, one cent higher than its 5-year average rate. However, due to the huge spending plans unveiled by Germany and the EU and surging European yields, sterling has wilted 2% against the euro this week so far – on track for potentially its biggest weekly loss in two years. GBP/EUR downside momentum might wane at its 50-week moving average, which has been a crucial support for over a year – currently located at €1.1878.
On the macro front this week, the final UK PMI figures confirmed the private sector economy grew modestly in February. The services PMI was revised lightly lower but still beat initial estimates of 50.8 and offsetting the decline in manufacturing. Late last month, we also saw a leading indicator for UK GDP growth hit its highest level since 2017. That said, the British Chambers of Commerce yesterday slashed its forecast for the UK economy due to the tax and trade “double whammy” afflicting UK businesses. But due to the the deteriorating US growth outlook as well, the growth rate differential is narrowing between the US and UK. It’s also led to a sharp increase in the UK-US rate differential as more Fed cuts are priced in. Both factors have contributed to the pound’s latest upswing versus the dollar.
Sterling has climbed into overbought territory versus the dollar, but the implied probability of GBP/USD touching $1.30 before the end of the month has jumped to over 60% from just 14% one week ago, according to FX options market pricing. Moreover, traders have the highest conviction in five years that more gains are in store for the pound over the coming weeks, though gains will be constrained from 1-month onwards due to elevated uncertainty in trade and foreign policy globally.
DXY finds support at 104 after its worst week in 2 years
*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
US non-farm employment seen as critical this month
Major US markets continued to weaken overnight with further losses in US equities while the US dollar fell to the lowest level since last year’s US presidential election.
The S&P 500 fell 1.8% while the Nasdaq dropped 2.6% overnight.
The US dollar dopped to the lowest level since 5 November before recovering later in the session.
The AUD/USD, initially higher, turned lower near the major technical resistance at 0.6400 – the three-month highs. The Aussie ended flat on the day.
The kiwi also reversed at three-month highs and ended the session up 0.1%.
In Aisa, the USD/SGD rebounded from four-month lows at 1.3300, reflecting the overnight bounce in the USD. USD/CNH also recovered from four-month lows.
Looking forward, all eyes are on tonight’s US jobs report. Financial markets are looking for 160k new jobs to be added in February with the unemployment rate forecast steady at 4.0%. The report is due at 12.30am AEDT.
Slowing US credit growth may add to USD weakness
Away from US jobs, the US consumer credit report will also be closely watched.
After rising sharply to $40.9 billion in December, consumer credit growth probably slowed to $16.0 billion in January.
January’s weak vehicle sales also suggest that the rise of auto loans has slowed.
The USD experienced significant depreciation, with the DXY Index falling by circa 2% Week-To-Date to its lowest level since November 2024.
The next key support level for the dollar index will be its 200-day EMA of 102.57 of the weekly chart.
CNH faces headwinds amid persistent deflation
Tomorrow, the China CPI will be released.
The Chinese New Year calendar mismatch between 2024 and 2025, which artificially produced a high base for February, is mostly to blame for our expectation that CPI inflation would decline to -0.4% y-o-y in February from 0.5% in January.
Due in significant part to a sequential comeback, we anticipate sequential PPI deflation of -2.0% y-o-y in February, up from -2.3% in January, and sequential CPI inflation to slow to 0.1% m-o-m in February from 0.7% in January.
We continue to have a pessimistic view of the CNH due to the possibility of future tariff hikes and the continued corporate propensity to hoard the USD.
As US tariffs increase, we continue to base our forecast on some CNH weakening, with the authorities maintaining the line at 7.50.
USD buyers may look to take advantage near 50-day EMA of 7.2422.
Greenback recovers from four-month lows
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
Greenback tumbles to four-month lows
The US dollar continued to fall overnight, down for the third straight session this week, as markets turned wary on US growth due to tariff worries.
The euro and British pound surged with markets hopeful Europe and the UK could avoid tariffs while expectations of increased defense spending saw the euro outperform.
This week’s moves bucked the recent trend of USD outperformance on tariff news. Markets instead are focused on a recent slowdown in US data, and improvement in European data, and the potential for relative outperformance for the euro.
Across the region, the greenback fell, with the AUD/USD as one of the better performers, up 1.1%. The Aussie was helped by an in-line December-quarter GDP result with full-year Australian growth at 1.3% over 2024.
The kiwi was even stronger as the NZD/USD gained 1.2%.
The USD/SGD fell 0.6% while the USD/CNH lost 0.2%.
Euro surges ahead of ECB
The euro has surged higher this week, with the EUR/USD up an incredible 4.1% this week, and the euro at or near five-year highs versus the Australian and NZ dollar.
The European Central Bank meets tonight and looks likely to cut the deposit rate by 25 basis points to 2.50%.
Furthermore, we believe that data results in comparison to the ECB’s projections lend credence to a rate reduction.
The ECB is expected to change its rhetoric about restrictiveness; we believe it will imply that rates are less restrictive today than they were previously as a result of the recent rate decreases and state that it will evaluate the degree of restrictiveness.
MYR outperformance backed by fundamentals
Today, Malaysia’s policy meeting will be held. We anticipate the BNM will reiterate that the present monetary stance is still supportive of the economy by keeping its policy rate at 3% and adopting a similarly neutral attitude to the previous MPC sessions.
Despite noting ongoing global uncertainties, we believe BNM will remain optimistic about the growth forecast and reiterate that the resilience of the local economy is expected to be maintained this year.
Although inflation remained steady in January due to the impact of the moving Chinese New Year vacation, Q4 GDP growth was revised up to 5.0% year-over-year from the advance estimate of 4.8%.
The ringgit’s superior performance in Asia is supported by Malaysia’s better trade balance and perhaps larger tourist surplus.
The next key resistance is 200-day EMA of 4.4740, where MYR buyers may look to take advantage.
USD extends losses as tariff trend reverses
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.
Despite the U.S. ISM services PMI (a measure of U.S. service sector activity) exceeding expectations in February, the narrative of a U.S. economic slowdown, coupled with Germany’s significant shift in fiscal policy, has driven markets to adopt a short-term bearish stance on the U.S. dollar. The DXY index has continued to struggle, losing approximately 2.8% in the last few days. This decline has capped gains for the Loonie above the 1.445 level, which has eased some of its tariff premium amid confirmation that President Trump is exempting automakers from newly imposed tariffs on Mexico and Canada for one month, and renewed hopes that tariffs could be lifted altogether if an agreement is reached soon. While the Loonie remains in uncertain territory and seeks firmer footing on trade policy, it has, for now, benefited from tariff rumors and the unexpected shift in U.S. dollar sentiment.
Altogether, the recent U.S. macro data published this week (ISM Services PMI, ISM Prices Paid, S&P Manufacturing PMI, and ISM Manufacturing) challenges the market narrative of an economic slowdown. This Friday’s payroll data will provide a more complete picture in what has been seen as a key test of the U.S. economy, amid fears of cooling following two years of failed recession predictions. The two-year Treasury yield has rebounded above 4%, reaching 4.03%, in response to this week’s positive macro news. The narrative of a U.S. economic slowdown has gained traction, supported by the Atlanta Fed GDP nowcast. However, given the indicator’s inherent volatility, it may serve as a key variable in shaping investor sentiment ahead of next month’s data, which will account for recent tariff developments.
There is also speculation that payroll data may eventually reflect the impact of DOGE’s federal employee layoffs, which number at least in the tens of thousands. However, these layoffs are unlikely to significantly influence this Friday’s payroll report, which reflects February’s data. Their effect may instead show up in March payroll figures, expected next month.
The USD/CAD is trading close to its 60-day SMA of 1.436 and has found some around the 1.433 level. In the near term, rebounds toward the 1.443 level could present shorting opportunities, especially if no significant tariff news emerges and U.S. dollar weakness persists.
The next 36 hours will be packed with market-moving events, including the ECB policy meeting outcome, remarks from U.S. Secretary Scott Bessent, key Fedspeak led by Chair Jerome Powell, the U.S. jobs report, and additional data releases from Europe, Canada and the U.S.
Tearing down the black zero and euro bears
Boris Kovacevic – Global Macro Strategist
This is what European investors have eagerly been waiting for. Germany’s likely next coalition of the CDU and SPD is preparing for a major fiscal expansion, potentially widening the deficit to 4% of GDP over the next decade. While details remain unclear and implementation risks are high, the plan aims to bolster military deterrence, drive economic recovery, and reshape Germany’s lagging infrastructure.
Around €500 billion could potentially be available for investment over the next ten years. How much of this will go into the expansion of the military complex is unclear. However, a report from the European Commission estimated that about €800 billion or 4.5% of the EU’s GDP could be mobilized in the coming years. To illustrate how significant the likely adjustment of the German black zero (rule of not increasing debt levels) is, we can take a look at their market impact. The 10-year government bond yield surged by an incredible 28 basis points to 2.8%. This is the largest single-day increase in financing costs since the reunification of East and West Germany in the 1990s.
It is also safe to say that no analyst saw the euro surging by 4% this week. However, we have consistently highlighted two key points over the past few weeks: first, that the dollar’s tariff-driven gains were likely to lose momentum as the US economy slowed, and second, that European pessimism had reached extreme levels—making positive surprises far more impactful on markets than any disappointing data or news. The German defense bazooka and signs that the Trump administration is monitoring the impact of tariff announcements on markets and the economy have pushed EUR/USD to the highest level this year above $1.08.
From now on, we warn on turning too optimistic too soon. First, the adjustment of the deficit rule needs a 2/3 majority in the German parliament which is still not guaranteed. Second, the global (US vs. RoW) tariff war has just started. Both can still act as headwinds for the euro. Still, the real rate differential makes it clear that levels such as $1.07 or $1.08 are not unjustified.
Dollar down 4% in 2025
Boris Kovacevic – Global Macro Strategist
Yesterday was probably the first trading session of the year in which global markets were not driven by developments in the US, but by the news flow coming out of Europe. The proposed increase of German defence spending and signs that the US economy are slowing have put the dollar on track for its worst week since November 2022.
The 3% drawdown is happening despite Trump’s rhetoric becoming more hawkish. This is likely due to two factors. First, investors are looking beyond the short-term safe haven flows and are asking what damage tariffs will do to the US economy. Second, despite this week’s tariff increases on Mexico, Canada, and China, potential exemptions and the undefined duration of the tariffs continue to confuse investors. Statements by the Trump administration have signalled that they are watching the impact of tariffs on markets and the economy. The White House excluded automakers from the newly imposed tariffs on Mexico and Canada for example. Could that mean that a large enough drop in equity prices or economic momentum could make Trump pivot?
Economic data came in mixed yesterday. The services sector beat forecasts and expanded modestly. Anxiety is high but the employment index rose from 52.3 to 53.9. This does contradict the ADP report, which showed that private hiring fell to the lowest level since July at 77,000. Against this ambiguous backdrop, all eyes will be on the nonfarm payrolls report tomorrow. The dollar needs an upside surprise on the jobs figure to stop the bleeding.
Pound now 7% higher than January low
George Vessey – Lead FX & Macro Strategist
As the US dollar dump continues, GBP/USD marches to fresh 4-month highs above the $1.29 handle. The pair has broken above key resistance levels including key moving averages like the closely watched 200-day and 200-week moving averages, which is a bullish signal. Moreover, in FX options markets, short-term risk reversals, favouring further sterling strength, have surged to their highest in around five years.
Expectations of the US dollar outperforming on escalating trade war tensions are fading as investors focus more on the negative repercussions on the US economy, with stagflation fears overwhelming. Instead of safe haven USD demand, traders are focused on a recent slowdown in US data, versus improvement in UK and European data, and the potential for relative outperformance between the economies. This is also having a positive impact on interest rate differentials between Europe and the UK versus the US, given the rise in Fed easing bets. Moreover, the spillover effect from surging German bund yields as a result of the proposed bazooka spending plan, saw the UK 10-year yield jump by the most in over a year yesterday, to over 1-month highs. This sent UK-US 10-year spreads soaring to an 18-month high, which has helped the pound’s rally against the battered and bruised US dollar.
But the near 7% climb from the low of $1.21 in January, and the 2.6% rally this week has pushed the pound into the overbought zone according to the 14-day relative strength index. A period of consolidation or a correction lower may be in the offing, but the psychological $1.30 level now serves as next resistance. Elsewhere, GBP/EUR has dropped 1.5% this week after enduring its biggest single day loss in five months as stronger flows into the euro dominate.
*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.
Tariffs are effectively a tax on consumers, which is a headwind to growth by nature. Thus, in an already weakening US economic backdrop, bets of more Fed rate cuts are rising, which is weighing heavily on the US dollar. The dollar index is down over 4% year-to-date. Meanwhile, Germany’s multi-billion commitment to boost infrastructure and defence spending has sent the euro 4% higher this week against the dollar, to almost 4-month highs above $1.08. GBP/USD has also marched nearly 3% higher this week with eyes on November highs of $1.30, but both the euro and pound are now in overbought territory.
Tearing down the black zero and euro bears
Boris Kovacevic – Global Macro Strategist
This is what European investors have eagerly been waiting for. Germany’s likely next coalition of the CDU and SPD is preparing for a major fiscal expansion, potentially widening the deficit to 4% of GDP over the next decade. While details remain unclear and implementation risks are high, the plan aims to bolster military deterrence, drive economic recovery, and reshape Germany’s lagging infrastructure.
Around €500 billion could potentially be available for investment over the next ten years. How much of this will go into the expansion of the military complex is unclear. However, a report from the European Commission estimated that about €800 billion or 4.5% of the EU’s GDP could be mobilized in the coming years. To illustrate how significant the likely adjustment of the German black zero (rule of not increasing debt levels) is, we can take a look at their market impact. The 10-year government bond yield surged by an incredible 28 basis points to 2.8%. This is the largest single-day increase in financing costs since the reunification of East and West Germany in the 1990s.
It is also safe to say that no analyst saw the euro surging by 4% this week. However, we have consistently highlighted two key points over the past few weeks: first, that the dollar’s tariff-driven gains were likely to lose momentum as the US economy slowed, and second, that European pessimism had reached extreme levels—making positive surprises far more impactful on markets than any disappointing data or news. The German defense bazooka and signs that the Trump administration is monitoring the impact of tariff announcements on markets and the economy have pushed EUR/USD to the highest level this year above $1.08.
From now on, we warn on turning too optimistic too soon. First, the adjustment of the deficit rule needs a 2/3 majority in the German parliament which is still not guaranteed. Second, the global (US vs. RoW) tariff war has just started. Both can still act as headwinds for the euro. Still, the real rate differential makes it clear that levels such as $1.07 or $1.08 are not unjustified.
Dollar down 4% in 2025
Boris Kovacevic – Global Macro Strategist
Yesterday was probably the first trading session of the year in which global markets were not driven by developments in the US, but by the news flow coming out of Europe. The proposed increase of German defence spending and signs that the US economy are slowing have put the dollar on track for its worst week since November 2022.
The 3% drawdown is happening despite Trump’s rhetoric becoming more hawkish. This is likely due to two factors. First, investors are looking beyond the short-term safe haven flows and are asking what damage tariffs will do to the US economy. Second, despite this week’s tariff increases on Mexico, Canada, and China, potential exemptions and the undefined duration of the tariffs continue to confuse investors. Statements by the Trump administration have signalled that they are watching the impact of tariffs on markets and the economy. The White House excluded automakers from the newly imposed tariffs on Mexico and Canada for example. Could that mean that a large enough drop in equity prices or economic momentum could make Trump pivot?
Economic data came in mixed yesterday. The services sector beat forecasts and expanded modestly. Anxiety is high but the employment index rose from 52.3 to 53.9. This does contradict the ADP report, which showed that private hiring fell to the lowest level since July at 77,000. Against this ambiguous backdrop, all eyes will be on the nonfarm payrolls report tomorrow. The dollar needs an upside surprise on the jobs figure to stop the bleeding.
Pound now 7% higher than January low
George Vessey – Lead FX & Macro Strategist
As the US dollar dump continues, GBP/USD marches to fresh 4-month highs above the $1.29 handle. The pair has broken above key resistance levels including key moving averages like the closely watched 200-day and 200-week moving averages, which is a bullish signal. Moreover, in FX options markets, short-term risk reversals, favouring further sterling strength, have surged to their highest in around five years.
Expectations of the US dollar outperforming on escalating trade war tensions are fading as investors focus more on the negative repercussions on the US economy, with stagflation fears overwhelming. Instead of safe haven USD demand, traders are focused on a recent slowdown in US data, versus improvement in UK and European data, and the potential for relative outperformance between the economies. This is also having a positive impact on interest rate differentials between Europe and the UK versus the US, given the rise in Fed easing bets. Moreover, the spillover effect from surging German bund yields as a result of the proposed bazooka spending plan, saw the UK 10-year yield jump by the most in over a year yesterday, to over 1-month highs. This sent UK-US 10-year spreads soaring to an 18-month high, which has helped the pound’s rally against the battered and bruised US dollar.
But the near 7% climb from the low of $1.21 in January, and the 2.6% rally this week has pushed the pound into the overbought zone according to the 14-day relative strength index. A period of consolidation or a correction lower may be in the offing, but the psychological $1.30 level now serves as next resistance. Elsewhere, GBP/EUR has dropped 1.5% this week after enduring its biggest single day loss in five months as stronger flows into the euro dominate.
*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.
Despite early optimism in financial markets, the mood soured in the latter half of February due to weaker U.S. economic data, declines in AI and technology stocks, and tariffs threats on Canada, Mexico and China. FX markets experienced saw sharp losses and volatility, as measured by the Chicago Board of Trade’s VIX index, which jumped to the highest level of the year.
If this a sign of more big moves to come, is your business prepared to navigate the storm? Download our Global FX Outlook for February to stay ahead of market shifts and help your business manage currency risks.
Event in focus: Who cuts when?
Markets face uncertainty as central banks reassess rate cut expectations amid shifting inflation and economic risks. The Fed, ECB, and BoE started 2024 planning to ease policy, but challenges remain.
In the U.S., the Fed remains caught between persistent core inflation and slowing growth. Headline inflation may have cooled, but weak retail sales and declining business sentiment are fueling concerns. With markets now expecting just two rate cuts in 2025, the Fed’s path remains unclear.
The European Central Bank has already begun easing, but fragile growth, slowing wages, and trade risks limit aggressive cuts. Meanwhile, the Bank of England faces the toughest challenge—stubborn inflation and high wages alongside stagnating growth and rising borrowing costs.
Trump moving markets
Global policy uncertainty has surged due to President Trump’s unpredictable leadership style and shifting political priorities. Markets are on edge as trade agreements are shaken up, alliances change, and the President takes an aggressive stance in economic negotiations. Investors face a backdrop where sudden policy changes and increased volatility have become the new normal. Global markets face heightened uncertainty as the world adjusts to this new reality.
Tariffs: Inflationary or stagflationary?
Expectations for a Federal Reserve rate cut in the first half of 2025 have been diminished. Inflation data came in stronger than expected, reinforcing concern that price pressures remain and forcing markets to reassess monetary easing timelines. Despite this, the US economy shows signs of slowing, with key indicators such as housing, consumer spending and services all underperforming. Risk assets and the US dollar are under pressure.
Dollar falls short of expectations
Stronger-than-expected inflation numbers have pared back expectations for Federal Reserve rate cut this year, however the U.S. dollar hasn’t strengthened. The absence of new tariffs has reduced safe-haven demand and the trade premium, while changing expectations for a Fed pause are being driven by rising inflation rather than macro data. Ultimately, the dollar has been unable to benefit from the Fed holding rates steady.
Watch an overview of the March outlook
Watch our Market Insights team provide a short summary of the most crucial insights from the March Global FX Outlook and start making informed decisions for your business today.
For businesses making cross-border payments, this evolving landscape underscores the importance of proactive FX risk management. The combination of tariff threats, inflationary pressures, and monetary policy shifts will continue to drive currency fluctuations. Companies should consider hedging strategies and real-time FX insights to mitigate risks in an increasingly unpredictable market.
Want more insights on the topics shaping the future of cross-border payments? Tune in to Converge, with new episodes every Wednesday.
