April is shaping up to be a pivotal month, with inflation data, labor market signals, and growth indicators shaping central bank expectations.
Download our Global FX Outlook for April to help ensure your business is prepared for potential market shifts and their impact on your currency exposures.
Currency moves in March
The US dollar fell to five-month lows last month, pressed by a slowdown in key US data, reaching levels last seen before President Trump’s election victory. Across the Atlantic, the euro was one of the largest beneficiaries with the EUR/USD up 4.4% in the first week of March before easing as the month progressed.
The British pound was another winner helped by a reluctance to cut interest rates from the Bank of England, which saw the GBP/USD touch 1.3000 – the highest level since November. Down under, the Australian dollar remains broadly stuck in a two-cent range hampered by worries about the Chinese economy and, unsurprisingly, trade issues.
Key market themes to watch
The historic German debt announcement may have just marked the bottom of the economic cycle in Europe. However, Germany is finally addressing the structural weaknesses that have interfered with growth and if executed effectively, this could drive productivity, investment and a shift in the broader European economic outlook.
Meanwhile the USD posted its worst month in over a year with a drawdown of 3.2% in March. While the currency’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 weakness signals investor skepticism.
Uncertainty surrounding tariff policy and fears of an economic slowdown have kept US equity markets in drawdown territory, with the S&P 500 down around 7% from its recent peak. But comments from President Trump on his tariff plans and flash PMI data called into question these fears, helping stocks rebound and the dollar rise across the board. Where is the US economy in the business cycle? This is a question without a definite answer…for now.
FX market insights: A delicate balance
As we enter April, markets will be navigating a delicate balance between inflation concerns, growth trajectories, and central bank policy decisions. The month will be packed with inflation releases from the US, Eurozone, Germany, and China, making price pressures a central theme. US CPI (April 10) and PCE prices (April 30) will be crucial in determining the Fed’s policy stance. If inflation proves sticky, rate-cut expectations could get pushed further out.
April also features several key central bank rate decisions, which raise questions about any potential cuts on the horizon. The Fed’s March meeting minutes (released on April 10) will offer insight into inflation concerns and whether policymakers are aligned with Powell’s cautious stance on cuts, while the European Central Bank and Bank of Canada will announce rate decisions mid-month. Any hints at rate cuts could boost risk appetite.
April is set to be a month of pivotal shifts and opportunities in the global FX landscape. With inflation data, central bank decisions, and market sentiment all in play, staying informed is crucial. Download the Global FX Outlook for April to navigate these complexities and position your business for success amidst this evolving foreign exchange landscape.
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