Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Trump confirms China meeting, risk sentiment improves
The greenback fell as Trump’s comments on China meetings triggered market optimism despite Chinese officials’ earlier dismissals of progress.
Euro firmed from around 1.1365 to 1.1395 during Trump’s press conference with Norway’s PM, benefiting earlier from a positive German Ifo survey.
Meanwhile, Fed Waller’s comments that he’d support rate cuts fuel hopes.
In the equities space, S&P 500 gains 2% while Nasdaq was up 2.7% overnight.
US curves bull steepened on Fedspeak suggesting a rate cut could come sooner if labor and growth data weakens notably and/or market volatility remains high.
Singapore industrial production is due for release today while antipodean markets observe local holidays.
NZD/USD was up +0.9% and AUD/USD gains +0.8%.
USD/CNH was flat while USD/SGD was down -0.4% overnight.
Fed Waller said the impact of tariffs is likely to occur in July
If businesses begin to lay off employees and the unemployment rate begins to climb, Fed Governor Waller stated that the Fed would support rate cuts.
Waller, meantime, stated that he believes the effects of tariffs on the economy will become apparent after July, when the jobless rate is expected to rapidly increase.
He also restates that the inflation shock will only last a short while.
Re APAC FX, as we’ve mentioned earlier, USD/SGD has recovered from oversold levels.
The next key resistance levels for USD/SGD will be 21-day EMA of 1.3223, and 50-day EMA of 1.3315.
ECB Rehn says banks should continue cutting, EUR recovers
The ECB According to Governor Rehn, tariffs have a two-pronged effect on inflation in Europe.
He believes the ECB should continue lowering rates if the inflation forecast develops as anticipated.
Nevertheless, EUR/USD looks set to continue higher with key support levels now at 21-day EMA of 1.1208.
For EUR/SGD, the pair also has its 21-day EMA of 1.4815 as key support handle, where EUR buyers may look to take advantage.
AUD/EUR however has flirted with the lows of 0.5390 recently, and now near its 21-day EMA resistance of 0.5642.
Antipodeans recovered as risk sentiment improves
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.
Mexican peso has benefited from recent risk rally in markets and renewed hopes that stiff tariffs against major trading partners might be negotiated away in the next few months. Discussions between President Sheinbaum and President Trump have been ramping up, although no agreement has been reached yet. Sheinbaum’s government has chosen not to impose retaliatory tariffs on the U.S., keeping tensions from escalating further.
A key issue for Sheinbaum—and Mexico’s economy overall—is the auto industry. When the tariffs took effect in early April, automakers like Stellantis NV Motor Corp had to halt some production in Mexico, while others reduced overtime. With the auto sector making up around 30% of Mexico’s exports, these tariffs could deal a significant blow to manufacturing.
In 2024, Mexico’s automotive industry set record highs in production and exports. The Automotive Industry Administrative Registry of Light Vehicles reported that the U.S. was the primary destination for light vehicle exports, accounting for 2,771,000 units, or nearly 80% of the total.
At the same time, funds and institutional investors have shifted their stance on the Mexican peso, moving from heavily short positions to a more neutral outlook.
The USD/MXN pair has the 200-day simple moving average (SMA) at 19.95, the 100-day SMA at 20.3438, and the 50-day SMA at 20.2505. The peso is currently trading at its weakest level since October 2024, a level last seen before President Trump’s election as the 47th president of the United States. Year to date, the peso has gained more than 6% against the US dollar.
Tariff seesaw swings on
George Vessey – Lead FX & Macro Strategist
Volatility-inducing policy statements just keep rocking investors. US equities looked poised to build on the biggest gains in two weeks, with the S&P 500 rising over 3% at one point yesterday on hopes of de-escalating trade tensions. Optimism was swiftly reined in though after President Donald Trump reaffirmed his commitment on tariffs. With macroeconomic uncertainty and geopolitical risks still unresolved, volatility across financial markets remains elevated.
The U-turns keep coming as President Trump allayed fears that he plans to fire Fed Chair Jerome Powell after rattling markets with multiple attacks against the Fed’s policy making. Risk appetite improved and was supported further after the President suggested the US is considering lower levies for Chinese products. Then, Treasury Secretary Bessent said Trump had not offered to cut tariffs on China on a unilateral basis, as market participants were dealt a reality check on a timely resolution to the US-China trade war. The inconsistent messaging continues to keep investors on edge and reluctant to hold US assets as the dollar continues to hover close to 3-year lows. Despite the attempted recovery over the past two days, the US dollar index has fallen over 8% year-to-date – marking its third worst start to a year on record.
On the macro front, the US Composite PMI fell to 51.2 in April, marking the slowest private sector growth in 16 months. Services PMI dropped to 51.4, while manufacturing unexpectedly rose to 50.7. Business expectations hit pandemic-era lows, and prices surged sharply, especially for manufactured goods due to tariffs. The outlook for the US economy remains murky, but if data continues to soften, the US exceptionalism narrative will continue fading, which will weigh further on the already beleaguered dollar.
Trumponomics isn’t a new play
Kevin Ford – FX & Macro Strategist
Trumponomics in 2025 centers on a few key pillars: tariffs and trade policies tied to strategic global bargaining, tax cuts and deregulation, and shifts in labor market and immigration policies.
Interestingly, Trumponomics isn’t a completely new play. Argentina has implemented similar measures since President Mile took office, focusing on fiscal austerity, deregulation, and cutting red tape. The results have been striking, with inflation dropping from triple digits and, perhaps more impressively, the elimination of a fiscal deficit for the first time in 123 years. However, comparisons between Argentina and the United States have their limits, particularly given the outsized role tariffs play in the U.S. context.
In the U.S., recent surveys show consumers cutting back on discretionary spending and growing increasingly concerned about job security, especially in export-dependent industries. Sentiment is declining, and inflation expectations are rising, both domestically and internationally. This raises a critical question: if Trumponomics seeks to emulate Argentina’s success, how do deregulation and the push for smaller government align with the use of tariffs? The “small yard, high fence” strategy highlights this contradiction. Tariffs are likely to drive up prices in the short term, fueling inflationary pressure and public dissatisfaction, while also risking a contraction in economic growth and broader instability. Policymaking aimed at bringing global players to the U.S. negotiating table has already had significant economic repercussions.
Although sentiment measures are not always reliable indicators of future economic activity, the uncertainty surrounding trade policies is likely to continue weighing on growth prospects in the coming quarters.
Euro’s unwind has room to run
George Vessey – Lead FX & Macro Strategist
After hitting a more than 3-year high recently just shy of $1.16, EUR/USD has pulled back to near $1.13. The 21-day moving average located at $1.1136 could act as a magnet in the short term, but the common currency continues to act as an attractive liquid alternative to the dollar in times of heightened risk aversion. For now, the uptrend remains intact, but the pace of the euro’s rally does give rise to an extended pullback in the very near term.
The April PMI was the first key sentiment gauge for the Eurozone since Trump’s ‘Liberation Day.’ The Eurozone’s figures reflect mixed sentiment amid ongoing tariff threats. It dropped to 50.1, its lowest in four months, though manufacturing showed slight improvement at 48.7, while services weakened to 49.7. France and Germany’s composite PMIs fell below 50, signalling contraction. Price pressures eased, supporting the ECB’s rate cut and raising the likelihood of further easing.
For the euro, these developments heighten risks of disinflation and stagnation. Economic uncertainty weighs on optimism, which could lead to more downward pressure on the currency if data weakens further. Until fiscal measures in Germany and European defense spending boost activity, further euro gains may be limited in the short term, but longer-term dynamics appear favourable given the regime shift in global trade and reduced demand for US assets unfolding.
Struggling UK economy bodes ill for sterling
George Vessey – Lead FX & Macro Strategist
The cautious relief rally in financial markets this week allowed GBP/EUR to reclaim the €1.17 handle briefly, having dropped to a 17-month low earlier this month. But a downside bias remains intact for the pair in the short-term so long as it remains below its 21-day moving average located at €1.1743. Meanwhile, GBP/USD has matched the recent drawdown in EUR/USD – dropping over 1% from 7-month highs above $1.34.
The stronger performance of EUR/USD compared to GBP/USD this month has caused the GBP/EUR exchange rate to decline. Initially, the ‘sell America’ trend put pressure on GBP/EUR; however, the recent EUR/USD pullback has shifted dynamics. Meanwhile, data indicates that the UK economy may be more impacted by tariff uncertainty than Europe, challenging earlier assumptions. Britain’s private sector faced its sharpest downturn in over two years, as Trump’s tariffs led to a significant drop in overseas orders, stoking concerns of a potential recession. The UK’s composite PMI tumbled to 48.2 in April, down from 51.5 in March. This figure not only fell short of economists’ expectations of 50.4 but also dropped below the critical 50 mark, signalling a contraction in economic activity.
The survey highlights mounting pressures on the UK economy amid global trade uncertainties and when we overlay the PMI differential over GBP/EUR, the figures over the past few months don’t bode well for the pound’s medium-term outlook versus the euro.
*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.
Volatility-inducing policy statements just keep rocking investors. US equities looked poised to build on the biggest gains in two weeks, with the S&P 500 rising over 3% at one point yesterday on hopes of de-escalating trade tensions. Optimism was swiftly reined in though after President Donald Trump reaffirmed his commitment on tariffs. With macroeconomic uncertainty and geopolitical risks still unresolved, volatility across financial markets remains elevated.
The U-turns keep coming as President Trump allayed fears that he plans to fire Fed Chair Jerome Powell after rattling markets with multiple attacks against the Fed’s policy making. Risk appetite improved and was supported further after the President suggested the US is considering lower levies for Chinese products. Then, Treasury Secretary Bessent said Trump had not offered to cut tariffs on China on a unilateral basis, as market participants were dealt a reality check on a timely resolution to the US-China trade war. The inconsistent messaging continues to keep investors on edge and reluctant to hold US assets as the dollar continues to hover close to 3-year lows. Despite the attempted recovery over the past two days, the US dollar index has fallen over 8% year-to-date – marking its third worst start to a year on record.
On the macro front, the US Composite PMI fell to 51.2 in April, marking the slowest private sector growth in 16 months. Services PMI dropped to 51.4, while manufacturing unexpectedly rose to 50.7. Business expectations hit pandemic-era lows, and prices surged sharply, especially for manufactured goods due to tariffs. The outlook for the US economy remains murky, but if data continues to soften, the US exceptionalism narrative will continue fading, which will weigh further on the already beleaguered dollar.
Euro’s unwind has room to run
George Vessey – Lead FX & Macro Strategist
After hitting a more than 3-year high recently just shy of $1.16, EUR/USD has pulled back to near $1.13. The 21-day moving average located at $1.1136 could act as a magnet in the short term, but the common currency continues to act as an attractive liquid alternative to the dollar in times of heightened risk aversion. For now, the uptrend remains intact, but the pace of the euro’s rally does give rise to an extended pullback in the very near term.
The April PMI was the first key sentiment gauge for the Eurozone since Trump’s ‘Liberation Day.’ The Eurozone’s figures reflect mixed sentiment amid ongoing tariff threats. It dropped to 50.1, its lowest in four months, though manufacturing showed slight improvement at 48.7, while services weakened to 49.7. France and Germany’s composite PMIs fell below 50, signalling contraction. Price pressures eased, supporting the ECB’s rate cut and raising the likelihood of further easing.
For the euro, these developments heighten risks of disinflation and stagnation. Economic uncertainty weighs on optimism, which could lead to more downward pressure on the currency if data weakens further. Until fiscal measures in Germany and European defense spending boost activity, further euro gains may be limited in the short term, but longer-term dynamics appear favourable given the regime shift in global trade and reduced demand for US assets unfolding.
Struggling UK economy bodes ill for sterling
George Vessey – Lead FX & Macro Strategist
The cautious relief rally in financial markets this week allowed GBP/EUR to reclaim the €1.17 handle briefly, having dropped to a 17-month low earlier this month. But a downside bias remains intact for the pair in the short-term so long as it remains below its 21-day moving average located at €1.1743. Meanwhile, GBP/USD has matched the recent drawdown in EUR/USD – dropping over 1% from 7-month highs above $1.34.
The stronger performance of EUR/USD compared to GBP/USD this month has caused the GBP/EUR exchange rate to decline. Initially, the ‘sell America’ trend put pressure on GBP/EUR; however, the recent EUR/USD pullback has shifted dynamics. Meanwhile, data indicates that the UK economy may be more impacted by tariff uncertainty than Europe, challenging earlier assumptions. Britain’s private sector faced its sharpest downturn in over two years, as Trump’s tariffs led to a significant drop in overseas orders, stoking concerns of a potential recession. The UK’s composite PMI tumbled to 48.2 in April, down from 51.5 in March. This figure not only fell short of economists’ expectations of 50.4 but also dropped below the critical 50 mark, signalling a contraction in economic activity.
The survey highlights mounting pressures on the UK economy amid global trade uncertainties and when we overlay the PMI differential over GBP/EUR, the figures over the past few months don’t bode well for the pound’s medium-term outlook versus the euro.
*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
Trump administration eyes long-haul approach on China trade
The greenback strengthened by 1% overnight but still below 100 key psychological barrier.
The CNH remained about 0.35% stronger at 7.2860, while high-beta currencies tracked higher US equities.
Treasury Secretary Bessent indicated rebalancing US-China trade could take two to three years, examining multiple factors including non-tariff barriers, government subsidies, and tariffs.
Key developments include possible auto parts exemptions from China tariffs according to the FT, and speculation about potential lower tariff rates of 50%-65% or a tiered approach.
We do expect higher FX volatility in the coming weeks.
The AUD/USD still below 0.6400 with a 0.1% loss overnight.
The NZD/USD, down 0.4%, still hovering below key psychological barrier of 0.6000.
WSJ says White House looking at slashing China tariffs
The Wall Street Journal reports that the White House is looking at ways to de-escalate trade tensions with China.
It said some tariffs could be cut in half on the plans being considered.
One official told the Journal that tariffs could be cut back to between 50% and 65%.
It said there is also some consideration of tiered tariffs: for example only 35% on goods that the US does not consider a threat to national security, but 100% on those goods that it does.
Nevertheless, USD/CNH has trailed its key 50-day EMA at 7.2881 recently, where the next key resistance lies at 7.3000 and 7.5000 next.
ECB/Bundesbank’s Nagel worries about recession and stagflation
Bundesbank President Nagel said he couldn’t rule out Germany dropping into recession this year.
Speaking on Bloomberg TV, he said the world economy was in a very delicate position.
He said although he didn’t think Germany’s fiscal package would be inflationary, he was still concerned that overall the Eurozone could see what amounts to a stagflationary environment this year.
Nagel was marginally dovish, but not overtly.
He said the ECB should be considered to be on autopilot and that it would continue to assess policy meeting-by-meeting.
EUR/USD has corrected from recent daily highs.
For EUR/SGD, next key support lies on 21-day EMA of 1.4801, and 50-day EMA of 1.4585 next, where EUR buyers may look to take advantage.
Aussie pairs scale back from highs
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 US dollar’s recent selloff has taken a breather as President Trump ratcheted down his rhetoric toward Federal Reserve (Fed) Chair Powell, saying he doesn’t plan to try to remove the head of the nation’s central bank despite his frustration over interest rates. A potential de-escalation in the US-China trade war also boosted demand for US assets. But is this market-friendly news just a temporary reprieve?
Tumbling stock markets and the dollar falling to 3-year lows on Monday was blamed on concerns about an erosion of the Fed’s independence and a growing unease over the blurred boundaries between monetary policy and political influence. Thus, Trump’s softer tone towards Powell has injected some positive life into risky assets – the S&P500 for example rose over 2.5%, whilst the US dollar index rebounded from 98.00, erasing Monday’s losses. Trump also sounded upbeat about making a trade deal with China, which faces a Trump 2.0 tariff of 145%. This came after US Treasury Secretary Scott Bessent had predicted a de-escalation between the two nations. However, the relief rally across markets may prove short-lived. The latest U-turn from Trump is just another example of the volatile decision making of the US administration, which is keeping policy uncertainty elevated at record levels and investors hesitant to hold US assets.
While erratic conditions are expected to persist in the short term, the long-term outlook suggests sustained pressure on US equities, bonds, and the dollar. As these uncertainties linger, the dollar’s structural weakness could become more pronounced.
Behind the U.S. Treasuries sell-off
Kevin Ford – FX & Macro Strategist
There’s been no shortage of speculation about who’s behind the sell-off in U.S. Treasuries. Is it China? Japan? Hedge funds? Or simply portfolios making tactical adjustments? Could this even hint at the dawn of de-dollarization? While the answers remain uncertain, at the heart of it all lies a fundamental force; Powell isn’t bringing the “Fed put.”
Take China, for instance. As America’s second-largest foreign creditor after Japan, it holds around $780 billion in Treasury securities. While their market moves are closely watched, a massive sell-off seems unlikely, as it would strengthen the Yuan due to repatriation effects, while Beijing is currently leveraging its currency to counter tariff impacts. However, there’s gold. With prices soaring to a new all-time high today, speculation is running wild about a shift from Treasuries to gold by central banks, pension funds, and institutional investors. Could this mark the next phase of de-dollarization? The allure of gold as a safe haven has never been stronger, especially as confidence in U.S. assets wavers.
Hedge funds, on the other hand, might have added fuel to the fire. As the bond sell-off gained momentum, margin calls could have forced funds to liquidate Treasuries to raise cash, especially those employing bond-basis trades.
Meanwhile, institutional investors are facing a triple whammy: equities down, dollar losing ground, and yields climbing. Gold and other metals have emerged as safe havens, but asset managers are struggling to reallocate tactically, and strategically as correlations break down. The message from the market is clear—there’s growing interest in exiting U.S. assets, particularly among foreign investors. Some might even be swapping long-dated Treasuries for European fixed income.
Finally, and perhaps even more significant, are the underlying fundamentals. Federal Reserve Chair Jerome Powell seems intent on shaping his legacy as a “Volcker” rather than a “Burns.” Arthur Burns, infamous for prematurely cutting rates in the 1970s, earned him lasting criticism, stands as a cautionary example. Powell, by contrast, appears steadfast in his fight against inflation, even as weaker growth looms. And the market has taken note: Powell is signaling he won’t cut rates, channeling Volcker’s resolve despite a slowing economy and mounting pressure from President Trump. This determination aligns with the broader trend of rising yields, which began when the market braced for tariff-driven inflation concerns. With recession fears mounting, the Fed has made one thing clear: a “Fed put” isn’t on the horizon.
Relief rally tempers euro’s momentum
George Vessey – Lead FX & Macro Strategist
EUR/USD appears to be in a brief consolidation phase after its strong rally from February’s lows near parity. After its 13% rally to above $1.15 in just a few months, the pair is trading back under $1.14 today amidst broad-based US dollar demand thanks to Trump’s softer rhetoric on tariffs and Powell. The $1.20 handle could still be a topside target for bullish traders this year, but the pace of the recent rally has fizzled out for the time being.
Momentum indicators remain bullish but overbought for EUR/USD, so we think the euro’s slight weakness is likely a temporary pause in its upward trajectory following its impressive recovery. On the data front, consumer confidence in the Eurozone took a notable hit in April 2025, declining to -16.7, its lowest level since November 2023. This marks a 2.2-point drop from March and fell short of market forecasts of -15, signalling growing concerns among households. Today, we have PMI data, with investors bracing for signs of the potential fallout from Trump’s tariffs. European Central Bank (ECB) President Christine Lagarde yesterday reinforced the ECB’s reliance on economic data, emphasizing its “extreme” importance in the current climate.
A rate cut for the ECB’s June meeting is fully priced in, but for July markets are still undecided. Such dovish ECB expectations will eventually keep a lid on euro strength, despite the break down in correlation between short-term rates and FX over the past month or so.
UK outlook downbeat
George Vessey – Lead FX & Macro Strategist
With the US dollar rebounding amidst Trump’s optimistic trade talk and softer stance on Powell, GBP/USD has recoiled from 7-month highs above $1.34 to trade nearer $1.33 this morning. GBP/EUR is creeping towards €1.17, with sterling benefiting more from improved global risk sentiment. UK flash PMIs today will be the next test as they’ll provide the first tangible indication of sentiment in the private sector in the wake of Trump’s tariffs.
Both services and manufacturing PMI are expected to come in lower than the previous month, though the composite figure is forecast to remain in expansion territory. On a gloomier note, the International Monetary Fund (IMF) has warned the UK economy will be among the hardest hit by the global trade war and inflation is set to climb. The IMF revised its UK growth forecasts downward, citing the impact of Trump’s tariffs. The fund now projects growth of 1.1% in 2025, down from 1.6% previously, and 1.4% in 2026, slightly below the earlier 1.5% estimate. These adjustments reflect the disruptive effects of heightened global trade barriers, weaker private consumption due to elevated energy costs, and rising gilt yields.
Despite a predicted temporary inflation spike, the IMF suggests it leaves room for the Bank of England (BoE) to cut interest rates up to three times this year to support the economy. Such easing could wear away at the pound’s yield appeal and limit the scope of any sterling recovery, though the gap between UK and German real rate differentials will close one way or another.
*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 US dollar’s recent selloff has taken a breather as President Trump ratcheted down his rhetoric toward Federal Reserve (Fed) Chair Powell, saying he doesn’t plan to try to remove the head of the nation’s central bank despite his frustration over interest rates. A potential de-escalation in the US-China trade war also boosted demand for US assets. But is this market-friendly news just a temporary reprieve?
Tumbling stock markets and the dollar falling to 3-year lows on Monday was blamed on concerns about an erosion of the Fed’s independence and a growing unease over the blurred boundaries between monetary policy and political influence. Thus, Trump’s softer tone towards Powell has injected some positive life into risky assets – the S&P500 for example rose over 2.5%, whilst the US dollar index rebounded from 98.00, erasing Monday’s losses. Trump also sounded upbeat about making a trade deal with China, which faces a Trump 2.0 tariff of 145%. This came after US Treasury Secretary Scott Bessent had predicted a de-escalation between the two nations. However, the relief rally across markets may prove short-lived. The latest U-turn from Trump is just another example of the volatile decision making of the US administration, which is keeping policy uncertainty elevated at record levels and investors hesitant to hold US assets.
While erratic conditions are expected to persist in the short term, the long-term outlook suggests sustained pressure on US equities, bonds, and the dollar. As these uncertainties linger, the dollar’s structural weakness could become more pronounced.
It’s PMI day
George Vessey – Lead FX & Macro Strategist
Purchasing Managers’ Index (PMI) data are due from major economies today. They are economic indicators derived from monthly surveys of private sector companies, specifically purchasing managers, and provide a snapshot of the health of the manufacturing, services, and construction sectors. They can also help gauge market sentiment and expectations about the future direction of the economy.
If sentiment weakens further, market stability could unravel. March’s PMIs from the US suggested fairly stable growth, outpacing the Atlanta Fed’s lower forecast, which has been affected by gold import trends. For April, expectations are for a modest composite PMI drop to 52.2 from 53.5. However, a more significant downturn, exacerbated by the instability from US tariff policies, could trigger further stock selloffs.
A weaker dollar is emerging as a hallmark whenever US PMIs fall short relative to developed-market counterparts, as it would be yet more evidence of the fading US exceptionalism narrative that has propped up the world’s reserve currency for the past few years.
Relief rally tempers euro’s momentum
George Vessey – Lead FX & Macro Strategist
EUR/USD appears to be in a brief consolidation phase after its strong rally from February’s lows near parity. After its 13% rally to above $1.15 in just a few months, the pair is trading back under $1.14 today amidst broad-based US dollar demand thanks to Trump’s softer rhetoric on tariffs and Powell. The $1.20 handle could still be a topside target for bullish traders this year, but the pace of the recent rally has fizzled out for the time being.
Momentum indicators remain bullish but overbought for EUR/USD, so we think the euro’s slight weakness is likely a temporary pause in its upward trajectory following its impressive recovery. On the data front, consumer confidence in the Eurozone took a notable hit in April 2025, declining to -16.7, its lowest level since November 2023. This marks a 2.2-point drop from March and fell short of market forecasts of -15, signalling growing concerns among households. Today, we have PMI data, with investors bracing for signs of the potential fallout from Trump’s tariffs. European Central Bank (ECB) President Christine Lagarde yesterday reinforced the ECB’s reliance on economic data, emphasizing its “extreme” importance in the current climate.
A rate cut for the ECB’s June meeting is fully priced in, but for July markets are still undecided. Such dovish ECB expectations will eventually keep a lid on euro strength, despite the break down in correlation between short-term rates and FX over the past month or so.
UK outlook downbeat
George Vessey – Lead FX & Macro Strategist
With the US dollar rebounding amidst Trump’s optimistic trade talk and softer stance on Powell, GBP/USD has recoiled from 7-month highs above $1.34 to trade nearer $1.33 this morning. GBP/EUR is creeping towards €1.17, with sterling benefiting more from improved global risk sentiment. UK flash PMIs today will be the next test as they’ll provide the first tangible indication of sentiment in the private sector in the wake of Trump’s tariffs.
Both services and manufacturing PMI are expected to come in lower than the previous month, though the composite figure is forecast to remain in expansion territory. On a gloomier note, the International Monetary Fund (IMF) has warned the UK economy will be among the hardest hit by the global trade war and inflation is set to climb. The IMF revised its UK growth forecasts downward, citing the impact of Trump’s tariffs. The fund now projects growth of 1.1% in 2025, down from 1.6% previously, and 1.4% in 2026, slightly below the earlier 1.5% estimate. These adjustments reflect the disruptive effects of heightened global trade barriers, weaker private consumption due to elevated energy costs, and rising gilt yields.
Despite a predicted temporary inflation spike, the IMF suggests it leaves room for the Bank of England (BoE) to cut interest rates up to three times this year to support the economy. Such easing could wear away at the pound’s yield appeal and limit the scope of any sterling recovery, though the gap between UK and German real rate differentials will close one way or another.
*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
Trade negotiations talk boosts risk sentiment but gains may be premature
The greenback saw a mixed performance against major peers as US trade deal optimism fueled a risk sentiment boost, even as Treasury Secretary Bessent clarified that comprehensive China negotiations haven’t begun yet.
US equities rallied, with S&P500 gains of 2.5%, closing near 5300.
USD strengthened almost globally except against high-beta LATAM currencies, which outperformed thanks to the US equity rally.
Across the region, the AUD/USD ended back below 0.6400 with a 0.8% loss.
The NZD/USD, down 0.5%, remains below key psychological barrier of 0.6000.
USD/SGD and USD/CNH both ended gains of 0.5% and 0.3% respectively.
Investors will focus on upcoming EU, UK and US PMIs, providing the first look at business reactions to tariffs and trade disruptions.
Fed Barkin: Causes for concern re consumer spending
Non-voter Richmond Fed President Barkin said that inflation expectations could have eased.
There are reasons to be concerned about consumer spending, he continued, and businesses are playing defence by postponing and deferring expenditures.
Looking at APAC FX, USD/SGD has bounced back from oversold RSI levels.
The next key resistance for USD/SGD will be 21 day EMA of 1.3245.
A negative confirmation that exposes USDSGD to more downside, with a target of 1.2789 and a goal of 1.2500 lower, would be closing and holding below 1.3000.
Lagarde of the ECB sounds dovish
In a CNBC appearance, ECB President Lagarde sounded dovish.
She said that while tariffs have a detrimental effect on economy, it is uncertain how they would affect inflation.
In the meanwhile, she said that the EUR’s strength defies logic.
Chart shows EUR/USD has indeed defied gravity and fundamentals and may look to correct given the recent strength.
For EUR/SGD, it has retreated from its highs of 1.5113, and the next key support lies on its 21 day EMA of 1.4793.
Antipodeans retreated from highs
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 primary driver for the Loonie in the short term will continue to be dollar weakness. The DXY index has taken another hit, reaching its lowest level since April 2022. In April alone, the DXY has dropped 5.7%, while the USD/CAD has gained 3.9%. This time, President Trump’s demand for Federal Reserve Chair Jerome Powell to cut rates ‘now’ has undermined the Fed’s independence and weakened the greenback.
Investor sentiment toward the Loonie has shifted significantly, with bearish positions now at their lowest since January 2021. This is evident in the one-year USD/CAD risk reversal, which has moved in favor of calls—marking the least bearish close for the Loonie in over two years.
This shift is further reflected in the unwinding of short positions, aligning with prices that have nearly erased all gains since President Trump’s election. Despite weak fundamentals highlighted by the Bank of Canada in its latest meeting, the outlook for the Loonie remains stable in the short-term.
And while the Loonie keeps trading closer to the 1.38, its lowest level since November last year, the 2 year yield differential between the U.S. and Canada remains sticky, possibly indicating that the current price movement might be subject to a medium-term rebound to revisit the upper side of the 1.373-1.40 trading range.
In the FX options market, yesterday’s spike in volatility prompted investors to cover short-term positions. This comes as Canadians prepare to elect a new Prime Minister in less than a week. Polls suggest a Liberal victory, which is unlikely to impact the Loonie’s short-term price. However, concerns linger over a potential rise in the debt-to-GDP ratio under Liberal leadership.
Meanwhile, the broader North American market has been grappling with the effects of U.S. dollar weakness. Investors face a triple blow: equities selling off, bonds under pressure, and the dollar losing ground. Gold and other metals have emerged as safe havens, but asset managers are struggling to reallocate tactically as correlations break down. The market’s message is clear—there’s a growing desire to exit U.S. assets, particularly among foreign investors who have been hit hardest by this unusual trifecta.
This week’s macro spotlight will be on April’s manufacturing data from Europe, Japan, and the U.S. As the week wraps up, attention will shift to Canada’s February retail sales figures and the final University of Michigan sentiment survey for April.
Euro at 2021 highs
George Vessey – Lead FX & Macro Strategist
The euro extended its rally on Monday to hit its highest level since November 2021 versus the US dollar – above our short-term upside target of $1.15. Investors are increasingly questioning the dollar’s dominance in the global financial system whilst turning to the common currency as an alternative.
EUR/USD has soared 13% since February, marking one of the fastest and largest euro advances in the past five years and in the top 5% of its best starts to a year on a record. Despite the remarkable rally already, further gains may still be on the horizon. If the common currency replicates the dramatic turnaround seen in 2023, EUR/USD could climb closer to $1.20. Interestingly, this surge comes as the European Central Bank shifts from aggressive rate hikes two years ago to easing policies today. While some indicators suggest the euro may be overextended, the ongoing global trade war could limit any significant pullbacks, supporting continued euro strength.
On the agenda this week, European officials are convening in Washington to address what many are calling the worst global trade crisis in a century. Tariffs are set to dominate discussions at the spring meetings of the International Monetary Fund and World Bank, as well as the G20 gathering of finance ministers and central bankers. The urgency stems from US threats to withdraw from the very multilateral institutions it helped establish, raising concerns about the stability of the global financial system.
On the data docket, flash industry PMIs are in the spot light to gauge the health of major economies whilst Germany’s Ifo index – a leading indicator for economic activity – will also be closely monitored.
*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 US dollar index has tumbled almost 10% year-to-date – facing headwinds from US growth underperformance, momentum sellers and capital outflow. The sell-America trade gathered momentum on Monday on growing concerns over President Donald Trump’s threats to fire Federal Reserve Chairman Jerome Powell.
Trump’s repeated criticism of Powell for not cutting interest rates has rattled Wall Street, with the S&P 500 Index dropping over 3% yesterday, in a taste of how the market would respond to a successful attempt to drag Powell out of his job before his term end next May. The US administration’s actions continue to amplify economic uncertainty, which is already at record high levels, creating a challenging environment for markets and policymakers alike. This heightened unpredictability is reshaping investor sentiment and influencing global financial dynamics.
Trump’s remarks have intensified fears about the independence of the US central bank, undermining confidence in the dollar’s safe-haven status. The blurred lines between monetary policy and politics are unsettling markets, driving liquidation of US assets. Until these uncertainties ease, pressure on US equities, bonds, and the dollar is likely to persist. indeed, the US dollar continued its slide in thin post-holiday trading, hovering near a 3-year low, while Treasuries showed mixed performance, shorter maturities rallied, and the long-end fell. Safe-haven assets like gold, the euro, yen, and Swiss franc gained traction as investors sought alternatives amid heightened political and market volatility.
Euro at 2021 highs
George Vessey – Lead FX & Macro Strategist
The euro extended its rally on Monday to hit its highest level since November 2021 versus the US dollar – above our short-term upside target of $1.15. Investors are increasingly questioning the dollar’s dominance in the global financial system whilst turning to the common currency as an alternative.
EUR/USD has soared 13% since February, marking one of the fastest and largest euro advances in the past five years and in the top 5% of its best starts to a year on a record. Despite the remarkable rally already, further gains may still be on the horizon. If the common currency replicates the dramatic turnaround seen in 2023, EUR/USD could climb closer to $1.20. Interestingly, this surge comes as the European Central Bank shifts from aggressive rate hikes two years ago to easing policies today. While some indicators suggest the euro may be overextended, the ongoing global trade war could limit any significant pullbacks, supporting continued euro strength.
On the agenda this week, European officials are convening in Washington to address what many are calling the worst global trade crisis in a century. Tariffs are set to dominate discussions at the spring meetings of the International Monetary Fund and World Bank, as well as the G20 gathering of finance ministers and central bankers. The urgency stems from US threats to withdraw from the very multilateral institutions it helped establish, raising concerns about the stability of the global financial system.
On the data docket, flash industry PMIs are in the spot light to gauge the health of major economies whilst Germany’s Ifo index – a leading indicator for economic activity – will also be closely monitored.
Sterling’s journey in uncertain times
George Vessey – Lead FX & Macro Strategist
The British Pound is on track to rise for eleven days on the bounce against the US dollar. This would be the longest stint without a daily decline on record. GBP/USD is above $1.34 now – its highest level in seven months. The pair is up 7% year-to-date, with gains driven largely by US dollar weakness as opposed to sterling strength as concerns over President Trump’s trade policies and their potential impact on the US economy continue to weigh on US assets.
Even lower-than-expected UK inflation data last week failed to hold back sterling’s rise, with headline CPI easing to 2.6% y/y and services inflation dropping to 4.7%. These figures have alleviated pressure on the Bank of England (BoE), prompting traders to slightly increase rate cut expectations with markets now anticipating 86 basis points of easing by year-end. The softer inflation data may grant the BoE more flexibility to support economic growth in the face of global trade uncertainty and rising household costs.
The outlook for further gains in GBP/USD remains strong, driven by Sterling’s alignment with the robust performance expected across the European FX complex this year. Additionally, the UK economy’s comparatively lower exposure to the negative impacts of US tariffs supports the pound’s resilience in the face of global trade shocks.
However, domestic challenges temper this optimism. Despite sterling’s strength against the dollar, these risks reduce the likelihood of sustained outperformance against other European currencies, such as the euro – hence GBP/EUR lingering around the €1.16 handle – down over 3% in 2025. Overall, the balance of external support and internal pressures shapes a cautious yet promising narrative for GBP/USD, while limiting broader sterling upside – particularly against the common currency.
*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
Stalling markets as trade talks take center stage
The US dollar continued to weaken as President Trump’s pressure on the Federal Reserve intensified, with the greenback falling across most major currencies.
The USD index slipped further, at three-year lows, as markets reacted to Trump’s ongoing demands for rate cuts, raising questions about Fed independence.
The euro was a standout performer, climbing 1% to finish above 1.1500.
The Japanese yen strengthened significantly with USD/JPY softening nearly 1% to close just below 141.00.
The Chinese yuan will be in focus with the April Politburo meeting expected later this week, which could outline policies to counter tariff impacts.
G24 Finance Ministers and Central Bank Governors meet today, with trade headlines potentially moving markets.
Fed’s Goolsbee: Potential decline in activity
On Sunday’s episode of CBS’s Face The Nation, Chicago Fed President Austan Goolsbee stated that the US economy may appear “artificially high” in the beginning “and then by the summer, might fall off, because people had bought it all and brought it forward” because to US penalties.
Goolsbee expressed his optimism that “this could be a spark to lead to a new era of global trade, which he called the golden age.”
According to him, the hard statistics for April was rather strong, with full employment, a declining inflation rate, and a stable unemployment rate.
Looking at risk sensitive currency, AUD/USD, after the previous pattern break and sharp down to the 0.5876-0.5921 support layer, the AUD/USD is now recovering towards important medium-term resistance levels in the 0.64-0.65 region.
AUD sellers may look to take advantage now as AUD is near the current 200-day EMA key resistance level of 0.6416, at the time of this writing.
China warns countries supporting the US in trade
At a news conference in Beijing, the Chinese Ministry of Commerce warned to react against countries that support US trade policy, according to Hoka News.
This highlights the growing geopolitical tensions between the two biggest economies in the world.
The delicate balance between geopolitical danger and economic opportunity will become even more critical as nations caught in the crossfire consider their options.
We opined that as the tariff war continues and the PBoC indicates a wider tolerance of a controlled CNY depreciation moving forward, the next key resistance for USD/CNY will be 7.50 to keep an eye on. Similar key level resistance of 7.50 for USD/CNH.
Short-term volatility might be introduced to the pair by developments in tariff discussions and trade negotiations as well as domestic policy stimulus.
Antipodeans scale back from top of trading range
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.
