As the second largest sender of international students behind China, India is a highly regulated financial services market. As of April 1st, 2025, the Tax Collection at Source (TCS) rules introduced under India’s Finance Act 2020 have changed, with the government increasing the TCS exemption limit from ₹7 lakh up to ₹10 lakh.
To help our Indian payment partners ensure full compliance with this these changes, we’ve updated our overview of the TCS regulations, originally posted in 2023.
What is Tax Collected at Source?
Tax Collected at Source came into effect across India on 1st October 2020. As of April 1st 2025, It is payable on cumulative remittances in excess of 10 lakh Indian Rupee (₹10 lakh) per remitter from India within a financial year on cross-border transactions that fall under the Liberalized Remittance Scheme. Education payments fall under the Liberalized Remittance Scheme so are therefore subject to the new TCS tax. At the end of the Indian financial year, TCS can be rebated as part of the payer’s tax return or be used to offset any outstanding taxes owed.
How is TCS applied?
To complete an income tax return in India, an individual requires a Permanent Account Number (PAN) which is issued as a laminated card. When a payer in India initiates a cross-border transaction through an Authorized Dealer (authorized by the Reserve Bank of India to deal in foreign exchange), such as a bank or payment provider, the payer’s PAN card is checked to confirm the cumulative cross-border remittance value that has been sent for the financial year.
If the remitter has not exceeded the INR ₹10 lakh limit, they do not have to pay the TCS
If the remitter has exceeded the limit or will exceed the limit, they must pay TCS on the remitted amount above the INR 10 lakh limit
For education payments, there are two applicable TCS rates which apply to the remitted amount above the INR 10 lakh threshold:
Nil if the cross-border payment is funded through an Indian bank loan
5% if the cross-border payment is self-funded (private)
How is this tax collected?
How is this tax collected?
It is the responsibility of the Authorized Dealer in India facilitating the cross-border transaction to remit the tax on behalf of the payer to the tax authority. So, if a student from India makes a payment to your institution, this would be handled by the bank or the Indian payment provider the student uses to transfer their funds.
How is this tax managed if a student from India uses the Convera platform?
We have worked with all our payment partners in India to help ensure these new tax obligations are being met.
ICICI Bank
Collection of TCS is managed by branch staff at ICICI. They will do a PAN look up and ask for a loan sanction letter and then apply TCS, if applicable, when the student visits their local ICICI branch. ICICI will remit the tax to the appropriate authorities.
Convera Agent
Collection of TCS is managed by branch staff at the Convera Agent location. They will do a PAN look up and ask for a loan sanction letter and then apply TCS if applicable. Each Agent will remit the tax to the appropriate authorities.
Domestic payment into our INR bank account
GlobalPay for Students will calculate the TCS amount and add such amount to the amount due. This will be displayed on the student’s payment instructions. The payer must remit the full amount (amount owed to your Institution and TCS). Our banking partner in India will withhold the amount of TCS payable and remit those funds to the tax authority and your institution will receive the full amount owed.
What does my institution need to do?
There is no action for you to take when receiving payments sent through GlobalPay for Students. Our payment partners in India will manage this process for your students, and there is no need to change your billing amounts. If you work with other payment providers, you should check with them on their processes.
What if a student sends a payment direct into our institution’s bank account?
We always advise our education institution partners not to accept or encourage payments by overseas students direct into their bank account. There are several reasons for this:
Reconciling and matching these payments to the student account creates additional work for your team
Any delay posting to the student account will impact on student experience
Publishing or sharing your bank details could expose your institution to fraud
Payments coming into your account will lack compliance screening (payment providers such as Convera do this for you)
If a student from India does send a payment direct into your bank account from India, the bank in India will also manage the TCS and remittance to the tax authorities.
Work with a trusted partner
When receiving payments from countries around the world, ensure you are working with a provider that has a global network and strong payment partner relationships. This ensures regulations and processes such as TCS in India are managed on your behalf, minimizing interruption to your cashflow and providing students with a stress-free payment process.
Convera is your trusted partner delivering:
Mobile enabled solution enabling your international students to pay their fees in their local currency quickly and easily online, by bank transfer or by credit card.
Seamless payment experience for your students and easy reconciliation for your institution.
60+ bank relationships and 500+ bank accounts.
~200 regulatory licenses.
Dedicated regional teams focused on local compliance requirements.
Disclaimer:
Convera has based the opinions expressed in this webpage on information generally available to the public, and such information or opinions are strictly for illustrative purposes only. Business between you and Convera shall be governed by the applicable terms and conditions provided to you before you undertake any transaction or commercial relationship with Convera.
US President Trump will unveil sweeping tariffs against US trading partners today. It isn’t a binary event though, a range of tariff policies could be announced, and the repercussions could prove hard to predict long after. Trump expects to bring “liberation” for the US economy, but amidst the spike in trade policy uncertainty, signs of slower growth, upward pressure on inflation and souring risk sentiment dominate. The 4% drop in US equities and the US dollar this year point to a more pessimistic outlook.
Does an awful April await the dollar?
George Vessey – Lead FX & Macro Strategist
Over the last 20 years, April has been the US dollar’s worst month of the year, averaging a negative return of -0.5%. Though seasonality trends will play second fiddle to trade wars, the broader economic and geopolitical landscape doesn’t bode well for the buck either.
The world waits on tenterhooks ahead of the White House’s announcement on a new set of tariffs on imported goods, which have the potential to reshape global trade and disrupt economic activity. The “blurred visibility’’ approach from Trump on tariffs brings a huge amount of unpredictability – and as a result, it’s difficult for companies to plan ahead with spending and hiring decisions. If the haphazard manner in which the White House has imposed its levies continues, it would likely aggravate the situation and potentially impede economic activity. Indeed, yesterday’s data offered a mix of weaker activity data, cooling labour market signals and surging price pressures.
The ISM manufacturing PMI fell to 49 in March from 50.3 previously, below forecasts of 49.5. The reading pointed to the first contraction in factory activity in three months. The details were also ugly. New orders, employment and production all contracted too, whilst price pressures soared to the highest since June 2022. All this suggests that tariff fears are hurting the US manufacturing sector and consistent with early stages of stagflation. This is negative for risk assets.
Nervous investors are hoping for more clarity on tariff policy, but there’s a chance that uncertainty extends beyond today, which is likely why FX traders are in a wait-and-see mode. Currency markets have been relatively calm over the past few days and implied volatility gauges somewhat subdued in light of circumstances. We think an escalating tariff narrative could provide dollar respite early on due to global risk aversion boosting safe haven flows, but rising US growth scares will come back to haunt the buck. A downtrend would also correlate with the dollar’s path during Trump’s first term. Back then, the dollar index depreciated around 15% from peak to trough during 2017-2018.
What we do know is that the Trump administration is aiming for a challenging trifecta: a weaker USD, lower yields, and a robust stock market. Historically, achieving this rare combination requires highly disinflationary policies to push yields and the USD lower, alongside a supportive Federal Reserve to bolster equity market sentiment. However, the current policy mix – marked by geopolitical shifts, tariffs, and macroeconomic uncertainty – may succeed in weakening the USD and lowering yields, but risks undermining economic growth and stock market performance in the process. This delicate balance highlights the complexities of navigating such ambitious goals without triggering broader financial instability.
Betting on euro strength despite tariff threat
George Vessey – Lead FX & Macro Strategist
European risk assets have been performing relatively well since Trump’s election, with EUR/USD up around 4% and the Euro Stoxx 50 up 8%. The German equity benchmark is up a whopping 13% – turbocharged by the historic German fiscal package. In the run-up to Trump’s announcement today, sentiment has turned more pessimistic though and the European Union said it’s ready to retaliate if necessary if reciprocal tariffs are imposed.
Tariffs risk reigniting inflationary pressures in the short term. Longer-term though, a trade war may weaken growth, turning into a disinflationary force for Germany and the eurozone. Germany’s 10-year Bund yield has fallen to a four-week low below 2.7%, reflecting investor caution amid escalating tensions. Money markets currently price an 77% chance of an ECB rate cut in April, but policymakers remain divided. More policy easing could weigh on the euro via falling relative yield spreads, but given the huge fiscal stimulus plans, the impact on growth and therefore need for aggressive monetary easing may be constrained.
This could be why FX options traders are still more optimistic on the euro’s outlook further down the line. So-called risk reversals, a closely watched barometer of positioning, show investors are the most bullish on the euro over the next month since late 2020. That’s despite the fact the common currency is already enjoying its best start to a year since 2016 and also suggests markets are wagering that a trade war will be more detrimental to the US than Europe.
Sterling looks sturdy
George Vessey – Lead FX & Macro Strategist
In contrast to the US dollar, seasonality plays in sterling’s favour. The pound has delivered the best average monthly returns versus the dollar in the past 20 years in April, and this is thanks in part to UK fiscal year-end flows and portfolio rebalancing. GBP/USD has consolidated around the $1.29 handle for the past four weeks, with no reversal signal identified on the charts yet. As long as the pair holds above the 200-day moving average (currently around $1.28), the path of least resistance should remain to the topside. The pair is up 7% from year-to-date lows of $1.21 and less than 4% away from its 2024 high.
As the pound starts April with support from favourable rate differentials and optimism around seasonality trends, there are doubts emerging that the UK will sidestep the worst of Trump’s looming tariff barrage. The Trump administration has not confirmed which countries will be hit, although it has trailed today’s announcement as a sweeping one. This has somewhat dashed hopes that the UK might float under the radar, though negotiating some sort of deal remains plausible, especially thanks to relatively modest bilateral trade with the US.
For this reason, sterling is being dubbed a tariff hedge of sorts. If Trump’s tariff plans roil global markets, sterling won’t be immune, but it seems to have a few supports that can act as a shield. In a full-blown risk-off move, the dollar tends to dominate, but any rebound in the safe haven could be short-lived if the focus shifts back to US recession fears.
*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
Markets inch higher ahead of US tariff announcement
Global markets edged higher overnight ahead of what is likely to be a massive 24 hours with US president Donald Trump planning to announce a new wave of tariffs overnight.
President Trump has marked 2 April as the key date for an announcement around reciprocal tariffs. Of course, the announcement, due Thursday morning APAC time, might be delayed, shifted or more positive than expected.
In recent days, media reports have suggested the focus will be on a country-by-country basis with tariffs of at least 20% reported overnight.
While equity markets and risk-sensitive currencies like the Australian dollar have been mostly weaker over the last fortnight, we saw a small rebound overnight, led by a 0.4% gain in the US’s S&P 500.
The AUD/USD gained 0.6% as it climbed from one-month lows while NZD/USD gained 0.5% as it also rebounded from one-month lows. In Asia, the USD mostly gained, with the USD/SGD up 0.1% and USD/CNH up 0.3%.
RBA holds steady, citing inflation uncertainty
No joy for Australian mortgage holders yesterday, with the Reserve Bank of Australia maintaining the cash rate at 4.10% on Tuesday as expected.
The central bank highlighted that labour markets remain tight despite February’s job losses. It also pointed to heightened global uncertainty, noting that US tariffs are affecting confidence—an impact that could intensify if tariffs expand or other countries retaliate.
The RBA stated that inflation could move in either direction.
AUD/USD reaction was muted after the RBA’s decision and press conference but the AUD/USD ended higher on the day in line with gains in global markets.
That said, the AUD/USD, AUD/CNY, AUD/EUR are all near the lower end of their 30-day trading range, signaling ongoing selling pressure in these markets.
For AUD/NZD, it is in the middle of the 30-day trading range, but AUD buyers may also look to capitalize on the pair.
Japanese yen higher as Tankan Survey indicates May BoJ live
Looking to Japan, the Tankan manufacturing index in Q1 was 12 compared to 14 before, while the non-manufacturing index was 35 compared to 33 previously.
While activity slowed, the results of the survey indicate a higher inflation expectation for all company categories, which supports the argument that the May BoJ will be live.
JPY has strengthened against USD circa 5% YTD, and it is the top three performing G10 FX YTD.
USD remains supported as Fed maintains “moderately restrictive” stance, with FOMC members emphasizing caution on rate cuts due to upside inflation risks.
Looking forward, USD/JPY may look to breach next resistance levels of 50-day EMA of 150.78 and 200-day EMA of 151.44.
Similarly for SGD/JPY, a move higher could potentially breach the next resistance levels of 50-day EMA of 112.42 and 200-day EMA of 113.05.
USD higher in Asia ahead of “Liberation Day”
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.
Uncertainty likely to persist beyond Liberation Day
George Vessey – Lead FX & Macro Strategist
Global markets extended their decline on Monday as trade war concerns continued to dampen investor sentiment, while safe haven Gold saw another strong rally, with prices continuing their run to record highs. The US dollar index ended the month 3% lower, its worst month since November 2022, but started the week on the front foot thanks to some defensive positioning. With so-called “Liberation Day” looming, uncertainty is high, and the range of possible outcomes is wide, with the administration considering various factors, including tariff rates, non-tariff measures, and value-added taxes, which could affect the final outcome.
The US administration’s chaotic approach to economic and trade policy seems to be weighing more heavily on its domestic consumers and businesses relative to peers. This is evidenced by recent US survey data with uncertainty on main street near record highs and consumer confidence at multi-year lows as respondents remain hesitant about economic conditions amid ongoing policy developments. With inflation still stuck above the Fed’s 2% target, and uncertainty around how much tariffs may fuel a rise in prices for consumers and businesses, the central bank has so far in 2025 maintained its benchmark rate at the current level of 4.25% to 4.5%. While the reciprocal tariff announcement tomorrow should provide some incremental clarity on the countries and products impacted and the rates of the levies, these will likely be subject to continued negotiation.
As such, scope for a sustained rebound in risk appetite and therefore risky assets, like equities and pro-cyclical or commodity-linked currencies, appears limited in our view. If trade frictions worsen, a recession is a realistic risk across major economies. This is why hard economic data remains integral too, with eyes on US ISM manufacturing PMI and JOLTS job openings today.
Euro held back by softer inflation
George Vessey – Lead FX & Macro Strategist
The euro stabilised around the $1.08 level at the start this week as investors assessed key inflation data while bracing for reciprocal US tariffs set to take effect on Wednesday. Expected volatility in EUR/USD remains subdued, reflecting trader complacency, with one-week swings estimated within 1.3% – a far cry from recent 1-week ranges. The currency pair staged a 1-week rise of 4.4% earlier this month – its second biggest rise since 2009.
On the data front, inflation for March brought some relief for the European Central Bank (ECB) yesterday. German headline inflation eased to 2.2% y/y – a 2-year low, while core inflation dipped to 2.5% from 2.6%. Germany’s import prices did surge 3.65% though, the highest since January 2023, while retail sales rose 0.8% m/m, marking the biggest increase in five months. Despite this resilience, Germany’s 10-year Bund yield fell to a four-week low as global borrowing costs declined amid escalating trade war fears. Still, the spread between US 10-year Treasury yields and German Bunds has narrowed by the sharpest margin since 2008 (excluding pandemic-related moves). This has coincided with the over 4% rise in EUR/USD this quarter – the strongest Q1 since 2016.
This mostly reflects Germany’s fiscal stimulus package, which aims to support growth. It also reflects the growing concern over inflation risks, potentially keeping ECB rate cutting at bay. But while trade tensions could temporarily lift inflation, a prolonged trade war might weaken growth, turning into a disinflationary force.
For now, euro traders remain on edge because if the US does opt for high tariffs on all EU products this week, EUR/USD could be driven back towards the 200-day moving average nearer $1.07. Conversely, there is a chance traders view this as riskier to the US economic outlook, in which case EUR/USD could move back above $1.09
Lacking directional conviction
George Vessey – Lead FX & Macro Strategist
The British pound edged higher against the euro and slightly lower against the dollar on Monday, though the latter clocked its best month since November 2023. Nervousness about the scale and timeline of Trump’s proposed tariffs keeps direction relatively random, confirming a lack of conviction as to how the currency market should react to the announcements on Wednesday.
With focus on April seasonality and bets the UK economy may prove to be relatively shielded from US tariff announcements this week, the pound looks to be in a more favourable position relative to its peers. Because the UK is perceived to be relatively at little risk to US tariffs relative to major peers, sterling has at times found itself well supported around tariff announcements. Indeed, GBP/EUR has recorded three consecutive weekly advances against the euro, although upside momentum is far from strong and the pair is prone to mean reversion around €1.19. Plus, given the elevated focus on tariffs, anything short of immediate implementation could drive some relief for the euro in the short term.
On the data front, the Lloyds business optimism index was published yesterday. This is a strong leading indicator of economic activity in the UK and has rebounded back to levels seen only a handful of times since 2017. Final PMI figures for March are due this week, but will play second fiddle to the tariff chatter.
Oil and gold near recent highs
Table: 7-day currency trends and trading ranges
Key global risk events
Calendar: March 31- April 4
All times are in BST
Have a question?[email protected] *The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates
The U.S. administration recently imposed a 25% tariff on auto imports, effective April 3, aiming to make it permanent. These tariffs directly impact five key trading partners—Mexico, Japan, South Korea, Canada, and Germany—with Canada standing out as one of the most affected. Ontario, responsible for 85% of Canada’s auto and parts industry, will bear the brunt of this policy. In 2024 alone, the U.S. imported $31.2 billion worth of vehicles and parts from Canada. Major industry players—Ford, GM, Stellantis, Honda, and Toyota—assemble over 1.4 million light vehicles in Canada each year, alongside 460,000 passenger vehicles and 23,000 heavy trucks.
The tariffs are designed to incentivize domestic production, and some foreign automakers, like Hyundai, have committed significant investments, such as $21 billion in U.S. operations between 2025 and 2028. However, the auto industry’s global supply chain presents significant challenges. North America’s interdependent trade network—established through agreements like the 1965 Auto Pact and later reinforced by NAFTA and the USMCA—relies on cross-border cost efficiencies. These agreements have historically been celebrated as milestones in fostering trade cooperation and industry growth.
Achieving fully domestic manufacturing remains a distant goal due to supply chain complexities. Even the Ford F-150, often touted as the “most American” car, saw the U.S. and Canadian share of its value drop from 75% in 2012 to 45% by 2024. U.S. automakers depend heavily on imported components, and while partial exemptions for Canada and Mexico exist, they only apply to parts significantly transformed within the U.S. This leaves manufacturers vulnerable to escalating production costs.
Canada’s counter-tariff list, worth C$155 billion, notably excludes auto-related goods, highlighting the Canadian government’s acknowledgment of the potential damage auto tariffs could inflict on North America’s tightly integrated production network.
As the tariff debate reaches its peak this Wednesday, market uncertainty remains high. Businesses, consumers, and investors are unlikely to receive the policy clarity they seek in the near term. President Trump has mentioned the possibility of negotiating reciprocal tariffs, but he also emphasized the administration’s long-term commitment to sector-specific tariffs, including those on autos.
Uncertainty likely to persist beyond Liberation Day
George Vessey – Lead FX & Macro Strategist
Global markets extended their decline on Monday as trade war concerns continued to dampen investor sentiment, while safe haven Gold saw another strong rally, with prices continuing their run to record highs. The US dollar index ended the month 3% lower, its worst month since November 2022, but started the week on the front foot thanks to some defensive positioning. With so-called “Liberation Day” looming, uncertainty is high, and the range of possible outcomes is wide, with the administration considering various factors, including tariff rates, non-tariff measures, and value-added taxes, which could affect the final outcome.
The US administration’s chaotic approach to economic and trade policy seems to be weighing more heavily on its domestic consumers and businesses relative to peers. This is evidenced by recent US survey data with uncertainty on main street near record highs and consumer confidence at multi-year lows as respondents remain hesitant about economic conditions amid ongoing policy developments. With inflation still stuck above the Fed’s 2% target, and uncertainty around how much tariffs may fuel a rise in prices for consumers and businesses, the central bank has so far in 2025 maintained its benchmark rate at the current level of 4.25% to 4.5%. While the reciprocal tariff announcement tomorrow should provide some incremental clarity on the countries and products impacted and the rates of the levies, these will likely be subject to continued negotiation.
As such, scope for a sustained rebound in risk appetite and therefore risky assets, like equities and pro-cyclical or commodity-linked currencies, appears limited in our view. If trade frictions worsen, a recession is a realistic risk across major economies. This is why hard economic data remains integral too, with eyes on US ISM manufacturing PMI and JOLTS job openings today.
Euro held back by softer inflation
George Vessey – Lead FX & Macro Strategist
The euro stabilised around the $1.08 level at the start this week as investors assessed key inflation data while bracing for reciprocal US tariffs set to take effect on Wednesday. Expected volatility in EUR/USD remains subdued, reflecting trader complacency, with one-week swings estimated within 1.3% – a far cry from recent 1-week ranges. The currency pair staged a 1-week rise of 4.4% earlier this month – its second biggest rise since 2009.
On the data front, inflation for March brought some relief for the European Central Bank (ECB) yesterday. German headline inflation eased to 2.2% y/y – a 2-year low, while core inflation dipped to 2.5% from 2.6%. Across the eurozone, inflation also fell sharply to 2.3% from 2.8% in February. Germany’s import prices did surge 3.65% though, the highest since January 2023, while retail sales rose 0.8% m/m, marking the biggest increase in five months. Despite this resilience, Germany’s 10-year Bund yield fell to a four-week low as global borrowing costs declined amid escalating trade war fears. Still, the spread between US 10-year Treasury yields and German Bunds has narrowed by the sharpest margin since 2008 (excluding pandemic-related moves). This has coincided with the over 4% rise in EUR/USD this quarter – the strongest Q1 since 2016.
This mostly reflects Germany’s fiscal stimulus package, which aims to support growth. It also reflects the growing concern over inflation risks, potentially keeping ECB rate cutting at bay. But while trade tensions could temporarily lift inflation, a prolonged trade war might weaken growth, turning into a disinflationary force.
For now, euro traders remain on edge because if the US does opt for high tariffs on all EU products this week, EUR/USD could be driven back towards the 200-day moving average nearer $1.07. Conversely, there is a chance traders view this as riskier to the US economic outlook, in which case EUR/USD could move back above $1.09
Lacking directional conviction
George Vessey – Lead FX & Macro Strategist
The British pound edged higher against the euro and slightly lower against the dollar on Monday, though the latter clocked its best month since November 2023. Nervousness about the scale and timeline of Trump’s proposed tariffs keeps direction relatively random, confirming a lack of conviction as to how the currency market should react to the announcements on Wednesday.
With focus on April seasonality and bets the UK economy may prove to be relatively shielded from US tariff announcements this week, the pound looks to be in a more favourable position relative to its peers. Because the UK is perceived to be relatively at little risk to US tariffs relative to major peers, sterling has at times found itself well supported around tariff announcements. Indeed, GBP/EUR has recorded three consecutive weekly advances against the euro, although upside momentum is far from strong and the pair is prone to mean reversion around €1.19. Plus, given the elevated focus on tariffs, anything short of immediate implementation could drive some relief for the euro in the short term.
On the data front, the Lloyds business optimism index was published yesterday. This is a strong leading indicator of economic activity in the UK and has rebounded back to levels seen only a handful of times since 2017. Final PMI figures for March are due this week, but will play second fiddle to the tariff chatter.
Mexican Peso slides, erasing yearly gains as April 2nd approaches
*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
Aussie falls to one-month lows
The Australian dollar was weaker overnight ahead of today’s Reserve Bank of Australia decision.
According to Bloomberg, of the 30 surveyed economists, only one forecaster is calling for the RBA to cut, with the other 29 expecting interest rates to remain on hold at 4.10%.
The RBA decision is due at 2.30pm AEDT with the governor Michele Bullock’s press conference at 3.30pm.
The AUD/USD was lower, falling 0.6%, with the pair dropping to the lowest level since 4 March.
Global markets stay volatile ahead of tariff deadline
US sharemarkets opened sharply lower overnight but then gained strongly throughout the session in a sign of the ongoing volatility in financial markets.
Last week, the S&P 500 and Nasdaq suffered their worst week since December, with markets on edge ahead of President Trump’s so-called “Liberation Day” of tariff announcements. President Trump has said he will announce further tariffs on 2 April (Thursday morning APAC time).
While equity markets rebounded, key FX markets were lower.
While the Aussie fell, the NZD/USD lost even more, down 0.7%.
The USD/SGD climbed 0.1% while the USD/CNH fell 0.1%.
Eurozone CPI due
In Europe, FX markets performed better with the GBP/USD down only 0.1% while the EUR/USD was flat.
Tonight, markets will be looking to Eurozone March CPI numbers.
The headline annual inflation number is forecast to fall from 2.3% to 2.2% while the core number is forecast to drop from 2.6% to 2.5% according to Bloomberg consensus numbers.
However, a higher inflation number could spark a further euro rally. The EUR has recently surged across APAC with the AUDEUR back near five-year lows overnight. Similarly, the NZD/EUR has also fallen to five-year lows while the EUR/SGD has climbed to eight-month highs.
Eurozone CPI is due at 8.00pm AEDT.
Aussie lower ahead of RBA
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 the Market Insights Team Stagflation fears rock dollar
George Vessey – Lead FX & Macro Strategist
Financial markets remain on edge as President Trump’s tariff rhetoric amplifies uncertainty ahead of major trade policy announcements this week. A sea of red across global equity markets this morning marks the start of hectic week. The S&P 500 is heading for its worst quarter since 2022, but more downside is likely amid risk from a prolonged global trade war. Treasuries could see more upside due to risk aversion, whilst the dollar’s safe-haven appeal has diminished, with selling pressure intensifying – a stark contrast to its dominance during past crises as the US exceptionalism narrative fades and stagflation fears rise.
On the economic data front, the Fed’s preferred measure of inflation came in higher than expected for February and the University of Michigan Consumer Sentiment Index fell to a 2-year low, whilst 5-year inflation expectations surged to 4.1% – the highest since 1993. The Atlanta Fed GDP nowcast was adjusted lower to -2.8% for Q1, down from -1.8% earlier last week. All of this added to worries the US is heading for a bout of stagflation at a time when investors are worried that Trump’s trade levies combined with a broader sense of uncertainty will hurt US economic growth while also increasing price pressures.
Over the weekend, President Donald Trump reaffirmed plans to impose reciprocal tariffs on all countries this week and reportedly urged his advisers to take a more aggressive stance on trade policies. Markets are increasingly worried that these measures could trigger retaliation from key trading partners, reignite inflation, and slow economic growth.
Looking ahead, markets will focus on Trump’s tariff announcements, and their implications for trade and inflation, but key data releases will also be monitored, including the March employment report, factory orders, and PMI updates, which will provide insights into the economic impact of trade tensions. Investors will also monitor Fed Chair Powell’s remarks for clues on monetary policy adjustments. With volatility expected to persist, the dollar’s trajectory remains uncertain, shaped by geopolitical developments and shifting sentiment.
Tariffs are backfiring for the U.S.
Kevin Ford – FX & Macro Strategist The US economy is sending mixed signals, creating a challenging landscape for businesses and investors alike. In March, consumer confidence fell sharply, reaching its lowest point since January 2021—a sentiment echoed by the University of Michigan survey. Although S&P PMIs indicated some improvement, the gains were concentrated in the services sector, likely supported by favorable weather conditions. Meanwhile, manufacturing PMIs weakened, possibly reflecting earlier front-loading.
Compounding this uncertainty, tariffs remain a source of inflationary pressure concerns, raising critical questions for the Federal Reserve: Will these tariff-driven price increases prove temporary, or will they spark more persistent inflationary effects? Recent data has done little to ease concerns. On Friday, the core PCE deflator rose 0.4% month-over-month, surpassing expectations. At the same time, real personal spending edged up by just 0.1% month-over-month, while January’s contraction was revised further downward to 0.6%. These developments suggest that declining confidence is beginning to translate into tangible behavioral shifts. Inflation expectations are also trending higher, as revealed in the final University of Michigan survey, which reported elevated near-term and long-term forecasts.
Looking ahead, beyond the so-called ‘Liberation day’ on Wednesday, markets are focused on the upcoming US labor market report. Nonfarm payroll growth is projected to slow to 125,000 in March, down from February’s 151,000, with risks skewing toward even weaker outcomes as layoffs—particularly in the tech sector—continue to unfold. Meanwhile, the unemployment rate is expected to hold steady at 4.1%, following a slight uptick last month.
At present, soft data paints a more concerning picture than hard data, but the precise point at which sentiment shifts meaningfully impact behavior remains uncertain. For investors, these factors weave a complex narrative. Declining consumer confidence, mounting inflation risks, and potential labor market softening highlight the importance of adaptability and strategic foresight in navigating an increasingly unpredictable economic environment.
Euro pounces on US weakness
George Vessey – Lead FX & Macro Strategist
European stock markets declined sharply on Friday, with the Stoxx 50 dropping 1.1% and the Stoxx 600 falling 0.8%, marking its third consecutive negative close. But the euro ended the week on a stronger footing versus the US dollar as traders sold the US currency amidst a string of disappointing US data. EUR/USD rebounded back above the $1.08 handle after support held firm around its 50-week moving average at $1.0738.
Investors are closely watching the looming April 2 deadline, when Trump is set to unveil reciprocal tariffs on key trading partners. Trump has already announced a 25% tariff on imported cars and light trucks, set to take effect this week. While uncertainty over tariffs is weighing on markets, the initial announcement could pave the way for further negotiations, potentially softening the final impact. In fact, the European Commission has signalled that it has prepared concessions for the US to escape reciprocal tariffs.
Meanwhile on the data front last week, the eurozone’s latest economic activity indicator showed the fastest expansion in seven months, with the composite PMI inching up to 50.4. While this was slightly below market expectations, the manufacturing sector outperformed, offering a glimpse of optimism for an economy that has struggled with stagnation. Germany led the improvement, as anticipation builds over the economic boost from its newly approved fiscal expansion focused on infrastructure and defence.
Europe’s fiscal boost still supports the medium-term bullish outlook for the euro, which is why the repricing at the back end of the euro’s volatility skew shows sentiment is the least bearish for the euro in over three years.
Preliminary inflation readings from Italy, Germany and the wider euro-region are also due this week, but will play second fiddle to tariff developments.
Tariff resilience underpins positive pound view
George Vessey – Lead FX & Macro Strategist
Due to concerns that President Trump’s tariffs will ignite inflation and dampen economic growth in the US, dollar selling is acting as a tailwind for GBP/USD, which is looks to be clawing its way back towards $1.30. With a gain of over 3%, the pound is on track for its best month since November 2023 against the US dollar, whilst April is one of the pair’s strongest months of the year historically.
On the domestic front, despite the UK government’s fiscal plans facing mounting scrutiny, the pound has held up relatively well in the wake of the Spring Statement. Gilts remain vulnerable as concerns over sustainability of the spending plan take centre stage, with the fiscal buffer eroding. But investors aren’t dumping the pound and gilts simultaneously like they were at the start of the year when confidence in UK policy was bleak, and stagflation fears were rising. A slew of data last week showed UK services PMI beating expectations, offsetting the fall in manufacturing, whilst retail sales, rose 1% m/m in February – against exceeding consensus forecasts and keeping Bank of England easing bets at bay, with just two more rate cuts fully priced in by year-end.
Meanwhile, sterling appears to hold an international advantage when it comes to tariffs as well. Optimism that the UK will avoid the worst of Trump’s reciprocal tariff plan makes it an attractive hedge against tariff noise. This is also evident via its rare positive (albeit weak) correlation with the VIX fear index. President Trump has suggested he may not take all of the non-tariff barriers into account when setting tariff rates, specifically mentioning VAT taxes, which will be welcomed by the UK. The UK’s greater resilience to direct tariffs than the eurozone could also act as a tailwind for GBP/EUR, which is hovering beneath the €1.20 handle this morning.
Gold surges to record high Table: 7-day 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.
Financial markets remain on edge as President Trump’s tariff rhetoric amplifies uncertainty ahead of major trade policy announcements this week. A sea of red across global equity markets this morning marks the start of hectic week. The S&P 500 is heading for its worst quarter since 2022, but more downside is likely amid risk from a prolonged global trade war. Treasuries could see more upside due to risk aversion, whilst the dollar’s safe-haven appeal has diminished, with selling pressure intensifying – a stark contrast to its dominance during past crises as the US exceptionalism narrative fades and stagflation fears rise.
On the economic data front, the Fed’s preferred measure of inflation came in higher than expected for February and the University of Michigan Consumer Sentiment Index came in softer than expected, whilst 5-year inflation expectations surged to 4.1% – the highest in decades. The Atlanta Fed GDP nowcast was adjusted lower to -2.8% for Q1, down from -1.8% earlier last week. All of this added to worries the US is heading for a bout of stagflation at a time when investors are worried that Trump’s trade levies combined with a broader sense of uncertainty will hurt US economic growth while also increasing price pressures.
Over the weekend, President Donald Trump reaffirmed plans to impose reciprocal tariffs on all countries this week and reportedly urged his advisers to take a more aggressive stance on trade policies. Markets are increasingly worried that these measures could trigger retaliation from key trading partners, reignite inflation, and slow economic growth.
Looking ahead, markets will focus on Trump’s tariff announcements, and their implications for trade and inflation, but key data releases will also be monitored, including the March employment report, factory orders, and PMI updates, which will provide insights into the economic impact of trade tensions. Investors will also monitor Fed Chair Powell’s remarks for clues on monetary policy adjustments. With volatility expected to persist, the dollar’s trajectory remains uncertain, shaped by geopolitical developments and shifting sentiment.
Euro pounces on US weakness
George Vessey – Lead FX & Macro Strategist
European stock markets declined sharply on Friday, with the Stoxx 50 dropping 1.1% and the Stoxx 600 falling 0.8%, marking its third consecutive negative close. But the euro ended the week on a stronger footing versus the US dollar as traders sold the US currency amidst a string of disappointing US data. EUR/USD rebounded back above the $1.08 handle after support held firm around its 50-week moving average at $1.0738.
Investors are closely watching the looming April 2 deadline, when Trump is set to unveil reciprocal tariffs on key trading partners. Trump has already announced a 25% tariff on imported cars and light trucks, set to take effect this week. While uncertainty over tariffs is weighing on markets, the initial announcement could pave the way for further negotiations, potentially softening the final impact. In fact, the European Commission has signalled that it has prepared concessions for the US to escape reciprocal tariffs.
Meanwhile on the data front last week, the eurozone’s latest economic activity indicator showed the fastest expansion in seven months, with the composite PMI inching up to 50.4. While this was slightly below market expectations, the manufacturing sector outperformed, offering a glimpse of optimism for an economy that has struggled with stagnation. Germany led the improvement, as anticipation builds over the economic boost from its newly approved fiscal expansion focused on infrastructure and defence.
Europe’s fiscal boost still supports the medium-term bullish outlook for the euro, which is why the repricing at the back end of the euro’s volatility skew shows sentiment is the least bearish for the euro in over three years.
Preliminary inflation readings from Italy, Germany and the wider euro-region are also due this week, but will play second fiddle to tariff developments.
Tariff resilience underpins positive pound view
George Vessey – Lead FX & Macro Strategist
Due to concerns that President Trump’s tariffs will ignite inflation and dampen economic growth in the US, dollar selling is acting as a tailwind for GBP/USD, which is looks to be clawing its way back towards $1.30. With a gain of over 3%, the pound is on track for its best month since November 2023 against the US dollar, whilst April is one of the pair’s strongest months of the year historically.
On the domestic front, despite the UK government’s fiscal plans facing mounting scrutiny, the pound has held up relatively well in the wake of the Spring Statement. Gilts remain vulnerable as concerns over sustainability of the spending plan take centre stage, with the fiscal buffer eroding. But investors aren’t dumping the pound and gilts simultaneously like they were at the start of the year when confidence in UK policy was bleak, and stagflation fears were rising. A slew of data last week showed UK services PMI beating expectations, offsetting the fall in manufacturing, whilst retail sales, rose 1% m/m in February – against exceeding consensus forecasts and keeping Bank of England easing bets at bay, with just two more rate cuts fully priced in by year-end.
Meanwhile, sterling appears to hold an international advantage when it comes to tariffs as well. Optimism that the UK will avoid the worst of Trump’s reciprocal tariff plan makes it an attractive hedge against tariff noise. This is also evident via its rare positive (albeit weak) correlation with the VIX fear index. President Trump has suggested he may not take all of the non-tariff barriers into account when setting tariff rates, specifically mentioning VAT taxes, which will be welcomed by the UK. The UK’s greater resilience to direct tariffs than the eurozone could also act as a tailwind for GBP/EUR, which is hovering beneath the €1.20 handle this morning.
*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 stocks lower, but FX more muted
US stocks were down sharply on Friday, with the Dow Jones falling 1.7%, S&P 500 down 1.9% and Nasdaq down 2.7%. For the S&P 500 and Nasdaq, it was the worst week since mid-December.
Friday’s US PCE number – the Federal Reserve’s preferred measure of inflation – hit sentiment with an unexpected rise in inflation with core PCE up from 2.7% to 2.8% in annual terms in February. Worryingly, spending fell, signalling a double-whammy of bad news.
However, as we have seen over the last two weeks, FX markets were more restrained, with only moderate moves on Friday.
The AUD/USD fell 0.2% on Friday after trading in a tiny range between 0.6255 and 0.6330 all last week.
The NZD/USD lost 0.4% to drift back to the lowest level since 14 March.
In Asia, the USD/SGD gained 0.1% while USD/CNH lost 0.1%.
“Liberation Day” nears
Global markets will likely be on edge ahead of the next round of tariff announcements, due on 2 April, and dubbed “Liberation Day” by President Trump.
Over the weekend, reports in the Washington Post suggested President Trump is pushing his advisers to take a more aggressive approach.
Trump is supposedly mulling whether to impose a set amount on all imports into the US or focus on the so-called “Dirty 15” trading partners that include the EU, Japan China, Canada and Mexico amongst others. (Australia, NZ and Singapore are not on the list).
Historically, more aggressive US tariff action has caused trade-sensitive currencies like the Aussie, Canadian dollar and Chinese yuan to weaken. However, more recently, this correlation has faltered, as markets instead focus on the negative impact on US growth.
Over the longer term, we expect trade-sensitive currencies to again suffer from tariff news – it’s just a matter of when.
RBA, Eurozone CPI, US jobs due this week
Away from tariff news, the focus will be on this week’s Reserve Bank of Australia decision, EU inflation and US jobs report.
The RBA, due 2.30pm Tuesday AEDT, has seen a massive shift in expectations over the month of March – from a 13% probability of a 25bps cut on 3 March to 90% today (source: Bloomberg). However, questions remain whether the RBA is willing to cut interest rates in the middle of an election campaign.
Eurozone CPI, due at 8.00pm Tuesday, will be key ahead of the 17 April European Central Bank decision. The euro has recently eased after a surge higher in late February – a higher inflation read could reignite the euro rally.
Finally, the biggest and baddest economic release of them all – the US non-farm payrolls number – is due on Friday night. Financial markets are looking for 139k jobs to be added – the lowest market forecast since the October report.
Aussie, kiwi fall into torpor
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.
Weak economic data and trade-related uncertainty negatively impacted sentiment, with equities holding modest gains as yields rose. The dollar remains on track for its worst month in over a year but has been able to rise this week.
Investor fears of stagflation and recession have replaced initial optimism about Trump’s tariffs boosting growth, reflecting skepticism toward the administration’s economic strategy.
The Conference Board’s Consumer Confidence Index fell to 92.9 in March, the lowest in four years, with the expectations component plunging to a 12-year low. Households are worried about rising prices and weaker economic conditions.
Fed officials are cautious about cutting rates amid rising inflation expectations. Governor Adriana Kugler highlighted concerns over inflation surprises and price pressures, indicating reluctance to ease policy too soon.
The idea of “secondary tariffs” on nations buying Venezuelan oil add and the upcoming 25% car import levy add unpredictability, raising concerns about broader economic and diplomatic effects.
Positive economic signals emerged as Germany’s Ifo index rose to 86.7 in March, indicating a potential economic bottoming out.
Despite concerns around the Spring Statement, the British pound remains resilient, with GBP/USD trading near $1.29 and GBP/EUR at €1.20, recovering recent losses.
Global Macro Tariff angst as April 2nd approaches
Tariff escalation. Uncertainty around the scope and implementation of US tariffs is keeping markets on edge. Trump hinted on Monday that some of his planned levies may not go into effect on April 2, fueling speculation that the administration could adopt a more flexible approach. However, the president’s latest move to introduce “secondary tariffs” on nations purchasing Venezuelan oil and his plans to introduce a 25% car import tax next week add another layer of unpredictability to US trade policy.
Stagflation fears. Hopes that Trump’s tariffs would boost US growth have been replaced by fears of stagflation and recession, with investors increasingly skeptical of the administration’s economic strategy. Consumer confidence took a significant hit in March, with the Conference Board’s index dropping to 92.9, its lowest level in four years. The expectations component was particularly weak, plunging nearly 10 points to a 12-year low. Households appear to be growing more anxious about rising prices and deteriorating economic conditions.
Bottoming Europe. The eurozone’s latest economic activity indicator showed the fastest expansion in seven months, with the composite PMI inching up to 50.4. While this was slightly below market expectations, the manufacturing sector outperformed, offering a glimpse of optimism for an economy that has struggled with stagnation. Germany led the improvement, as anticipation builds over the economic boost from its newly approved fiscal expansion focused on infrastructure and defense.
Swings. The week in markets has been volatile due to the flux of trade news. Equities swung from loses to gains as yields climbed higher on inflation fears. The US dollar has been able to capitalize on that and rose for a second consecutive week.
Week ahead A monster week to start April
Key events
RBA decision. The meeting will be closely monitored, especially if the bank deviates from the previous rate of 4.1%. Any surprise could sway the AUD.
Inflation. We get preliminary inflation rate data from Italy and Germany. The prior rates stood at 1.6% and 2.3% respectively. The Eurozone will release its Inflation Rate YoY Flash for March, with the previous figure at 2.3%.
ISM and JOLTS. In the US, both the ISM Manufacturing PMI (previously 50.3) and JOLTs Job Openings data (previously 7.74 million) will offer insight into the health of the manufacturing sector and labor market.
NFP. The highly anticipated US Non-Farm Payrolls (NFP) report for March is set to be released, with consensus at 128K, down from the previous 151K. Alongside the US Unemployment Rate (previously 4.1%), these data points will be crucial in gauging the strength of the labor market and the Federal Reserve’s policy outlook.
Market Themes to Watch
Trade Uncertainty: Markets continue to react to news related to US trade policy, particularly the recent tariffs on auto imports.
Economic Divergence: The contrast between strong US data and mixed global indicators may shape currency movements, particularly for the dollar, euro, and commodity-linked currencies.
Central Bank Policy: The RBA’s stance and inflation data from the Eurozone will be pivotal, while NFP figures could hint at the Fed’s future moves. Expect volatility, especially around major releases like the US NFP, ISM PMI data, and inflation prints from the Eurozone. Traders should be prepared for rapid sentiment shifts driven by economic data and ongoing geopolitical developments.
FX Views Lack of direction and conviction
USD Month-end rebound. Markets remain on edge as trade policy takes centre stage once again. The safe haven appeal of the US dollar amidst Trump’s latest round of tariff announcements appears to have just outweighed the fear of further erosion of US economic exceptionalism. Despite soft data coming in weak, hard data from the US remains resilient, creating confusion about the true state of the economy. Although the tariff war is seen as slowing the US economy, and could be expressed by broad dollar weakness, short-term losses could be limited due to the dollar’s legacy as a safe haven asset. Moreover, in the very short term – due to the dollar’s weakest month since Nov 2022 and the significant underperformance of US equities – month-end and quarter-end rebalancing indicates a strong dollar-buying signal. Beyond this though, the Greenback’s outlook remains highly uncertain, dependent on economic data, Fed policy, and geopolitical and trade developments. We do note though that over the last 20 years, April has been the dollar’s worst month of the year, averaging a negative return of -0.5%. But seasonality trends play second fiddle to trade wars as “Liberation Day” beckons.
EUR Short-term pain, long-term gain?EUR/USD continues unwinding its overbought condition from earlier this month, with the pair primed for a second successive weekly loss. The 50-week moving average has offered decent support, and staying afloat the 200-day at $1.0720 is critical to maintain a bullish short-term bias. The euro’s outlook has improved thanks to Germany’s game-changing shift in spending plans, which has already bolstered sentiment across the bloc. However, this optimism is being eroded by escalating trade tensions fueling concerns about the Eurozone’s export-heavy economy. If Trump follows through on his double-digit tariffs on EU imports, then EUR/USD could fall back towards $1.05. However, we can’t rule out a resumption of the rotation from US to European assets if traders view tariffs as more damaging to the US economy. Moreover, Europe’s fiscal boost still supports the medium-term bullish outlook for the euro, which is why the repricing at the back end of the euro’s volatility skew shows sentiment is the least bearish for the euro in over three years.
GBP A spring in its step. Despite the UK government’s fiscal plans facing mounting scrutiny, the pound has held up relatively well this week. Gilts remain vulnerable as concerns over sustainability of the spending plan take centre stage, with the fiscal buffer eroding. But investors aren’t dumping the pound and gilts simultaneously like they were at the start of the year when confidence in UK policy was bleak, and stagflation fears were rising. Instead, sterling is rising with yields for now, helped by the largely softer-than-expected inflation report and stronger retail sales figures this week. Sterling appears to hold an international advantage too when it comes to tariffs. Optimism that the UK will avoid the worst of Trump’s reciprocal tariff plan makes it an attractive hedge against tariff noise. This is also evident via its rare positive (albeit weak) correlation with the VIX fear index. Moreover, speculative traders have recently turned net-bullish on the pound’s outlook again according to CFTC data. GBP/USD is on track for a weekly gain, perched above $1.29 – it’s 5-year average – but $1.30 remains a tough hurdle to the upside. And GBP/EUR is back above €1.20, clawing back its month-to-date losses as tariff headlines are punishing the euro.
CHF Trade risk tailwind. The Swiss franc has had a mixed week, rising against the euro and yen, whilst falling against the USD from a 4-month high. Germany’s fiscal initiatives have supported EUR/CHF’s partial alignment with rate differentials, but this effect now seems increasingly priced in. Moreover, as the 2 April tariff deadline nears, the ECB’s dovish stance could come back into focus amid negative tariff developments. And because the SNB has already lowered rates to 0.25%, its capacity to respond to shocks is limited, suggesting a downward bias for EUR/CHF. Conversely, from a technical view – the pair sits above its long-term moving averages, which are pointing higher, suggesting a bullish bias remains intact. Plus, the franc has become the lowest-yielding major currency, so although increased tariff risks might act as a tailwind, if trade tensions ease and risk appetite improves, the franc’s role as a funding currency could help propel EUR/CHF above 0.96.
CNYHolding pattern. It’s been one of the least volatile weeks of the year for the USD/CNY pair, hovering between 7.25 and 7.26. Sentiment remained subdued amid growing concerns over the effectiveness of China’s stimulus measures in offsetting new US tariffs. President Trump’s auto and reciprocal tariffs will add to the 20% levies already imposed on Chinese goods, heightening trade tensions. Meanwhile, the People’s Bank of China announced plans to issue CNY 450 billion in one-year MLF loans and has signaled potential rate cuts. China’s 10-year yields have dropped sharply, pressuring the yuan lower. Technically, USD/CNY looks supported by its 100-day MA in the short term, but topside capped by its 50-day moving average at 7.27.
JPY Looking past inflation. USD/JPY has climbed almost 1% this week, driven by dovish remarks from BoJ Governor Ueda, who downplayed inflation risks and global uncertainties, signaling no urgency for rate hikes. Higher-than-expected Tokyo CPI briefly pressured the pair, but the dollar regained strength as traders doubted an early BoJ policy shift. The Fed’s steady stance has provided underlying dollar support, keeping USD/JPY’s upward momentum intact. Concerns over auto tariffs and potential pressure from Japanese lawmakers ahead of July elections may further delay BoJ rate hikes. For now, USD/JPY’s path of least resistance remains to the upside, supported by contrasting monetary policy outlooks. However, the safe haven appeal of the yen amidst heightened trade policy uncertainty should keep JPY losses limited.
CADWaiting for April 2nd. The CAD remains closely tied to the tariff situation, with risks heavily tilted to the downside, especially in the short term. According to the Bank of Canada, while domestic Q4 data showed signs of strength and hinted at recovery, the shadow of tariffs has overshadowed this progress. The BoC has also acknowledged that, were it not for the economic threats posed by tariffs, the central bank would have maintained steady interest rates during its latest meeting. Should these tariffs persist long-term, they could impose a significant supply shock, potentially pushing Canada’s economy toward a recession. The uncertainty surrounding this issue is palpable, with ripple effects already evident in slumping consumer confidence and cooling business spending. The Loonie reached a weekly low of 1.423 following Trump’s comments hinting at a potentially softer stance on tariffs toward Canada. However, by week’s end, fresh auto tariff news pushed the VIX higher, and the Loonie posted its weekly high of 1.435. The 100-day SMA serves as a robust support level at 1.4276. Meanwhile, the 20, 40, and 60-day SMAs form a short-term congestion zone between 1.435 and 1.431. The 20-week SMA indicates a neutral level at 1.431 and highlights a medium-term support zone.
AUD Mounting challenges. The Australian dollar is struggling to hold onto the 0.63 handle amid intensifying global trade jitters, with fresh US tariffs set to take effect next week. These escalating tensions have weighed on risk-sensitive currencies like the Aussie, prompting traders to reassess positions. Focus has also shifted to the Reserve Bank of Australia’s upcoming policy decision, where rates are expected to remain steady at 4.1%, leaving little room for immediate support to the currency. Adding to the mix, Australia’s CPI data showed a surprising drop to 2.4% in February, reinforcing expectations of subdued inflation pressures. Meanwhile, political uncertainty has entered the picture as the Prime Minister announced a May 3 election campaign. With slowing price pressures and geopolitical risks intensifying, the Australian dollar faces challenges in maintaining upward momentum and premium to protect against further downside risks is growing.
MXN Dovish Banxico underscores tariff risk. Banco de México reduced the overnight interbank interest rate by 50 basis points to 9.00%, as expected.
The erosion of carry is likely to weaken the peso as rate cuts unfold. The MXN remains one of the most vulnerable emerging market currencies to a U.S. slowdown and equity market corrections, with both domestic and U.S. risks adding pressure. Tariffs also pose challenges, despite efforts by President Sheinbaum’s administration to ease trade tensions. Market uncertainty is expected to persist.
The peso dropped from 20.10 to 20.36 following Banxico’s dovish press release and hasn’t been able to maintain levels below 20 during the week, with April 2nd around the corner. The Peso traded as low as 19.95 and high of 20.36, hitting the 20-week SMA resistance. 20, 40 and 60-day SMA are crossing below the 100-day SMA, creating a strong resistance at the 20.38 level.
*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.
