Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
China retaliation drives global markets lower
Key global markets extended heavy losses on Friday with the US’s S&P 500 down 5.5% on Friday bringing its two-day loss to 10.6%
The major leg lower on Friday night was driven by retaliation from China as the world’s second-largest economy announced 34% tariffs on the world’s largest economy late on Friday.
Away from sharemarkets, other markets were also shaken. The US ten-year bond yield fell from 4.13% to 3.99% while crude oil is down 16% since the US’s tariff announcement on Wednesday (US time).
Importantly, US administration leaders, notably US treasury secretary Scott Bessent, said on the weekend that they were willing to look through the impact on markets, meaning that any market volatility might not force a shift in policy from the Trump administration.
In FX markets, the Australian dollar was the hardest hit, down 4.6% on Friday after trading higher on Thursday, and briefly trading below 0.6000 for the first time since April 2020.
The NZD/USD fell 3.4% but remains just above key support at 0.5515.
Reciprocal tariffs hit Asia’s risk assets
US retaliatory tariffs had a significant negative impact on Asia’s risk assets. Given that Asian exporters are disproportionately affected by this tariff shock, the region’s macroeconomic effects will surely be profound.
The Chinese yuan is the big issue, and FX would be the worst hit by this terms of trade shock in the medium term.
Given the extra economic challenges facing China, further policy assistance is probably needed. This support might take the shape of RRR and policy rate cuts of 30–40 basis points. Even more powerful disinflationary dynamics will propel rates markets in Asia, continuing the downward trend in regional bond yields.
In Asia, the USD/SGD jumped back to one-month highs.
The USD/CNH ended Friday approaching the 7.3000 level and near the highest closing level in a month.
SGD/CNH dropped from the six-month highs seen on Thursday morning. The AUD/CNH fell to the lowest level in five years.
Busy week for data across major economies
The economic calendar for the first full week of April features crucial inflation readings from multiple regions.
US CPI data arrives on Thursday with core inflation expected at 2.6% YoY, while China releases both PPI and CPI figures the same day.
Additionally, Germany will publish its March CPI readings on Friday. These inflation metrics will be closely monitored for signals about the monetary policy trajectory of major central banks.
Industrial production data will be released across several economies, beginning with Germany on Monday, followed by UK on Friday. These figures will provide valuable insights into the global manufacturing sector’s health as economies continue to navigate challenging conditions.
On Wednesday, the RBNZ will announce its official cash rate decision, with expectations centered around 3.5%. Thursday brings the release of FOMC meeting minutes from the March 19 meeting, offering market participants further clarity on the Fed’s thinking.
This follows recent mixed US economic signals and will be scrutinized for indications about the potential timing and pace of rate adjustments.
The UK releases its monthly GDP figures on Friday, providing an updated view on economic growth. Japan’s BoP Current Account Balance on Tuesday will draw attention from traders focused on external balances and currency valuation metrics. The US Federal Budget Balance report on Friday will also be closely watched amid ongoing fiscal discussions.
Aussie hit hardest with almost 5.0% fall on Friday
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.
When markets get shaky, investors usually turn to gold for stability, and in FX, the US dollar has long been considered the go-to safe haven. Other safe havens include the Japanese yen and Swiss franc. But following April 2nd, market behavior has taken an unexpected turn, marked by widespread bearish sentiment toward the greenback—a reaction that few could have predicted.
Leading up to April 2nd, it was widely assumed that tariffs would boost the dollar. Given its reputation as a safe-haven currency and by the direct impact tariffs were expected to have on the US economy through higher prices, many anticipated a stronger dollar. However, this safe-haven status seems to have been undermined by a lack of confidence in US policymaking. To make matters worse, the weaker dollar won’t soften the blow of tariffs; instead, it’d exacerbate inflationary pressures by driving up the cost of imported goods.
So, who’s gaining from the dollar’s surprising weakness? The Canadian dollar has seen an uptick, reaching its highest value since December. Wednesday’s tariff announcements triggered a US dollar sell-off, offering some support to the CAD. That said, don’t call it a comeback yet. Canada remains under pressure from levies on steel, aluminum, and auto tariffs, leaving the CAD lagging behind other G-10 currencies since the tariff announcement. If these tariffs persist, they could weigh heavily on the CAD over the medium to long term, given Canada’s strong trade ties with the US. After reciprocal tariffs announcement, the Loonie traded as low as 1.4028, approaching its 200-day SMA, but has rebounded as high as 1.4209.
In the midst of all this, we may be approaching the peak of policy uncertainty. While tariffs are likely here to stay for a while, many investors remain hopeful, viewing them as both structural components of US trade policy and tools for negotiation, with their effects on growth and inflation expected to be more of a one-time shock than an ongoing issue. Nevertheless, equity markets continue to struggle with the fallout from tariff-related disruptions, reflecting widespread investor unease and heightened market volatility. The VIX has reached a new 2025 high of 41, signaling extreme and alarming fear levels not observed since last summer’s growth scare, which was triggered by the unwind of the Japanese yen carry trade.
Meanwhile, attention is now shifting to the upcoming non-farm payrolls report, which is expected to show a slowdown in job creation—140,000 jobs added in March compared to 151,000 in February. A weaker-than-anticipated report could deepen concerns, further dampening sentiment not only on Wall Street but across global markets.
Worst day for US stocks and dollar in years
George Vessey – Lead FX & Macro Strategist
Equities, treasury yields, the US dollar and oil have all felt the brunt of the tariff announcement, as investors bet that Donald Trump’s sweeping tariffs would result in pain for the US economy and the global trade system.
US equities came under intense pressure, with benchmarks suffering their biggest daily drops since the height of the Covid pandemic in 2020. The US stock market is now down over 10% since Trump took office – the worst 10-week start under a new president in 24 years. Oil plunged 6% due to fears a global trade war could slow economic growth and reduce fuel demand, hurt further when OPEC+ countries unexpectedly announced they would increase oil production more than planned.
The dollar index dropped over 2%, its worst day in almost ten years and to its lowest level in six months. The dollar is being sold against the big, liquid defensive currencies of the Japanese yen and Swiss franc as well as the euro and pound. This will aggravate the impact of the levies on US consumers. The currency will be one key price to watch to gauge the extent of economic discomfort the US can withstand before it potentially decides to soften its approach.
For now, the market is repricing the US economy and the dollar the most, but the path ahead is neither linear nor obvious. One reason being that the global policy response will determine whether the dollar ends up weakening further or rebounding eventually. Europe, in particular, has argued that a combination of trade, tariff and subsidy measures may be an appropriate response. This could offset the tariff effects in a growth-enhancing way, and support the euro, hence EUR/USD’s over 2% rally on Thursday. But as compelling as the sell-US narrative appears based on the price action of the past month and week, it might be unwise to chase beyond the near term. indeed, a US recession will reverberate globally, and could support demand for the world’s reserve currency.
In response to the tariff news and rising recession risks, traders increased their bets on Federal Reserve rate cuts. Three to four quarter-point reductions are priced for this year, with the first cut likely in June. On the data front, the ISM services PMI fell sharply to 50.8 in March from 53.5 in February. The reading pointed to the softest expansion in the services sector since June last year. The Challenger report showed that US companies cut the most jobs since 2020 in March, largely due to the DOGE layoffs. The jobs report today will provide further clarity on the labour market performance.
It’s the euro that’s been “liberated”
George Vessey – Lead FX & Macro Strategist
The euro jumped more than 2% versus the dollar yesterday and sits above $1.11 today, its highest level since early October 2024. It was EUR/USD’s biggest daily jump in about five years, benefiting from general dollar weakness as traders react to the latest batch of tariffs announced by President Trump.
The move puts it at odds with the move in Germany’s front-end bonds, though overnight indexed swaps assign some 70% chance of an ECB rate reduction on April 17 down from 90% earlier this week. Germany’s two-year yields are down 11 basis points, and are likely to stay lower as the EU works out its response to US tariffs.
The dynamics in the currency market highlight that tariffs ultimately fall on domestic consumers and businesses, with the economic damage to the US likely surpassing the impact on the EU from reduced exports. Although a global trade war would typically weigh on the euro, the vulnerabilities in the US economy are currently the driving force for EUR/USD, but for how long?
A steep decline in US equities, alongside further drops in US yields, continues to erode the narrative of US economic exceptionalism. A move towards $1.12 cannot be ruled out assuming the market prices European retaliatory measures, including subsidies, that blunt the tariff effects, meaning EUR/USD converges to real rate differentials.
Pound (and penguins) stand proud
George Vessey – Lead FX & Macro Strategist
The British pound’s tariff resilience was in evidence in the UK’s lower tariff rate, which underpins the potential for sterling to outperform versus peers. GBP/USD accelerated higher once breaking above the $1.30 barrier to peek above $1.32 briefly and clock one of its biggest daily gains in over a year. But against the euro, the pound dropped 1% because EUR/USD rose over 2% on the day.
In terms of the UK, the good news is that it’s been slapped with the lowest possible tariff of 10%. This is mainly because the UK doesn’t export more goods to the US than it imports. Bizarrely, the president also imposed 10% tariffs on dozens of tiny territories including Heard and McDonald Islands, that are inhabited only by penguins and seals. It seems nowhere on Earth is safe. Still, the 10% on the UK looks better in relative terms – which is one reason why the pound surged over 1% higher yesterday. Moreover, business groups have strongly welcomed the UK government’s decision not to announce immediate retaliatory tariffs against the US, but to instead keep talking about a trade deal that might lead to tariffs being removed. Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices.
Meanwhile, traders added to bets on further monetary easing globally, including in the UK, where money markets now imply over 60 basis points of Bank of England (BoE) interest-rate cuts over the remainder of 2025 from around 53 basis points Wednesday. Separately, the BoE’s Decision Maker Panel survey for year-ahead inflation expectations rose to 3.4% in March from 3.1% in February.
Equities, oil, dollar, yields – down down downdown
*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.
Global markets were meant to be prepared for the US tariff announcement on 2 April but the scale of the policy shift exceeded most of the worst-case scenarios that economists had been modelling for months.
US sharemarkets led the losses. The S&P 500 fell 4.8% on the Thursday after the announcement in its worst one-day fall since June 2020. The tech-focused Nasdaq lost 6.0% in its biggest one-day loss since March 2020.
The major company losses on the day illustrated the market’s fears. Nike fell 14% on worries about the impact of a 46% tariff on Vietnamese imports like sneakers. Apple lost 10% as Chinese imports like iPhones might now face a 54% tariff.
FX markets shuddered. The US dollar index fell 1.7% in the 24 hours after the announcement as markets worried about the impact on the US economy.
The euro continued to reverse the trend seen last year when it underperformed during periods of tariff stress. Instead, the euro is now the greatest beneficiary from tariff worries, and post the tariff announcement the EUR/USD saw its biggest one-day gain since 2015.
The British pound also gained strongly, with GBP/USD jumping to six-month highs. The Canadian dollar was stronger as it hit four-month highs versus the USD but the Aussie weakened as Chinese growth worries weighed.
Global Macro Trump opts for shock therapy
Reciprocal tariffs. Trump has implemented 10% blanket tariffs on all imports, starting April 5, extending them further for China (54%), the EU (20%), Japan (24) and UK (10%), with charges largely based on trade surpluses with the US. He also signaled upcoming duties on pharmaceuticals, semiconductor chips, lumber, and copper. Combined with prior import taxes on autos, and goods from Canada, Mexico, and China, these measures will raise the average US tariff rate to 23%—a dramatic increase from 2.3% in 2024. This is the highest average US tariff rate in more than a century, and surpasses the infamous 1930 Smoot-Hawley tariffs, which arguably worsened the Great Depression.
Risk-off sentiment. Equity markets are in extreme fear levels. The VIX, or the fear index, is back above 25, showing extreme fear as investors weigh the implications of higher near-term inflation and slower medium-term growth. In a classic flight to safety, gold rose to new all-time highs and yields fell on Treasuries of all maturities. However, the dollar is being sold against major defensive currencies like the Japanese yen, Swiss franc, and the euro.
Recession risks. These moves are a major shock to the world economy and close to the worst-case scenario Trump had threatened on his campaign trail. It will prompt retaliatory measures from trading partners and although there may be room for negotiation, high tariffs and lingering uncertainty raise recession risks. Tariffs will boost inflation in the short-term, weighing on real disposable income and cutting into spending; financial market conditions will likely tighten, and the risk of equity price declines could hit consumer spending via the wealth effect; and trade policy uncertainty will remain elevated, which is suffocating for business investment. Polymarket odds of a 2025 recession in the U.S. has risen to 50%.
US dollar sell-off. The dollar’s traditional safe-haven status was overshadowed by worries about US growth. The buck buckled by almost 2% after Liberation Day – its worst day in years.
FX Views Options volumes reach record high
USD Worst day in three years.
FX options volumes reached a record high in the wake of Trump’s tariff bonanza as the dollar selloff meant traders increased their exposure across the board. A steep decline in US equities, alongside further drops in US yields, continues to erode the narrative of US economic exceptionalism. The dollar index hit its lowest level in six months and dropped over 2% at one point, which would’ve been its worst day in ten years. The dollar was sold heavily against the big, liquid defensive currencies of the Japanese yen and Swiss franc as well as the euro and pound. The currency will be one key price to watch to gauge the extent of economic discomfort the US can withstand before it potentially decides to soften its approach. For now, the market is repricing the US economy and the dollar the most, but the path ahead is neither linear nor obvious. As compelling as the sell-US narrative appears based on the price action of the past month and week, it might be unwise to chase beyond the near term. One reason being that the global policy response will determine whether the dollar ends up weakening further or rebounding eventually.
EUR A surprise beneficiary.
The euro jumped more than 2% versus the dollar yesterday and rose above $1.11, its highest level since early October 2024.It was EUR/USD’s biggest daily jump in about five years. Although a global trade war would typically weigh on the euro, the vulnerabilities in the US economy are currently the driving force for EUR/USD. The dynamics in the currency market highlight that tariffs ultimately fall on domestic consumers and businesses, with the economic damage to the US likely surpassing the impact on the EU from reduced exports. A move towards $1.12 cannot be ruled out assuming the market prices European retaliatory measures, including subsidies, that blunt the tariff effects, meaning EUR/USD converges to real rate differentials.
GBP Brexit dividend at last. As we’ve been highlighting for several weeks, the pound continues to act as a safe haven tariff play since Britain has a broadly balanced trade relationship with the US. Although the UK was still hit with 10% tariffs, that is far more lenient than what other nations are facing, such as the EU’s 20%. GBP/USD accelerated higher once breaking above the $1.30 barrier and peeked above $1.32 briefly to clock one of its biggest daily gains in over a year. But against the euro, the pound dropped 1% to 4-month lows because EUR/USD rose so much. One and three-month risk reversals are the least bearish GBP since 2020, both sitting well beyond their 10-year averages. There’s even been a surge in demand for protection against upside tail risks for GBP/USD in the short-term. This is evidenced by 10-delta risk reversals, which have a 10% probability of being at the money, also climbing to their highest since 2020. However, the pair pulled back under $1.30 by the end of the week as traders booked profits ahead of the weekend.
CHF Soaking up flight to safety. The liquid defensive currency of the Swiss franc was in full view this week. A surge in demand for the franc took place after Trump’s tariff rollout. USD/CHF dropped 2.5% in one day, which is four standard deviations away from its average daily % change. The swissy reached its highest level since November 2024 as investors flocked to safe-haven assets in response to Trump’s more aggressive-than-anticipated tariffs on major trading partners. As part of his “reciprocal tariffs” strategy, Trump imposed a 31% levy on Swiss imports, with the US accounting for a substantial 19% of Swiss exports. On the domestic data front, the annual inflation rate in Switzerland stood at 0.3% in March, unchanged from February’s near four-year low, slightly below market forecasts of 0.5%. The new tariffs are likely to weigh on both economic growth and inflation in Switzerland, increasing the chances that the Swiss National Bank (SNB) will reduce its policy rate to zero in June.
Week ahead Data-rich week across major economies
Inflation data takes center stage. The economic calendar for the first full week of April features crucial inflation readings from multiple regions. US CPI data arrives on Thursday with core inflation expected at 2.6% y/y, while China releases both PPI and CPI figures the same day. Additionally, Germany will publish its March CPI readings on Friday. These inflation metrics will be key with central banks growing more concerned about inflation.
Manufacturing and industrial output in focus. Industrial production data will be released across several economies, beginning with Germany on Monday, followed by UK on Friday. These figures will provide valuable insights into the global manufacturing sector’s health as economies continue to navigate challenging conditions.
Central bank watch Wednesday brings the release of FOMC meeting minutes from the March 19 meeting, offering market participants further clarity on the Fed’s thinking. This follows recent mixed US economic signals and will be scrutinized for indications about the potential timing and pace of rate adjustments. Additionally, the RBNZ will announce its official cash rate decision, with expectations looking for a cut to 3.5%.
GDP and trade balance readings. The UK releases its monthly GDP figures on Friday, providing an updated view on economic growth. Japan’s BoP Current Account Balance on Tuesday will draw attention from traders focused on external balances and currency valuation metrics. The US Federal Budget Balance report on Thursday will also be closely watched amid ongoing fiscal discussions.
Consumer and business sentiment indicators. Several confidence measures are scheduled throughout the week, including Australia’s Westpac Consumer Confidence and NAB Business Confidence on Tuesday. Friday brings the University of Michigan Sentiment preliminary reading for April, expected at 55.0. These sentiment indicators often provide forward-looking insights into consumer spending and business investment intentions.
CNY China’s manufacturing gains meet trade balance challenges. China’s March Caixin Manufacturing PMI rose to 51.2, supported by stronger foreign demand and robust export orders. Employment climbed for the first time in 19 months, while input prices declined, reflecting easing cost pressures. With the tariff rate rising to almost 54% with the US trade tariffs, China is in the crosshairs. The USD/CNH first spike as a result of worries about possible capital outflows and China’s export-driven economy. However, a pullback resulted from USD weakening overall, which was fuelled by lowered prospects for US growth and Fed easing, and USD/CNH now near two-week lows. Resistance levels for USD/CNH at 7.2832 and 7.2995 are expected to cap upside. Breaking above the Cloud would weaken the negative outlook, risking a move toward 7.3682. However, as long as the pair trades below these levels, downside risks persist, targeting 7.2000. Key economic releases, including CPI, PPI, exports, imports, and trade balance, will be pivotal in determining the next move for USD/CNH.
JPY BoJ inflation focus and household spending shape Yen’s path. Japanese household spending fell modestly by 0.5% y/y in February, outperforming expectations of a 1.7% dip. Seasonally adjusted spending rebounded 3.5% m/m, suggesting resilience in domestic demand. Meanwhile, the BoJ’s Deputy Governor Uchida emphasized inflation as the primary driver for future policy shifts, keeping markets focused on wage and consumption trends to gauge the timing of rate hikes. USD/JPY is now at six-month lows. On the weekly chart, USD/JPY remains below the Ichimoku Cloud (resistance at 150.79), supporting a negative bias. The pair is also forming a head-and-shoulders topping pattern, targeting 141.75. A break above 151.41 would weaken the negative case, exposing 153.74 as the next resistance level. Upcoming data on foreign reserves, current account, household confidence, and PPI will be key in shaping USD/JPY’s outlook.
CADCanada dodges tariff fallout. The USD/CAD has dropped to its lowest level since December, yet it lagged all G-10 currencies. This movement occurred in response to broad-based USD weakness triggered by the market’s reaction to Wednesday’s U.S. tariff announcement. While Canada managed to avoid President Trump’s reciprocal tariffs, levies on steel and aluminum remain in effect, and auto tariffs were implemented on Thursday. These tariffs could limit the Canadian dollar recovery in the medium to long term, given Canada’s heavy reliance on the U.S. Following the tariff announcement, USD/CAD climbed to 1.431. However, as risk-off sentiment eased and bearish momentum for the US dollar gained traction, the CAD broke a three-month trading range with a 280-pip decline, reaching 1.403 and approaching the key psychological support at 1.40, aligned with the 200-day SMA.
AUD RBA’s repo rate shift faces consumer sentiment test. The Reserve Bank of Australia (RBA) announced changes to its repo rate operations, raising the price of new repos by 5-10bps above the cash rate target. Although this policy shift aims to incentivize market participants to recycle reserves, it does not signal a shift in the RBA’s monetary policy stance. AUD/USD is now at one-month low. AUD/USD declined from 0.6285, breaking below the Ichimoku Cloud on March 31, increasing the risk of invalidating the positive cup-and-handle formation. Downward momentum has strengthened, although the sharp decline also raises the potential of a corrective rebound. A sustained move below 0.6249 would weaken positive sentiment, targeting 0.6131. Conversely, a recovery above the Cloud could signal a move toward 0.6409. Key drivers to watch include Westpac consumer sentiment and NAB business confidence. These indicators will shape expectations for the RBA’s policy trajectory and AUDUSD’s near-term direction.
MXN Reciprocal tariffs avoided. The Mexican peso surged 1.7% against the dollar on Thursday, marking its largest intraday gain in a month, and reaching its highest level against the US since November last year, following President Donald Trump’s announcement of reciprocal tariff plans. For now, Mexico and Canada are exempt from these new levies, though they remain entangled in a separate, intermittent tariff dispute with the U.S. Despite avoiding the latest round of tariffs, existing duties persist, leaving the Peso exposed—especially due to Mexico’s reliance on auto and steel exports to the U.S. The peso is currently targeting the 200-day SMA at 19.8 as a crucial support level, benefiting from generalized US dollar weakness, which has eased some pressure on the USD/MXN pair. Banxico’s upcoming monetary policy meeting on May 15 is anticipated to bring a 50-basis-point rate cut. This move is expected to erode carry in the short term and introduce upward pressure on the peso in the medium term. Meanwhile, the easing of tariff-premia reflects the absence of an escalating regional trade war narrative.
*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.
Equities, treasury yields, the US dollar and oil have all felt the brunt of the tariff announcement, as investors bet that Donald Trump’s sweeping tariffs would result in pain for the US economy and the global trade system.
US equities came under intense pressure, with benchmarks suffering their biggest daily drops since the height of the Covid pandemic in 2020. The US stock market is now down over 10% since Trump took office – the worst 10-week start under a new president in 24 years. Oil plunged 6% due to fears a global trade war could slow economic growth and reduce fuel demand, hurt further when OPEC+ countries unexpectedly announced they would increase oil production more than planned.
The dollar index dropped over 2%, its worst day in almost ten years and to its lowest level in six months. The dollar is being sold against the big, liquid defensive currencies of the Japanese yen and Swiss franc as well as the euro and pound. This will aggravate the impact of the levies on US consumers. The currency will be one key price to watch to gauge the extent of economic discomfort the US can withstand before it potentially decides to soften its approach.
For now, the market is repricing the US economy and the dollar the most, but the path ahead is neither linear nor obvious. One reason being that the global policy response will determine whether the dollar ends up weakening further or rebounding eventually. Europe, in particular, has argued that a combination of trade, tariff and subsidy measures may be an appropriate response. This could offset the tariff effects in a growth-enhancing way, and support the euro, hence EUR/USD’s over 2% rally on Thursday. But as compelling as the sell-US narrative appears based on the price action of the past month and week, it might be unwise to chase beyond the near term. indeed, a US recession will reverberate globally, and could support demand for the world’s reserve currency.
In response to the tariff news and rising recession risks, traders increased their bets on Federal Reserve rate cuts. Three to four quarter-point reductions are priced for this year, with the first cut likely in June. On the data front, the ISM services PMI fell sharply to 50.8 in March from 53.5 in February. The reading pointed to the softest expansion in the services sector since June last year. The Challenger report showed that US companies cut the most jobs since 2020 in March, largely due to the DOGE layoffs. The jobs report today will provide further clarity on the labour market performance.
It’s the euro that’s been “liberated”
George Vessey – Lead FX & Macro Strategist
The euro jumped more than 2% versus the dollar yesterday and sits above $1.11 today, its highest level since early October 2024. It was EUR/USD’s biggest daily jump in about five years, benefiting from general dollar weakness as traders react to the latest batch of tariffs announced by President Trump.
The move puts it at odds with the move in Germany’s front-end bonds, though overnight indexed swaps assign some 70% chance of an ECB rate reduction on April 17 down from 90% earlier this week. Germany’s two-year yields are down 11 basis points, and are likely to stay lower as the EU works out its response to US tariffs.
The dynamics in the currency market highlight that tariffs ultimately fall on domestic consumers and businesses, with the economic damage to the US likely surpassing the impact on the EU from reduced exports. Although a global trade war would typically weigh on the euro, the vulnerabilities in the US economy are currently the driving force for EUR/USD, but for how long?
A steep decline in US equities, alongside further drops in US yields, continues to erode the narrative of US economic exceptionalism. A move towards $1.12 cannot be ruled out assuming the market prices European retaliatory measures, including subsidies, that blunt the tariff effects, meaning EUR/USD converges to real rate differentials.
Pound (and penguins) stand proud
George Vessey – Lead FX & Macro Strategist
The British pound’s tariff resilience was in evidence in the UK’s lower tariff rate, which underpins the potential for sterling to outperform versus peers. GBP/USD accelerated higher once breaking above the $1.30 barrier to peek above $1.32 briefly and clock one of its biggest daily gains in over a year. But against the euro, the pound dropped 1% because EUR/USD rose over 2% on the day.
In terms of the UK, the good news is that it’s been slapped with the lowest possible tariff of 10%. This is mainly because the UK doesn’t export more goods to the US than it imports. Bizarrely, the president also imposed 10% tariffs on dozens of tiny territories including Heard and McDonald Islands, that are inhabited only by penguins and seals. It seems nowhere on Earth is safe. Still, the 10% on the UK looks better in relative terms – which is one reason why the pound surged over 1% higher yesterday. Moreover, business groups have strongly welcomed the UK government’s decision not to announce immediate retaliatory tariffs against the US, but to instead keep talking about a trade deal that might lead to tariffs being removed. Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices.
Meanwhile, traders added to bets on further monetary easing globally, including in the UK, where money markets now imply over 60 basis points of Bank of England (BoE) interest-rate cuts over the remainder of 2025 from around 53 basis points Wednesday. Separately, the BoE’s Decision Maker Panel survey for year-ahead inflation expectations rose to 3.4% in March from 3.1% in February.
Equities, oil, dollar, yields – down down downdown
*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
Tariff news sends shockwaves through FX
Global equity markets were heavily sold over the last 24 hours, with US markets leading the losses, as investors reacted to yesterday’s announcement on new US tariffs.
The Dow Jones fell 4.0%, S&P 500 lost 4.8% while the tech-focused Nasdaq fell 6.0%.
In Europe, the UK’s FTSE 100 fell 1.6% while Germany’s DAX dropped 3.0%. Japan’s Nikkei lost 2.8%.
In FX markets, the moves were sharp, volatile and divergent.
The US dollar collapsed, with the USD index falling 1.6%.
The European currencies outperformed with the EUR/USD up 1.8% and GBP/USD up 0.7%.
APAC currencies were initially lower before rebounding. The AUD/USD traded in a 150-point range before ending up 0.5%. The NZD/USD touched a four-month high before finishing 0.8% higher.
Looking forward, while the tariff news will dominate, markets will also be looking to the US jobs report, due at 11.30am AEDT. Markets are looking for 135k new jobs to be added with the unemployment rate forecast to remain steady at 4.1%.
Chinese yuan hit by reciprocal tariffs
In detail, all exporters to the US, with the exception of Canada and Mexico, are subject to universal reciprocal tariffs of at least 10%, as mandated by President Donald Trump. Canada and Mexico remain in negotiation after tariffs were first imposed in February.
South Korea will pay 25%, Japan 24%, the EU 20%, and China 34%. The total US tariff rate on imports from China will increase to 54%.
Trump added that nations who want to have the reciprocal tariffs lifted must lower their duties on the US, so further talks are probably in order.
Indirectly, US Treasury Secretary Scott Bessent hinted that this is the maximum for the time being (“maximalist negotiating position”) and might decrease when trade partners grant some of America’s requests.
The USDCNH pair spiked from 7.2800 to slightly under 7.3500 before reversing to end the day lower.
The Chinese yuan saw losses in other markets, with SGD/CNH hitting the highest levels since October and AUD/CNH at the highest level since December before later easing.
Euro stands out
Ursula von der Leyen, the head of the European Commission, said the EU is sorry that the United States has decided to impose further tariffs, which would increase inflation, and threatened to take action if negotiations were unsuccessful.
Tariffs won’t solve the issue, she added, even if some nations do violate the law, as President Donald Trump maintains. Von der Leyen hoped that there was still time for US trade talks.
Prior to the announcement on Wednesday, EUR/USD was already above 1.0860 and has been rising as yield spreads tighten and pressure mounts on US rates.
The euro surged in other markets. The AUD/EUR and NZD/EUR both hit new five-year lows while EUR/USD jumped to 21-month highs.
USD down sharply as markets digest tariffs
Table: seven-day rolling currency trends and trading ranges
Loonie breaks below 1.41 post April 2nd Kevin Ford – FX & Macro Strategist Yesterday’s reciprocal tariff announcement, though a best-case scenario for Canada and Mexico, leaves uncertainty lingering. Neither country was included on the tariff list, which primarily targeted China and the European Union.
In the FX market, USD/CAD surged to 1.4319 before dropping below 1.41 for the first time since December last year. Short-term, expect the 1.405-1.41 as strong support level. Meanwhile, the dollar is being sold against major defensive currencies like the Japanese yen, Swiss franc, and, to a lesser extent, the euro.
What’s next? Watch for potential retaliation from affected countries, rumours around the start of trade negotiations, heightened volatility across asset classes, and the impact of public sentiment on how the tariff rates were calculated. A weaker-than-expected jobs report tomorrow could exacerbate fears of a global recession. For now, markets remain in fear mode, leaving the US dollar vulnerable. US equities are the most sensitive right now, with the VIX jumping up again to extreme fear levels.
The tariffs’ impact has been most pronounced in previously unaffected industries and regions. Footwear and apparel stocks, for example, saw after-hours declines following Trump’s announcement of a 46% tariff on Vietnam, along with additional levies on Cambodia and Indonesia. This move threatens supply chains critical to companies like Nike, which sources nearly 50% of its footwear from Vietnam, and Adidas, with 39% of its shoes originating there. Treasury Secretary Scott Bessent also confirmed that goods from China now face an effective tariff rate of 54%, combining the newly imposed 34% rate with the earlier 20% rate.
For Canada and Mexico, CUSMA/USMCA exemptions remain intact, cushioning the immediate shock of heightened U.S. trade barriers. These exemptions ensure the continued flow of nearly 4 million barrels of crude oil daily from Canada to the U.S., maintaining stable trade volumes. Steel and aluminum also remain unaffected by reciprocal tariffs.
However, uncertainties persist, particularly regarding sector-specific tariffs in the automotive industry and scrutiny of the dairy quota agreed upon under CUSMA/USMCA in 2020.
The baseline tariff of 10% for all countries, coupled with higher rates targeting key trading partners, has heightened concerns about weaker global growth. Equity markets have softened as investors weigh the implications of higher near-term inflation and slower medium-term growth. The U.S. administration’s focus on reshoring manufacturing is now evident. As risk aversion remains high, gold reigns as the ultimate safe haven.
Trump opts for shock therapy
George Vessey – Lead FX & Macro Strategist
The Trump administration has unleashed aggressive tariff measures in both scale and breadth that go far beyond his first-term levies. They hit everyone – friend and foe. As well as the 10% tariff across the board, he’s overlayed that with additional tariffs on a wide group of countries that the US views as already implicitly placing tariffs on US exports. The market reaction has been ugly. Nasdaq 100 futures are down by about 4%, and S&P 500 futures by nearly 3%. In a classic flight to safety, Gold rose to new all-time highs and yields fell on Treasuries of all maturities, weakening the US dollar to 6-month lows.
Trump has implemented 10% blanket tariffs on all imports, starting April 5, extending them further for China (54%), the EU (20%), Japan (24) and UK (10%), with charges largely based on trade surpluses with the US. He also signaled upcoming duties on pharmaceutical drugs, semiconductor chips, lumber, and copper. Combined with prior import taxes on autos and goods from Canada, Mexico, and China, these measures will raise the average US tariff rate to 23%—a dramatic increase from 2.3% in 2024. This is the highest average US tariff rate in more than a century, and surpasses the infamous 1930 Smoot-Hawley tariffs, which arguably worsened the Great Depression.
This is a major shock to the world economy and close to the worst-case scenario Trump had threatened on his campaign trail. It will prompt retaliatory measures from trading partners and although there may be room for negotiation, high tariffs and lingering uncertainty raise recession risks. Tariffs will boost inflation in the short-term, weighing on real disposable income and cutting into spending; financial market conditions will likely tighten and the risk of equity price declines could hit consumer spending via the wealth effect; and trade policy uncertainty will remain elevated, which is suffocating for business investment.
As for the US dollar, well – so far its safe haven status has not cushioned the blow. Investors are focussed more on US stagflation and recession fears. USD/JPY is down 1.4% today, and EUR/USD up almost 1% – dragging the US dollar index to its lowest level since before the election last year.
Euro enthused by Europe’s vow to retaliate
George Vessey – Lead FX & Macro Strategist
As well as falling Treasury yields weighing on the US dollar, EUR/USD is being supported by the proactive approach of EU leaders to US tariffs. The EU is preparing a package of crisis measures to guard its economy from Trump tariffs. EUR/USD has jumped beyond $1.09 this morning, matching its highest level in the post-election period.
European currencies, including the euro, are still viewed as vulnerable, because Trump has been so vocal about growing hostility towards the EU. This may result in smaller trade negotiation room for the bloc, which clouds the growth outlook. However, pre-tariff-announcement euro strength materialized following reports of EU Commission plans for economic support measures. Moreover, in the medium term, we also think that Germany’s fiscal policy stimulus should provide a positive offset and help Europe to weather the tariffs storm, while the ECB is likely to take time to construct its policy response and is unlikely to cut rates this month as it works out the implications of the levies on not only growth but also inflation.
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. The repricing in sentiment is also evident over the longer term. While one-year risk reversals still suggest the euro will be weaker in 12 months, that gauge jumped in March by the second most on record, and has extended higher today – a sign of the speed at which traders are turning more positive on the currency.
A Brexit dividend at last
George Vessey – Lead FX & Macro Strategist
As we’ve been highlighting for several weeks, the pound continues to act as a safe haven tariff play. Along with broader markets, sterling was volatile during Trump’s announcement. It did briefly turn lower when it was confirmed UK imports would receive a 10% tariff. But the reality is that 10% is far more lenient than what other nations are facing, and this has helped send GBP/USD soaring to $1.31 this morning – it’s highest level since October last year.
We also mentioned yesterday that GBP/USD has consolidated around the $1.29 handle for the past four weeks, with no reversal signal identified on the charts and as long as the pair held above the 200-day moving average – the path of least resistance should remain to the topside. The technical and fundamental analysis was correct. It is not just sterling strength though, it is US dollar weakness – hence the mixed performance of other GBP crosses whilst the USD is lower across the board. This is understandable because ultimately, US consumers and businesses shoulder the higher import costs – and US recession risks have shot up, dragging US yields lower.
Since Britain had a broadly balanced trade relationship with the US, it did not deserve to be punished with reciprocal tariffs. UK PM Starmer will now continue to negotiate a UK-US trade deal which he hopes will ultimately cut the US tariff on British exports. But there is already relief given the 10% tariff is the lowest rate imposed by the US president – half the EU’s 20% rate – a bonus for leaving the EU. This is why sterling could continue to trade more like a relative haven in this global trade war.
*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.
Convera is excited to announce ThePayments Pulse, a new multi-part report analyzing the changing state of commerce in its quest for standardization and efficiency. As always, cross-border payments play a critical role, and the future will unfold with these systems positioned front and center.
As the global economy digitizes and transforms at a breakneck pace, Convera takes the pulse of the global payments industry, breaking down the latest macro trends and tactics that will move the world forward through innovations, disruptions and an evolving regulatory environment.
Cross-border payments market projected to exceed $290 trillion by 2030
The cross-border payments ecosystem is undergoing rapid transformation, with the global market expected to surpass $290 trillion by 2030. This growth is driven by a combination of globalization, digital commerce, fintech innovation and evolving regulatory frameworks. As businesses and financial institutions continue to adapt to this dynamic environment, understanding the key trends and challenges shaping the future of international payments is crucial for staying competitive and compliant.
Trends driving growth in cross-border payments
The cross-border payments landscape has become increasingly essential to global finance, encompassing a wide range of transactions, from family remittances to large-scale business payments. In this expanding market, cross-border payments are poised to play an even larger role in global trade, financial inclusion and the expansion of e-commerce.
Several macro trends are driving this growth, including:
Globalization and trade
International trade heavily influences cross-border payments. As global trade continues to grow, the need for efficient, secure and scalable payment solutions becomes more critical. Projections suggest that by 2030, business-to-business (B2B) transactions will constitute the largest share of the cross-border payments market, expanding from$39 trillion in 2023 to $56 trillion.
Additionally, the ISO 20022 standard is set to modernize the cross-border payment experience, enhancing transparency and reducing transaction costs.
Open banking and B2B e-commerce
The expansion of open banking is enabling businesses to access better financial services, with regulations that support seamless integration across payment platforms.
The rise of B2B e-commerce, along with the automation of accounts payable and receivable (AP/AR) processes, is further boosting the demand for advanced cross-border payment solutions.
Understanding the market breakdown
Cross-border payments can be broadly divided into wholesale and retail segments. Wholesale payments primarily involve large transactions between financial institutions, such as SWIFT transfers, international wire payments and foreign exchange (FX) transactions. Retail payments, on the other hand, include smaller transactions like remittances, online purchases, and e-wallet or card-based payments.
In 2023, the global cross-border payments market was valued at approximately $190.1 trillion. By 2030, it is projected to rise to $290.2 trillion, with wholesale payments accounting for most of this growth.
Notably, B2B payments are expected to experience a sharp increase. Consumer cross-border payments, although smaller, are also poised to double due to the expanding role of digital wallets and e-commerce.
The role of ISO 20022 in cross-border payments
A key development in the evolution of cross-border payments is the migration to the ISO 20022 messaging standard, which is set to become the global language for financial communications. This transition will enable financial institutions to process payments more efficiently, with improved operational capabilities and compliance mechanisms.
ISO 20022 supports a data-rich format that allows for real-time processing and automation, drastically reducing the need for manual interventions. This will lead to faster payment processing, fewer errors and better overall transparency in transactions.
The transition to ISO 20022 is already underway, with major deadlines looming for systems like SWIFT and the Federal Reserve’s FedNow and Fedwire networks. By November 2025, the SWIFT network will complete its shift to ISO 20022, phasing out legacy MT messages. With over 32% of financial institutions already adopting this standard, the industry is moving quickly to adopt this new messaging protocol.
Overcoming challenges in cross-border payments
Despite the vast potential of cross-border payments, several obstacles hinder their efficiency. These include currency fluctuations, high transaction costs, slow processing times, and regulatory barriers such as tariffs, sanctions, anti-money laundering laws and know-your-customer compliance.
Businesses and financial institutions also face increasing pressure to comply with diverse regulatory frameworks, including an array of data privacy laws. The complexities of cross-border payments can be especially burdensome due to the costs and time associated with navigating these varying regulations.
Cooperation is the key to overcoming these cross-border challenges. Collaborations between traditional financial institutions, fintech companies and payment solution platforms such as Convera are helping to future-proof payment solutions and improve customer experience.
The evolving regulatory landscape
The global regulatory landscape is undergoing significant changes as governments address the challenges posed by technological advancements, geopolitical tensions and shifting economic priorities.
In the US, for example, the Trump administration has been particularly focused on reducing regulatory hurdles for fintechs. This could have significant implications for cross-border payments.
One of the most notable regulatory shifts is the push to expand the role of stablecoins in the payments ecosystem. The bipartisan Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, introduced in early 2025, aims to create clear regulations for stablecoins, making them a viable tool for cross-border payments. This act seeks to ensure consumer protection, transparency and stability within the stablecoin market by setting reserve requirements and imposing dual regulatory oversight.
The European Union has taken a more cautious approach, introducing the Markets in Crypto-Assets (MiCA) regulation to oversee digital assets, including stablecoins and tokenized real-world assets. Complying with these standards can be challenging for businesses operating in both the US and the EU.
Additionally, the EU’s Payment Services Directive 3 (PSD3) will expand open banking regulations starting in July 2025, enabling cross-border payment initiation and multi-currency settlements. This move contrasts with the US approach, where open banking laws are still in development.
Looking to the future of cross-border payments
The future of cross-border payments hinges on further innovations and improvements in infrastructure. With the advent of real-time payments, ISO 20022 and increasing digitalization, the payments landscape is moving toward faster, more efficient and transparent solutions.
Download Module 1 of The Payments Pulse now and stay tuned for Module 2 of the report coming in May to discover more tips on navigating the complexities of global commerce and trade.
To succeed in this evolving environment, businesses need to partner with trusted providers who can guide them through the complexities. Convera’s global network and ISO 20022–compliant platform offers businesses the tools to streamline payments, mitigate risks and comply with regulatory requirements.
Want more insights into the topics shaping the future of cross-border payments? Tune in toConverge, with new episodes every Wednesday.
The sharp global market selloff underscores investor skepticism about any beneficiaries emerging from the latest and largest escalation in the trade war. It also signals growing concerns that the US could be among the hardest-hit by Trump’s protectionist measures. US equities are set to open the day over 3% lower and the US dollar is already 1% lower against a basket of currencies – heading for one of its worst days of the year.
Trump opts for shock therapy
George Vessey – Lead FX & Macro Strategist
The Trump administration has unleashed aggressive tariff measures in both scale and breadth that go far beyond his first-term levies. They hit everyone – friend and foe. As well as the 10% tariff across the board, he’s overlayed that with additional tariffs on a wide group of countries that the US views as already implicitly placing tariffs on US exports. The market reaction has been ugly. Nasdaq 100 futures are down by about 4%, and S&P 500 futures by nearly 3%. In a classic flight to safety, Gold rose to new all-time highs and yields fell on Treasuries of all maturities, weakening the US dollar to 6-month lows.
Trump has implemented 10% blanket tariffs on all imports, starting April 5, extending them further for China (54%), the EU (20%), Japan (24) and UK (10%), with charges largely based on trade surpluses with the US. He also signaled upcoming duties on pharmaceutical drugs, semiconductor chips, lumber, and copper. Combined with prior import taxes on autos and goods from Canada, Mexico, and China, these measures will raise the average US tariff rate to 23%—a dramatic increase from 2.3% in 2024. This is the highest average US tariff rate in more than a century, and surpasses the infamous 1930 Smoot-Hawley tariffs, which arguably worsened the Great Depression.
This is a major shock to the world economy and close to the worst-case scenario Trump had threatened on his campaign trail. It will prompt retaliatory measures from trading partners and although there may be room for negotiation, high tariffs and lingering uncertainty raise recession risks. Tariffs will boost inflation in the short-term, weighing on real disposable income and cutting into spending; financial market conditions will likely tighten and the risk of equity price declines could hit consumer spending via the wealth effect; and trade policy uncertainty will remain elevated, which is suffocating for business investment.
As for the US dollar, well – so far its safe haven status has not cushioned the blow. Investors are focussed more on US stagflation and recession fears. USD/JPY is down 1.4% today, and EUR/USD up almost 1% – dragging the US dollar index to its lowest level since before the election last year.
Euro enthused by Europe’s vow to retaliate
George Vessey – Lead FX & Macro Strategist
As well as falling Treasury yields weighing on the US dollar, EUR/USD is being supported by the proactive approach of EU leaders to US tariffs. The EU is preparing a package of crisis measures to guard its economy from Trump tariffs. EUR/USD has jumped beyond $1.09 this morning, matching its highest level in the post-election period.
European currencies, including the euro, are still viewed as vulnerable, because Trump has been so vocal about growing hostility towards the EU. This may result in smaller trade negotiation room for the bloc, which clouds the growth outlook. However, pre-tariff-announcement euro strength materialized following reports of EU Commission plans for economic support measures. Moreover, in the medium term, we also think that Germany’s fiscal policy stimulus should provide a positive offset and help Europe to weather the tariffs storm, while the ECB is likely to take time to construct its policy response and is unlikely to cut rates this month as it works out the implications of the levies on not only growth but also inflation.
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. The repricing in sentiment is also evident over the longer term. While one-year risk reversals still suggest the euro will be weaker in 12 months, that gauge jumped in March by the second most on record, and has extended higher today – a sign of the speed at which traders are turning more positive on the currency.
A Brexit dividend at last
George Vessey – Lead FX & Macro Strategist
As we’ve been highlighting for several weeks, the pound continues to act as a safe haven tariff play. Along with broader markets, sterling was volatile during Trump’s announcement. It did briefly turn lower when it was confirmed UK imports would receive a 10% tariff. But the reality is that 10% is far more lenient than what other nations are facing, and this has helped send GBP/USD soaring to $1.31 this morning – it’s highest level since October last year.
We also mentioned yesterday that GBP/USD has consolidated around the $1.29 handle for the past four weeks, with no reversal signal identified on the charts and as long as the pair held above the 200-day moving average – the path of least resistance should remain to the topside. The technical and fundamental analysis was correct. It is not just sterling strength though, it is US dollar weakness – hence the mixed performance of other GBP crosses whilst the USD is lower across the board. This is understandable because ultimately, US consumers and businesses shoulder the higher import costs – and US recession risks have shot up, dragging US yields lower.
Since Britain had a broadly balanced trade relationship with the US, it did not deserve to be punished with reciprocal tariffs. UK PM Starmer will now continue to negotiate a UK-US trade deal which he hopes will ultimately cut the US tariff on British exports. But there is already relief given the 10% tariff is the lowest rate imposed by the US president – half the EU’s 20% rate – a bonus for leaving the EU. This is why sterling could continue to trade more like a relative haven in this global trade war.
*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, Chinese yuan hit on trade announcement
Global markets shuddered this morning after US president Donald Trump announced the long-awaited next stage of his trade program with a blanket tariff of 10% on all imports into the US.
In addition to the 10% minimum on all countries, Trump announced a series of other tariffs that reflect the restriction on US imports into other countries.
China will see an additional 34% tariff while Japan sees an additional 24% tariff. Australian imports will see the minimum 10% tariff imposed.
US sharemarket futures tumbled on the news. The S&P 500 fell 3.4% while the Nasdaq lost 4.3%.
In FX markets, trade sensitive currencies fell, with the AUD/USD down 0.9% as it reached one-month lows. The NZD/USD fell 0.7%.
In Asia, USD/CNH jumped 0.6% to near the year’s highs. USD/SGD hit one-month highs.
GBP/USD eyes rebound amid slower UK wage growth
UK wage growth is slowing, with median pay increases dropping to a three-year low at 3.5% in February, down from 4.0% previously.
This supports the Bank of England’s cautious approach to monetary policy, especially as private sector pay is expected to slow further by year-end.
GBP/USD is near four-month highs, while GBP/SGD is near eight-month highs. GBP/AUD however, is near five-year highs.
GBP/USD has followed a corrective decline from 1.2925, still above its 50-day EMA of 1.2770.
Key support levels lie at 1.2790–1.2860, where a rebound could pave the way for further upside, potentially forming a positive inverted head-and-shoulders pattern.
A sustained move above 1.3049 could open the door to 1.3264, while a break below 1.2790 risks further declines toward support at 1.2456.
EUR/USD poised for positive breakout as ECB eyes policy shift
The European Central Bank (ECB) may consider cutting rates in April if inflation data aligns with its 2% target, according to Governing Council Member Rehn.
Both AUD/EUR and NZD/EUR are near eight-month lows.
Looking at EUR/USD, the pair has rebounded from its recent corrective decline, still above its 50-day EMA at 1.0666
A close above 1.0955 would confirm this pattern, potentially opening the way for a significant move toward 1.1697.
However, if EUR/USD fails to hold above 1.0630, it risks further downside toward support near 1.0387.
USD jumps on tariff announcement
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.
April is shaping up to be a pivotal month, with inflation data, labor market signals, and growth indicators shaping central bank expectations. Markets will be monitoring for shifts in policy guidance, particularly from the US Federal Reserve and European Central Bank, which will drive risk sentiment heading into the summer months.
Download our Global FX Outlook for April to help ensure your business is prepared for potential market shifts and their impact on your currency exposures.
Currency moves in March
The US dollar fell to five-month lows last month, pressed by a slowdown in key US data, reaching levels last seen before President Trump’s election victory. Across the Atlantic, the euro was one of the largest beneficiaries with the EUR/USD up 4.4% in the first week of March before easing as the month progressed.
The British pound was another winner helped by a reluctance to cut interest rates from the Bank of England, which saw the GBP/USD touch 1.3000 – the highest level since November. Down under, the Australian dollar remains broadly stuck in a two-cent range hampered by worries about the Chinese economy and, unsurprisingly, trade issues.
Key market themes to watch
The historic German debt announcement may have just marked the bottom of the economic cycle in Europe. However, Germany is finally addressing the structural weaknesses that have interfered with growth and if executed effectively, this could drive productivity, investment and a shift in the broader European economic outlook.
Meanwhile the USD posted its worst month in over a year with a drawdown of 3.2% in March. While the currency’s fall is primarily market-driven, history suggests that Trump’s favorability ratings tend to follow a similar trajectory. A strong dollar has often coincided with confidence in his economic policies, while weakness signals investor skepticism.
Uncertainty surrounding tariff policy and fears of an economic slowdown have kept US equity markets in drawdown territory, with the S&P 500 down around 7% from its recent peak. But comments from President Trump on his tariff plans and flash PMI data called into question these fears, helping stocks rebound and the dollar rise across the board. Where is the US economy in the business cycle? This is a question without a definite answer…for now.
FX market insights: A delicate balance
As we enter April, markets will be navigating a delicate balance between inflation concerns, growth trajectories, and central bank policy decisions. The month will be packed with inflation releases from the US, Eurozone, Germany, and China, making price pressures a central theme. US CPI (April 10) and PCE prices (April 30) will be crucial in determining the Fed’s policy stance. If inflation proves sticky, rate-cut expectations could get pushed further out.
April also features several key central bank rate decisions, which raise questions about any potential cuts on the horizon. The Fed’s March meeting minutes (released on April 10) will offer insight into inflation concerns and whether policymakers are aligned with Powell’s cautious stance on cuts, while the European Central Bank and Bank of Canada will announce rate decisions mid-month. Any hints at rate cuts could boost risk appetite.
April is set to be a month of pivotal shifts and opportunities in the global FX landscape. With inflation data, central bank decisions, and market sentiment all in play, staying informed is crucial. Download the Global FX Outlook for April to navigate these complexities and position your business for success amidst this evolving foreign exchange landscape.
Want more insights on the topics shaping the future of cross-border payments? Tune in to Converge, with new episodes every Wednesday.
