Navigating Trade Winds and Policy Shifts

Forex Market Round Up

The global risk sentiment will be a major factor influencing currency values this week. Uncertainty about US trade policy continues to impact markets, even with temporary tariff pauses. This uncertainty will likely favour safe-haven currencies like the Swiss Franc (CHF) and Japanese Yen (JPY), while negatively impacting commodity-linked currencies such as the Australian Dollar (AUD) and Canadian Dollar (CAD). Other currencies like the Euro (EUR), British Pound (GBP), New Zealand Dollar (NZD), and US Dollar (USD) will be affected by both global risk sentiment and domestic factors, including economic data releases and central bank announcements.

Strength of Currencies

Here is a ranking of the currencies based on the expected influence upon their fair value during the upcoming seven days (strongest bullish to weakest bearish):

• CHF: Moderately bullish influence expected due to its paramount safe-haven status amid global uncertainty.

• JPY: Neutral influence expected as safe-haven appeal contends with domestic policy questions and upcoming data.

• GBP: Neutral to moderately bearish influence expected, balancing key UK data releases (inflation, labour) against lingering trade risks.

• NZD: Moderately bearish influence expected, driven by the interplay between the RBNZ rate cut aftermath, global risk sentiment, and upcoming inflation data.

• EUR: Moderately bearish influence expected, dominated by anticipation of dovish signals from the upcoming ECB policy decision.

• USD: Moderately bearish influence expected as upcoming data is viewed through the lens of tariff impacts and recession fears.

• AUD: Very bearish influence expected, pressured by global risk aversion, commodity price sensitivity, and potential for weak domestic jobs data cementing RBA easing bets.

• CAD: Very bearish influence expected, facing headwinds from the BoC policy decision amid a sharp economic downturn linked to trade risks.

CHF: Haven Demand Dominates

The CHF is expected to see a moderately bullish influence on its fair value throughout the upcoming days and weeks.

The Swiss Franc's primary driver remains its strong safe-haven appeal, particularly fuelled by persistent global trade uncertainties and market volatility. Upcoming domestic data, like the March trade balance, is secondary to the overwhelming influence of external risk sentiment. As long as global trade tensions, especially concerning US policy, keep markets on edge, the demand for the CHF's perceived stability should provide underlying support, aligning the seven-day moderately bullish outlook with the seven-week view. The SNB's accommodative policy stance is currently being overshadowed by these powerful haven flows.

Over the previous seven days, the Swiss Franc strengthened considerably, registering as very bullish. This was almost entirely due to significant safe-haven inflows driven by the escalating US-China trade tensions which rattled global markets and undermined confidence in the US dollar. Investors sought refuge in the CHF, largely ignoring domestic data points like consumer confidence. The SNB's non-intervention allowed market risk aversion to dictate the currency's appreciation. This strong haven performance aligns with the drivers identified over the previous seven weeks, where global risk factors were paramount.

Upcoming Key Indicators/Events (Apr 12 - Apr 18, 2025):

• Apr 17: CH Balance of Trade (Mar) - Forecast: CHF 3.9B

JPY: Balancing Haven Flows and Policy Questions

The JPY is expected to see a neutral influence on its fair value throughout the upcoming days and weeks.

The Yen's trajectory this week is caught in a tug-of-war. Its role as a premier safe-haven currency, attracting flows amid global market jitters related to US trade policy, provides support. However, upcoming domestic data, including March trade figures and national CPI, are critical. Strong inflation could reignite speculation about Bank of Japan tightening, boosting the Yen, while weak figures might reinforce expectations for BoJ caution, limiting gains. A speech by BoJ's Nakagawa adds another variable. These conflicting forces result in a neutral outlook for both the seven-day and seven-week periods, suggesting high volatility potential rather than a clear directional bias.

In the previous seven days, the Yen surged, exhibiting a moderately bullish influence. This was driven by intense global risk aversion sparked by the US-China trade war escalation, enhancing its safe-haven appeal. Concurrent weakness in the US dollar, stemming from concerns about US economic policy and outlook, further bolstered demand for the Yen. Direct US tariffs on Japan (temporarily reduced) were less impactful than the overwhelming flight-to-safety dynamic. This safe-haven dominance was also the key driver noted in the analysis of the preceding seven weeks.

Upcoming Key Indicators/Events (Apr 12 - Apr 18, 2025):

• Apr 16: Machinery Orders MoM (Feb) - Forecast: 4.0%

• Apr 16: Machinery Orders YoY (Feb) - Forecast: 4.7%

• Apr 17: Balance of Trade (Mar) - Forecast: ¥-100.0B

• Apr 17: Exports YoY (Mar)

• Apr 17: BoJ Nakagawa Speech

• Apr 18: Inflation Rate YoY (Mar) - Forecast: 4.3%

• Apr 18: Core Inflation Rate YoY (Mar) - Forecast: 2.5%

GBP: Data Watch Amid Trade Uncertainties

The GBP is expected to see a neutral to moderately bearish influence on its fair value throughout the upcoming days and weeks.

Sterling's performance this week hinges crucially on key UK economic data releases: March inflation (Apr 16th) and February labour market statistics (Apr 15th). Persistently high core inflation or strong wage growth could reinforce expectations of a cautious Bank of England, offering support. Conversely, clear signs of cooling inflation or a weakening labour market would likely amplify rate cut expectations, weighing on the Pound. Global risk sentiment related to trade remains a significant background factor, potentially limiting upside. This balancing act between domestic data dependence and external risks leads to a neutral to moderately bearish outlook for both the seven-day and seven-week timeframes.

Over the past seven days, the Pound showed moderately bullish performance against the US dollar. This was primarily driven by surprisingly robust February GDP data, which tempered expectations for imminent Bank of England rate cuts. Broad US dollar weakness, fuelled by escalating trade tensions and concerns about the US economy, provided an additional tailwind. This contrasts slightly with the seven-week perspective where trade fears and BoE policy expectations were more central, though the outcome remains similar: global risk factors and relative monetary policy outlooks are key.

Upcoming Key Indicators/Events (Apr 12 - Apr 18, 2025):

• Apr 15, 2025: BRC Retail Sales Monitor YoY (Mar) - Forecast: 0.50%

• Apr 15, 2025: Unemployment Rate (Feb) - Forecast: 4.40%

• Apr 15, 2025: Average Earnings incl. Bonus (3Mo/Yr) (Feb) - Forecast: 5.70%

• Apr 16, 2025: Inflation Rate YoY (Mar) - Forecast: 2.70%

• Apr 16, 2025: Core Inflation Rate YoY (Mar) - Forecast: 3.40%

NZD: Buffeted by Global Tides and Domestic Data

The NZD is expected to see a moderately bearish influence on its fair value throughout the upcoming days and weeks.

The Kiwi dollar's outlook this week is shaped by the market digesting the recent RBNZ rate cut, prevailing global risk sentiment influenced by US trade policy (despite NZ's 90-day tariff pause), and the crucial upcoming Q1 domestic inflation data (Apr 16th). A softer-than-forecast inflation print could solidify expectations for further RBNZ easing, exerting downward pressure. The interplay between these domestic policy signals and external risk factors suggests a continued moderately bearish influence, aligning the seven-day view with the seven-week forecast, where global trade tensions and RBNZ easing expectations are seen as dominant negative drivers.

During the previous seven days, the NZD strengthened, showing a moderately bullish influence relative to the USD. This was primarily due to significant US dollar weakness stemming from escalating US-China trade tensions and concerns about the US economic outlook. The widely anticipated RBNZ rate cut had a limited negative impact. Improved risk appetite following the announcement of tariff pauses (excluding China) also provided support. This recent strength contrasts with the very bearish drivers identified over the preceding seven weeks, which were dominated by the negative impacts of trade escalations and RBNZ easing expectations.

Upcoming Key Indicators/Events (Apr 12 - Apr 18, 2025):

• Apr 15, 2025: Global Dairy Trade Auction Event 377

• Apr 15, 2025: Balance of Trade (Period: Mar 2025) - Forecast: NZ$ 0.03B

• Apr 16, 2025: Inflation Rate QoQ (Period: Q1 2025) - Forecast: 0.80%

EUR: ECB Decision Casts a Shadow

The Euro is expected to be moderately bearish influence on its fair value throughout the upcoming days and weeks.

The Euro's direction this week will be heavily influenced by the European Central Bank's monetary policy decision and accompanying press conference on April 17th. While no rate change is widely expected this time, the ECB's assessment of growth risks (particularly from trade tensions) versus moderating inflation will be paramount. Confirmation of a dovish tilt and signals pointing towards imminent rate cuts (possibly starting soon) could pressure the Euro. Regional data like industrial production and ZEW sentiment will provide additional context. This anticipated dovish signal from the ECB, relative to potentially slower easing elsewhere, shapes the moderately bearish outlook for both the seven-day and seven-week horizons.

Over the past seven days, the Euro rallied strongly against the US dollar, exhibiting a moderately bullish influence relative to the USD. This strength was driven primarily by significant USD weakness as US-centric trade fears escalated. The Euro benefited from capital flows seeking alternatives to US assets, acting as a relative safe haven despite direct tariff threats (albeit paused for 90 days). Easing Eurozone inflation data reinforced expectations for ECB rate cuts but did not impede the Euro's rise against the faltering dollar. This recent haven behaviour contrasts somewhat with the seven-week perspective, where the focus was more on the negative impact of trade tensions and ECB easing expectations, even though the outcome versus the dollar was similar due to USD weakness.

Upcoming Key Indicators/Events (Apr 12 - Apr 18, 2025):

• Apr 15: EA Industrial Production MoM (Feb 2025) - F'cast: 0.1%

• Apr 15: EA ZEW Economic Sentiment Index (Apr 2025) - F'cast: 34

• Apr 17: EA ECB Interest Rate Decision & Press Conference - F'cast: Deposit Rate Cut to 2.25%

USD: Data Scrutinized Amid Recession Fears

The USD is expected to see a moderately bearish influence on its fair value throughout the upcoming days and weeks.

The US Dollar's direction this week will be shaped by upcoming economic data, notably March Retail Sales (Apr 16th) and housing figures (Apr 17th), interpreted through the lens of recent tariff escalations and heightened recession concerns. While last week's surprisingly weak producer price data and plunging consumer sentiment reinforced market expectations for Fed rate cuts, strong retail sales could challenge this narrative and offer temporary support. However, the dominant market focus on the negative economic impact of trade policy and the potential for recession suggests downside risks remain paramount. This leads to a moderately bearish outlook for both the seven-day and seven-week periods, driven by policy uncertainty and growth fears potentially outweighing any data resilience.

Over the past seven days, the US Dollar Index plummeted, marking a very bearish influence. This was driven by escalating trade tensions with China and widespread fears of a US recession, severely undermining investor confidence. Weak producer price inflation and disastrous consumer sentiment readings solidified expectations for significant Fed rate cuts. The dollar weakened broadly against almost all major counterparts, indicating a fundamental loss of faith in US assets and policy predictability. This aligns with the seven-week view where US policy uncertainty and its economic consequences were seen as the primary bearish drivers for the dollar.

Upcoming Key Indicators/Events (Apr 12 - Apr 18, 2025):

• Apr 16 2025: US Retail Sales MoM (Mar) - Forecast: 1.30%

• Apr 17 2025: US Building Permits Prel (Mar) - Forecast: 1.46M

• Apr 17 2025: US Housing Starts (Mar) - Forecast: 1.41M

AUD: Commodity Links Strained by Trade Fears

The Australian Dollar is expected to see a very bearish influence on its fair value throughout the upcoming days and weeks.

The Australian Dollar's path this week is highly dependent on global risk sentiment, heavily influenced by the US-China trade conflict, commodity price fluctuations (especially iron ore reacting to Chinese demand signals), and domestic factors including RBA meeting minutes (Apr 15th) and March employment data (Apr 17th). Given the AUD's high sensitivity to global growth and trade, persistent tensions represent a major headwind. Weak domestic jobs data could cement expectations for a near-term RBA rate cut, further pressuring the currency. This confluence of negative external factors and potential domestic weakness leads to a very bearish outlook for both the seven-day and seven-week periods.

Over the past seven days, the AUD benefited significantly from broad US dollar weakness, showing a moderately bullish influence relative to the USD. Escalating US-China trade tensions eroded confidence in US assets, driving flows away from the dollar. Concerns about the direct impact of US tariffs on key Australian trading partners like China persisted, despite Australia facing a lower baseline tariff. Hawkish-leaning RBA comments provided only temporary support against the dominant global risk-off drivers. This recent strength, driven by USD weakness, contrasts sharply with the very bearish fundamental drivers identified over the previous seven weeks, which focused on the negative impact of trade tensions on commodity demand and the Australian economy.

Upcoming Key Indicators/Events (Apr 12 - Apr 18, 2025):

• Apr 15 2025: AU RBA Meeting Minutes (Apr)

• Apr 17 2025: AU Employment Change (Mar, F'cast: 30.0K)

• Apr 17 2025: AU Unemployment Rate (Mar, F'cast: 4.10%)

CAD: Central Bank and Inflation Take Centre Stage

The Canadian Dollar is expected to see a very bearish influence on its fair value throughout the upcoming days and weeks.

The Canadian Dollar faces a critical week centred around the Bank of Canada's policy decision, Monetary Policy Report (MPR), and press conference on April 16th, alongside March inflation data on April 15th. While interest rates are expected to remain unchanged, the BoC's assessment of the severe economic downturn signalled by recent data (jobs, PMI) amid ongoing trade risks will be crucial. A dovish tone acknowledging growth damage could significantly pressure the CAD. The inflation print will also be vital; continued core persistence complicates easing, while a sharp drop could accelerate rate cut expectations. Given the negative economic backdrop and trade uncertainties, the overall influence leans very bearish for both the seven-day and seven-week horizons.

The Canadian Dollar strengthened over the previous seven days, exhibiting a moderately bullish influence relative to the USD. This was largely due to pronounced US dollar weakness driven by escalating US-China trade tensions and recession fears impacting US assets. Rebounding oil prices provided some additional support. However, the severe underlying economic damage from the trade dispute remained the primary concern, despite a temporary US tariff pause for Canada. This recent strength, stemming from USD weakness and oil gains, contrasts with the very bearish fundamental drivers identified over the preceding seven weeks, which highlighted the severe economic impact of the trade dispute and anticipated BoC easing.

Upcoming Key Indicators/Events (Apr 12 - Apr 18, 2025):

• Apr 15, 2025: Housing Starts (Mar 2025) - Forecast: 238K

• Apr 15, 2025: Inflation Rate YoY (Mar 2025) - Forecast: N/A (TE: 2.80%)

• Apr 15, 2025: Core Inflation Rate YoY (Mar 2025) - Forecast: N/A (TE: 2.80%)

• Apr 15, 2025: Inflation Rate MoM (Mar 2025) - Forecast: 0.70% (TE: 0.80%)

• Apr 16, 2025: BoC Interest Rate Decision - Forecast: 2.75%

• Apr 16, 2025: BoC Monetary Policy Report & Press Conference

CONCLUSION

The upcoming seven days present a complex trading environment, dominated by lingering global trade uncertainties and pivotal central bank meetings for the Eurozone and Canada. While safe-haven currencies like CHF and JPY find support, risk-sensitive commodity currencies AUD and CAD face significant headwinds. Key data releases, including inflation figures from the UK and NZ, US retail sales, and Australian employment, will be crucial inputs. Forex traders should remain vigilant, focusing on risk management amidst potential volatility triggered by policy decisions, data surprises, or unexpected shifts in geopolitical tensions.

Top Indicators to Watch

1. Apr 16: CA BoC Interest Rate Decision & MPR: Hugely significant for CAD. Focus isn't on the expected rate hold, but on the BoC's assessment of severe economic damage from trade disputes and forward guidance on future cuts. A dovish tone acknowledging growth risks could heavily pressure CAD.

2. Apr 17: EA ECB Interest Rate Decision & Press Conference: Critical for EUR. While no rate change is expected now, Lagarde's tone on growth risks vs. inflation and signals about the timing/pace of future cuts (potentially starting soon) will drive EUR sentiment and market rate expectations.

3. Apr 16: US Retail Sales MoM (Mar): Key gauge of US consumer health amid tariff fears. A strong number could challenge recession narratives and briefly support USD by questioning aggressive Fed cut pricing. A weak number would reinforce recession fears and weigh on USD.

4. Apr 16: UK Inflation Rate YoY / Core Inflation Rate YoY (Mar): Crucial for GBP and BoE expectations. Persistently high core inflation could reinforce BoE caution and support GBP. Clear signs of cooling would amplify rate cut bets and pressure GBP.

5. Apr 17: AU Employment Change / Unemployment Rate (Mar): Vital for AUD and RBA outlook. Weak jobs data, following recent confidence drops, would likely cement expectations for a near-term RBA rate cut, adding significant pressure to the AUD. A strong report might offer temporary relief but likely wouldn't override broader global risk concerns.