Intro
The euro was the most bullish currency in the past week despite the European Central Bank delivering an interest rate cut. A few developments have led us to change our sentiment to bullish for EUR.
The Swiss franc and Japanese yen were Other currencies that were strong (and reinforced our biases) in this past period. Let’s dive deeper into our latest market sentiment report!
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (DXY): Bearish
The U.S. administration temporarily suspended the 25% tariffs on Canadian and Mexican goods and threatened to impose global tariffs on April 2. The uncertainty has led investors to seek shelter in safe-haven assets like the yen, Swiss franc, and gold.
Further downside pressure also remains due to a slight uptick in the unemployment rate and a 96% probability of a rate cut on March 19, 2025.
Key news to watch: Inflation Rate YoY on Wednesday and Initial Jobless Claims on Thursday.
Euro (EUR): Bullish
The Euro has been under pressure due to vague threats of U.S. tariffs on European goods, adding to economic uncertainties within the Eurozone.
However, the currency hit phenomenal heights recently, supported mainly by Germany’s announcement of a €500 billion infrastructure fund and a relaxation of borrowing limits. Europe’s efforts at drafting a peace plan for Ukraine also contributed to the euro’s strength.
British Pound (GBP): Bullish
The pound climbed against the U.S. dollar to November levels, aided by the favourable reception to the UK visit of Ukrainian President Volodymyr Zelenskiy and receding concerns over U.S. tariffs. It dropped against the euro due to Germany’s fiscal expansion plans.
Japanese Yen (JPY): Bullish
The yen is firmer, following recent highs after a sharp jump in Japanese inflation. January’s inflation in its core measure was its quickest in 19 months.
The inflation rally fuels expectations of rate increases by the Bank of Japan, making the yen more desirable. The safe-haven appeal of the yen keeps drawing funds too on the back of global uncertainty.
In the long term, we should also keep an eye on US Treasury yields – rising yields = lower JPY, while lower yields = higher JPY.
Australian dollar (AUD): Neutral
Despite global trade tensions, the AUD has appreciated slightly due to global risk sentiment after the U.S. administration delayed imposing auto import tariffs on Canada and Mexico. Yet, China’s economic health concerns (because of Australia’s close trade relations) can be negative for the currency.
New Zealand dollar (NZD): Weak Bearish
The New Zealand Dollar has declined sharply due to its sensitivity to global risk sentiment. The threatened U.S. tariffs have triggered a sell-off in risk-sensitive currencies, and the NZD has been especially affected. The currency is closely linked to global trade flows, so it is vulnerable in the current environment.
The Reserve Bank of New Zealand also dropped the interest rate recently by 50 basis points, further adding to the bearish bias.
Canadian dollar (CAD): Weak Bearish
CAD posted modest gains against some currencies after the U.S. administration delayed auto import tariffs on Canada and Mexico.
In addition, the U.S. Commerce Secretary Howard Lutnick indicated that future tariffs might not reach the anticipated 25%. There is also a favourable correlation between oil prices and the loonie, which can support the currency.
However, markets suggest an 83% chance of the Bank of Canada dropping the interest rate this week.
Key news to watch: BoC interest rate decision on Wednesday.
Swiss Franc (CHF): Weak Bullish
Uncertainty in the global economy continues to propel demand for the franc. The Swiss franc is still a safe-haven currency. However, the Swiss National Bank wants to keep interest rates in the negative.
The new SNB chairman is more keen to cut rates than the last chairman, with the SNB aiming for neutral rates between 0 and 0.5% (currently at 0.5%).
