Market sentiment remains downbeat on the final day of the quarter, as traders begin the US NFP week while reacting to US President Trump's surprise trade tariff plans and harsh remarks on Russia and Iran. Concerns over a potential recession triggered by new tariffs, alongside higher inflation and recent hawkish comments from the Fed, continue to weigh on sentiment. Despite these fears, the US Dollar Index (DXY) is in a three-day losing streak, ignoring strong inflation data and the Fed’s tough stance.
Trump's threat of reciprocal tariffs and tough talk on Russia, Venezuela, and Iran sparked concerns about economic risk but failed to boost the US dollar. Even with the strong US Core PCE Price Index, which supported hawkish Fed views, worries about economic hardship kept the dollar weak. Meanwhile, positive signs from China, the UK, Australia, and Japan’s mixed data couldn’t shake the risk-off mood, fueled by geopolitical tensions and lower US yields.
The DXY ends a three-day losing streak, while gold prices hit a new all-time high above $3,100. USDJPY leads G10 currencies lower, and while the euro and pound start the week strong, the Antipodean currencies remain flat. Crude oil breaks its two-day losing streak, but cryptocurrencies and equities continue to drift lower.
EURUSD extends its winning streak to three days, supported by stronger EU data and the bloc’s efforts to ease trade tensions with the US. Optimism around Germany and a weaker US Dollar also helped the euro, although concerns over a dovish ECB and fears that a US-driven trade war could lead to a global recession are limiting further gains.
Meanwhile, GBPUSD rebounds from the previous day's losses, buoyed by a softer US Dollar and positive UK business confidence and retail sales data. The UK’s business confidence, per Lloyds Bank, stayed strong in March, near a six-month high, while retail sales in February saw an unexpected jump.
The USDJPY bears continue to dominate, driven by a weaker US Dollar, increased demand for safe-haven assets due to global trade and political uncertainty, and concerns over hawkish Bank of Japan (BoJ) policies and falling US Treasury bond yields. Despite mixed data from Japan, the yen is leading G10 currencies in gains against the US Dollar. Japan’s industrial output rose, retail sales growth slowed, and housing starts increased. Meanwhile, Japan's Finance Minister Kato expressed concern over volatile currency movements, particularly linked to US trade news, while another official dismissed the idea of higher Japanese output due to tariff-related issues.
AUDUSD and NZDUSD both extend losses as overall negative sentiment outweighs China-related news and a weaker US Dollar. The AUDUSD pair ignores positive inflation data ahead of the Reserve Bank of Australia's likely steady policy decision this week. Meanwhile, NZDUSD reacts to weaker ANZ Business Confidence, keeping sellers in control.
The USDCAD sees its first daily loss in three days, supported by stronger Crude Oil prices, Canada’s key export, amid easing US-Canada trade war concerns after a Friday call between President Trump and Canada's new leader, Mark Carney.
Gold continues its rally, hitting a new all-time high of $3,116 on Monday, supported by market uncertainty, a softer US Dollar, and expectations of higher demand from China, India, and global central banks. Rising fears over the US-driven trade war, recession risks, and central banks’ struggles to raise rates also boost gold's appeal.
Meanwhile, Crude Oil lacks clear direction after a three-week uptrend. Tensions between the US and Iran, as well as the US and Venezuela, suggest potential supply issues, while OPEC+ and Trump’s "drill, baby, drill" approach keep energy sellers optimistic.
Trump's tariffs, concerns over higher supplies, and increased ETF outflows are putting pressure on Bitcoin (BTCUSD) and Ethereum (ETHUSD), especially as optimism around crypto acceptance in the US and Japan fades. As a result, BTCUSD is on a four-day losing streak, while ETHUSD hits a three-week low after six consecutive days of declines.
After a volatile start to the week with the US employment report ahead, traders may see lower liquidity due to a light calendar and holidays in several countries for Eid. Key data to watch includes Germany’s Retail Sales and inflation figures, followed by PMIs from the Federal Reserves of Chicago and Dallas. The BoE's quarterly bulletin will also be important.
Headlines around US tariffs and geopolitical issues with Iran, Russia, Ukraine, Venezuela, and China could drive significant market moves. However, quarter-end positioning may limit the continuation of recent trends, leading to a mixed start to the week. This could allow the US Dollar to recover from previous losses, testing Gold buyers near the $3,123 resistance level. EURUSD and GBPUSD may see further declines, while the Antipodean currencies could extend early losses, but USDJPY may resist the trend, keeping the bears in control.
May the trading luck be with you!
