Market volatility continued yesterday, with USD extending losses following a weaker-than-expected US CPI print in March. Month-on-month, core CPI only rose 0.1% from February, the smallest increase in nine months. This caused markets to add to rate cut bets once again, pushing expectations to up to 90 basis points by year-end.
In general, it seems that investor confidence in US assets is waning. Stocks have now surrendered nearly half of the gains made after the 90-day tariff pause announcement, and treasuries are selling-off.
Read more about Trump's tariffs here: Trump Tariffs Explained – Everything Global Businesses Need to Know
EURUSD hit its highest levels since July 2023, with a clear preference of flow going from USD into EUR. GBPEUR also fell back to January 2024 lows. Overall CHF, EUR and JPY were the clear winners yesterday, with investors seeking safe havens.
*Daily move - against G10 rates at 7:30am, 11.04.25
** Indicative rates - interbank rates at 7:30am, 11.04.25
Yesterday, USD weakened on a combination of investor confidence waning, seeking CHF, EUR and JPY as safety alternatives, and a lower CPI number. It will take a larger-than-expected US PPI number to see markets bid for USD again. Currently, technical indicators are all showing that CHF, EUR and JPY are overbought versus USD. While this indicates a potential market correction, the resurgence of confidence in US assets would be essential to drive capital back into the USD.
UK GDP in February jumped to 0.5%, beating analysts’ estimates of 0.1%. The gains were driven by 0.3% growth in the service sector, as well as 2.2% growth in manufacturing. The UK is on course for growth in Q1 of this year but there is still caution about the economy, given the OBR halved its growth forecast for this year. Following the numbers, GBP gains were muted.
Back to the EUR. Typically deemed to trade like a risk currency, it now seems to be acting as a safe-haven currency for investors. Considering Germany’s change in stance from fiscal restraint to now attempting to promote growth, EUR demand has picked up in recent weeks. The EU’s 90-day delay in retaliatory tariffs against the US also boosted the currency, with some seeing Europe as a stabilising force in an environment where others are being reactive. So, whilst the EUR is benefitting from overall USD weakness, there are arguments that perhaps the single-bloc currency has enough legs to be firm in its own right.
Both the EUR index and EURUSD are trading at multi-year highs and, as mentioned above, technical indicators suggest the EUR is overbought, so a correction could well be on the cards. However, it seems that a mere shift in market positioning may not suffice to trigger a EUR correction.
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