Global stocks posted significant gains at the start of the week, following a partial exemption from tariffs on electronics imports. The US government announced on Friday a temporary exemption for some electronics from the 145% tariff on Chinese goods. These products were also exempt from the fixed 10% tariff. This waiver gave markets a strong boost, particularly in Asia and Europe. Meanwhile, US stock futures settled at a moderately higher level.
US Dollar Weakness Continues Despite Stocks’ Improvement
Despite stocks’ gains, the US dollar remained weak overall. The US currency maintained a negative tone throughout the past week’s sessions, due to political uncertainty regarding trade and expectations of a rate cut. US President Donald Trump also indicated that tariffs on electronics and chips remain in place. Trump said sharply, “No one is immune from the consequences.”
Global Market Movements and Investor Reaction
During the same period, US bond prices rose, pushing Treasury yields down by 5 to 6 basis points.
Long-term Japanese bonds also fell, adding four basis points to yields.
Oil prices saw a modest gain, but oversupply concerns persisted due to slowing global growth.
These moves show that investors are opting for caution amid heightened political and trade volatility.
Foreign Exchange Performance Against the Dollar
Despite some positive indicators, the dollar continued to weaken against most foreign currencies. The Swiss franc and the South Korean won saw only slight declines. Conversely, commodity-linked currencies benefited from improved risk appetite. Bloomberg Dollar Indexes show sharp volatility in short-term sentiment. Investors priced in the highest premium for puts since the beginning of the pandemic. This is an indicator of growing concern about continued dollar weakness.
A Look at the US Dollar Index (DXY)
The US Dollar Index fell below 100 and is currently stabilizing near 99. This decline has pushed the index toward critical technical support levels according to Fibonacci analysis. If the decline continues, the index could head toward the 90-95 range in the medium term. These expectations have been heightened by comments from Federal Reserve Chairman Collins, who emphasized the readiness to intervene if needed.
US Inflation Data Pressures the Dollar
US Consumer Price Index (CPI) data came in below expectations, increasing pressure on the dollar. The data showed annual inflation declining to 2.4% in March, down from 2.8% in February. Markets had expected it to decline to only 2.6%. The core component also declined from 3.1% to 2.8%. These figures have reinforced investor bets on an imminent interest rate cut by the Federal Reserve.
Producer Price Data Confirms Slowdown
On Friday, new data was released showing factory gate prices falling by 0.4% in March. This decline marked the first monthly decline in producer inflation since October 2023. This data has increased the likelihood of new stimulus measures to support the economy.
Key Movements in the Global Currency Market
Amid a weaker dollar, the EUR/USD pair rose 3.7% during the week ending April 11. The pair opened at 1.0955 and reached a high of 1.1475 on Friday. The British pound also jumped 1.5% during the same period, supported by stronger-than-expected economic growth data. The GBP/USD pair reached 1.3155 at the end of the week.
The Australian dollar rose more than 4% against its US counterpart, reaching a high of 0.6301, amid escalating tensions between Beijing and Washington. The dollar also fell 2.3% against the Japanese yen, reaching 143.51. Safe-haven demand for the yen supported the Japanese currency.
Market Outlook for the Current Week
Global markets are awaiting a number of important economic indicators this week. First, the Reserve Bank of Australia meeting minutes are released on Monday, which is of interest to currency investors. Markets are also awaiting UK unemployment data on Tuesday morning, followed by inflation figures on Wednesday. These figures directly impact the British pound, which has recently seen strong performance against the dollar.
Thursday is the most important day, as the European Central Bank announces its interest rate decision. This decision has a significant impact on the euro, especially given the recent fluctuations in the exchange rate against the dollar. In addition, US consumer price index data is also released on Thursday, increasing market tensions. Markets are anticipating weak data, which could push the dollar further lower if it misses expectations.
In the same context, investors continue to monitor developments in US tariffs, especially after recent conflicting statements. Meanwhile, markets will be monitoring the views of Federal Reserve officials regarding the future direction of interest rates. Any hint of a more hawkish or accommodative policy could quickly change market direction. Corporate earnings reports remain a significant factor influencing stock indices, especially in the United States. Focus will shift to technology companies, whose recent performance has been linked to changes in tariff policies.
Exchange firms are reducing the probability of a 25 basis point interest rate cut by the European Central Bank at its policy meeting scheduled for April 17 to 96%.
The USD/JPY pair fell -0.08% today. The Japanese yen rose slightly today, approaching the six-and-a-half-month high it reached last Friday against the US dollar. The yen received support today after Kyodo News reported that Prime Minister Ishiba will request a draft supplementary budget for fiscal 2025 early this week, in response to President Trump’s tariffs and rising prices.
