Global FX Market Summary: US-China Trade Tensions, Weakening US Dollar, Global Monetary Policy Expectations 14 April 2025

US-China trade tensions, weakening dollar, and global rate cut expectations spark market uncertainty, investment caution, and central bank dovish shifts.

US-China Trade Tensions:

The initial US move to impose hefty tariffs on Chinese tech was significant, and the subsequent exemptions, while seemingly a step back, came with a caveat from US Commerce Secretary Lutnick about new levies on these and semiconductor products within the next couple of months. That whipsaw effect keeps businesses on edge, potentially delaying investment decisions as they try to predict the next move. China’s swift retaliation by hiking tariffs on US goods to 125% underscores the tit-for-tat nature of this conflict. This isn’t just a bilateral issue; other nations, like the UK and the EU, are also bracing for the “profound” effects of these policies on their own economies and are strategizing their responses. The surge in inflows into Chinese gold ETFs highlights how investors within China are seeking safe havens amidst these intensifying trade worries.

Weakening US Dollar:

The sustained selling pressure on the US Dollar speaks volumes about the market’s current concerns. It’s not just a minor dip; hitting levels not seen since April 2022 suggests a significant shift in sentiment. While the initial tariff exemption news offered a brief respite, it didn’t have staying power. The fact that the dollar is struggling even as risk sentiment shows some improvement indicates deeper underlying issues. The anticipation of the Federal Reserve potentially shifting to a more accommodative stance, as indicated by the CME FedWatch Tool showing a non-negligible probability of a May rate cut, is a key factor. If Fed officials reiterate a patient stance, it could offer some support to the dollar, but the market seems to be leaning towards expecting easing. The unusual breakdown in the traditional positive correlation between US Treasury yields and the dollar last week also points to potential market stress and a reassessment of the US economic outlook.

Shifting Global Monetary Policy Expectations:

The trade tensions are acting as a catalyst, influencing how central banks around the world are likely to approach monetary policy. The ECB’s expected rate cut this week, which would be their seventh reduction since June, signals a clear direction, especially as some policymakers explicitly link it to the US tariff situation. The idea that the trade war might not be inflationary for the Eurozone, potentially leading to cheaper Chinese imports, further supports this dovish stance. In the UK, upcoming employment and inflation data are crucial as they will likely shape expectations for a potential Bank of England rate cut as early as May. Even former BoE officials are suggesting aggressive easing. This coordinated, or at least similarly influenced, shift towards potentially lower interest rates across major economies highlights how interconnected global monetary policy is in the face of these trade headwinds.

Top economic events for this week:

Here are 10 important news events from your list for the week of April 14th to April 18th, 2025, along with their significance:

• April 15, 2025, 01:30:00 – RBA Meeting Minutes (HIGH Impact, AUD): These minutes provide detailed insights into the Reserve Bank of Australia’s (RBA) recent monetary policy decisions, including the factors that influenced their interest rate stance. Traders and analysts scrutinize these minutes to understand the central bank’s outlook on the economy and potential future policy moves, which can significantly impact the Australian Dollar.
• April 15, 2025, 06:00:00 – Claimant Count Change (HIGH Impact, GBP): This data point reflects the change in the number of people claiming unemployment-related benefits in the UK. A significant increase suggests a weakening labor market, which can negatively impact the British Pound, while a decrease indicates a strengthening economy.
• April 15, 2025, 06:00:00 – Employment Change (3M) (HIGH Impact, GBP): This report details the change in the number of employed people in the UK over the past three months. It’s a key indicator of the health of the labor market. Strong employment growth is generally positive for the GBP, while a decline can signal economic challenges.
• April 15, 2025, 06:00:00 – ILO Unemployment Rate (3M) (HIGH Impact, GBP): This is a widely watched measure of unemployment in the UK, calculated by the International Labour Organization. A lower unemployment rate typically supports the GBP, indicating a tighter labor market and potential for wage inflation.
• April 15, 2025, 12:30:00 – BoC Consumer Price Index Core (YoY) (HIGH Impact, CAD): This measures the year-over-year change in the price of a basket of goods and services in Canada, excluding volatile food and energy prices. It’s a crucial indicator of underlying inflation. Higher-than-expected core inflation can lead to expectations of interest rate hikes by the Bank of Canada, which is typically positive for the Canadian Dollar.
• April 15, 2025, 12:30:00 – Consumer Price Index (YoY) (HIGH Impact, CAD): This broader measure tracks the overall year-over-year change in consumer prices in Canada. It’s a key gauge of inflation pressures in the economy. Rising inflation can prompt the BoC to tighten monetary policy, influencing the CAD.
• April 15, 2025, 16:00:00 – ECB’s President Lagarde speech (HIGH Impact, EUR): Speeches by the President of the European Central Bank (ECB) are closely monitored for insights into the central bank’s current thinking on monetary policy and the economic outlook for the Eurozone. Her comments can provide clues about future interest rate decisions and influence the Euro’s value.
• April 16, 2025, 02:00:00 – Gross Domestic Product (QoQ) (HIGH Impact, CNY): This report shows the quarterly change in the total value of goods and services produced in China. GDP growth is a fundamental indicator of economic health. Stronger-than-expected growth is generally positive for the Chinese Yuan and can have global implications given China’s economic significance.
• April 16, 2025, 02:00:00 – Gross Domestic Product (YoY) (HIGH Impact, CNY): This measures the year-over-year change in China’s GDP, providing a longer-term perspective on economic performance. Consistent strong growth is vital for maintaining global economic stability and can impact commodity prices and international trade.
• April 16, 2025, 13:45:00 – BoC Interest Rate Decision (HIGH Impact, CAD): This announcement reveals the Bank of Canada’s decision on the key interest rate. It’s one of the most significant events for the Canadian Dollar, as interest rate changes directly impact borrowing costs, investment, and the overall economy. Any deviation from market expectations can lead to significant currency volatility.

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