Global FX Market Summary: US-China Trade War, Weakening US Dollar, Safe-Haven Demand 11 April 2025

US-China trade war escalates, weakening USD amid recession fears and Fed uncertainty; investors flee to gold, yen, and Swiss franc.

Escalating US-China Trade War:

This isn’t just a simple disagreement over trade balances; it’s a dynamic and reactive situation with significant economic implications. China’s decision to increase tariffs to 125% is a direct response to the US raising tariffs on Chinese goods to 145%. This cycle of retaliation creates uncertainty for businesses and investors, potentially disrupting supply chains and increasing costs for consumers. The fact that China is actively seeking stronger ties with Europe and Asia suggests a strategic move to diversify its economic relationships and reduce reliance on the US. Standard Chartered estimates the current tariff levels could already shave off around 1.8 percentage points from China’s GDP growth, highlighting the tangible economic impact. The market’s reaction, with US stock index futures turning south after China’s tariff announcement, underscores the immediate concern surrounding this escalating conflict.

Weakening US Dollar:

The dollar’s decline isn’t happening in a vacuum. Several factors are converging to create this pressure. The fear of a US recession, amplified by the trade war, leads investors to anticipate aggressive interest rate cuts by the Federal Reserve. The March CPI data, showing tamer-than-expected inflation (2.4% year-over-year), has further solidified these expectations, with markets pricing in multiple rate cuts this year. Adding another layer of complexity is the concern around the Federal Reserve’s independence, sparked by a recent court ruling that could potentially allow the President to more easily remove members of independent agencies, including the Fed Chair. This raises questions about the stability and predictability of US monetary policy, making the dollar less attractive. The USD Index’s significant drop below 100.00 signifies a broad loss of confidence in the currency.

Surge in Safe-Haven Demand:

In times of economic and geopolitical uncertainty, investors tend to seek out assets perceived as safe stores of value. Gold is a classic example, and its record-breaking price above $3,220 directly reflects this “flight to safety.” The intensifying trade war and the weakening dollar are creating the very conditions that drive investors towards such havens. The Japanese Yen and Swiss Franc are also experiencing increased demand for similar reasons. Japan’s Finance Minister even commented on the excessive volatility in exchange rates, indicating the significant movements occurring. The fact that traditional safe-haven currencies like the CHF and JPY are gaining against the USD, even as the dollar previously held a safe-haven status, signals a notable shift in market sentiment and a clear preference for perceived stability outside of the US dollar.

Top economic events for next week:

• April 15, 2025, 01:30:00 (AEST): RBA Meeting Minutes (HIGH Impact, AUD) – The Reserve Bank of Australia (RBA) Meeting Minutes provide detailed insights into the central bank’s discussions and the factors influencing their monetary policy decisions. This can significantly impact the Australian dollar as traders and analysts look for clues about future interest rate movements and the overall economic outlook.
• April 15, 2025, 06:00:00 (BST): Claimant Count Change & ILO Unemployment Rate (3M) (HIGH Impact, GBP) – These UK labor market indicators are crucial for assessing the health of the British economy. A higher claimant count (more people claiming unemployment benefits) and a rising unemployment rate can signal economic weakness, potentially weakening the British pound. Conversely, lower figures indicate a stronger labor market.
• April 15, 2025, 08:00:00 (CEST): ECB Bank Lending Survey (HIGH Impact, EUR) – This survey conducted by the European Central Bank (ECB) provides valuable information on the lending conditions in the Eurozone. It reflects the demand for and supply of loans to enterprises and households, offering insights into the transmission of monetary policy and the overall financial stability of the region, thus impacting the euro.
• April 15, 2025, 12:30:00 (EDT): BoC Consumer Price Index (YoY) & Core (YoY) (HIGH Impact, CAD) – These Canadian inflation figures are key indicators for the Bank of Canada’s (BoC) monetary policy decisions. Higher-than-expected inflation can lead to expectations of interest rate hikes, strengthening the Canadian dollar, while lower inflation could suggest the opposite. The core CPI excludes volatile items, giving a clearer picture of underlying inflation trends.
• April 16, 2025, 02:00:00 (CST): Gross Domestic Product (QoQ & YoY), Industrial Production (YoY), Retail Sales (YoY) (HIGH Impact, CNY) – These Chinese economic growth indicators provide a comprehensive view of the country’s economic performance. As the world’s second-largest economy, strong GDP, industrial output, and retail sales figures can have global implications and influence market sentiment, potentially affecting currencies and commodity prices. Weak data could raise concerns about global growth.
• April 16, 2025, 06:00:00 (BST): Consumer Price Index (MoM & YoY) & Core (YoY) (HIGH Impact, GBP) – Similar to the Canadian CPI, these UK inflation figures are critical for the Bank of England’s (BoE) monetary policy. Rising inflation could prompt the BoE to consider interest rate hikes, impacting the British pound. Core CPI offers a less volatile measure of inflation.
• April 16, 2025, 12:30:00 (EDT): Retail Sales (MoM) & Retail Sales Control Group (HIGH Impact, USD) – These US retail sales figures are a significant gauge of consumer spending, which drives a large portion of the US economy. Strong retail sales indicate economic strength and can be positive for the US dollar, while weak data may suggest a slowdown. The control group figure excludes volatile items like autos, providing a more stable underlying trend.
• April 16, 2025, 13:45:00 (EDT): BoC Interest Rate Decision, Monetary Policy Report & Statement (HIGH Impact, CAD) – The Bank of Canada’s interest rate decision is a pivotal event for the Canadian dollar. The accompanying Monetary Policy Report and Statement provide crucial context for the decision, outlining the central bank’s economic outlook and future policy intentions, leading to significant market reactions.
• April 16, 2025, 17:30:00 (EDT): Fed’s Chair Powell speech (HIGH Impact, USD) – Speeches by the Chair of the US Federal Reserve are always closely watched by financial markets. Powell’s remarks can provide insights into the Fed’s current thinking on the economy and future monetary policy direction, leading to significant volatility in the US dollar and global markets.
• April 17, 2025, 12:15:00 (CEST) & 12:45:00 (CEST): ECB Main Refinancing Operations Rate, Monetary Policy Statement & ECB Press Conference (HIGH Impact, EUR) – Similar to the BoC and Fed announcements, the ECB’s interest rate decision, accompanying statement, and the subsequent press conference are major events for the euro. They provide crucial information about the ECB’s monetary policy stance and economic outlook for the Eurozone, significantly influencing the currency’s value.

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