### United States
The focus today is on the Federal Reserve, as its statements could significantly impact markets. Despite expectations that the Fed will maintain its current stance, updates to forecasts and Chair Powell’s comments will be crucial. Powell is likely to express that the economy’s current state allows the central bank to remain patient and wait for clearer signals regarding the administration’s policies. The Summary of Economic Projections will offer vital forward guidance. The dollar is showing a firmer stance against the G10 currencies and most emerging market currencies, with recent strong selling pressure from Europe easing today. Equities are mixed, with Europe’s Stoxx 600 slightly down and US index futures slightly up. The benchmark 10-year yields in Europe are down by 2-3 basis points, while the 10-year US Treasury yield remains steady at around 4.28%. Gold reached a record high near $3045 before falling back to $3022, but has since recovered above $3030 in Europe. Meanwhile, May WTI crude reversed lower after hitting $68.50 and is now hovering around $66.
### Eurozone
The euro experienced a session low slightly below $1.09 yesterday, following a surge in US housing starts. It quickly recovered, testing the upper range around $1.0955. Today, the euro pulled back to $1.0875, staying above Monday’s low, and is hovering above $1.09 in European trading. Meanwhile, the US two-year yield premium over Germany has rebounded by approximately 22 basis points since its five-month low, potentially providing the dollar with support. Germany’s Bundestag approved a new fiscal initiative, with the Bundesrat expected to follow suit. The economic calendar remains light until next week’s preliminary PMI figures.
### United Kingdom
Sterling saw some volatility yesterday, trading just above $1.30 before dipping below $1.2950 and then rebounding. It is largely moving within a $1.2960-$1.3005 range today. The week’s low was just below $1.2920. The economic calendar picks up tomorrow with the release of employment data and the Bank of England meeting. While the labor market is gradually slowing, it has not prompted a strong policy response. While there is little expectation of a rate cut tomorrow, there’s a 75% chance of a cut at the May 8 meeting, with a cut fully discounted by August.
### China
The dollar is trading stronger against the yuan, near CNH7.2415, after experiencing recent lows since the US election. The PBOC set the dollar’s reference rate at CNY7.1697. Chinese banks are expected to keep loan prime rates unchanged at 3.10% for one-year and 3.60% for five-year tenors. The PBOC appears cautious in easing monetary policy, likely waiting to see the impact of US tariffs before making significant moves.
### Japan
As expected, the BOJ left its policy unchanged, with Governor Ueda expressing concerns about US trade policy. The BOJ’s next meeting is on May 1, allowing time to assess US reciprocal and sector tariffs. Japan’s economy had a weak start to the year, with core machine tool orders declining 3.5% in January. The dollar briefly climbed above JPY150 today before pulling back, reflecting recent US housing data and Japan’s February trade figures.
### Canada
The US dollar reached a new eight-day low against the Canadian dollar due to US housing data and a rise in Canada’s CPI. The greenback hit new session highs near CAD1.4320 but faces resistance in the CAD1.4340-50 area. Inflation showed a significant jump, but core rates remained controlled. The likelihood of an April rate cut has reduced, and attention now turns to January retail sales figures. Anecdotal evidence suggests there is a consumer boycott of US goods.
### Australia
The Australian dollar initially approached $0.6400 but has retreated to test lows near $0.6320. Tomorrow’s release of employment data is significant, with job growth lagging the increase in the participation rate, raising the unemployment rate to the upper end of its range. The resistance above $0.6400 remains formidable for new longs, suggesting vulnerability below $0.6300.
### Mexico
The US dollar dipped below MXN20.00 for the first time since October 24 but then rebounded to MXN20.0960. The dollar was sold following the bounce, reaching lows near MXN19.91 and testing MXN19.90 today. Mexico’s CPI data is due next week, with a likely central bank rate cut following soon. Brazil’s central bank is tipped for a rate hike, with the dollar falling to new lows against the Brazilian real.
