### United States
Investor attention is primarily focused on next week’s US “reciprocal tariffs,” following the announcement of a 25% tariff on imported cars, effective April 3. Initially, fully assembled vehicles will be targeted, with major parts like engines and transmissions included by May 3. The tariffs for Mexico and Canada will be adjusted based on domestic content. A White House official claimed the tariffs could generate up to $100 billion a year, although economists are skeptical of this figure. President Trump has warned of additional measures if Europe and Canada attempt to inflict economic damage on the US. More tariffs are expected next week, along with a controversial suggestion that Greenland should be part of the US, despite local opposition. Financial markets have shown subdued reactions; the US dollar is consolidating within yesterday’s ranges, and gold has reached its highest level of the week at over $3035. Equities remain relatively stable, with minor declines in South Korean and Taiwanese markets. The European Stoxx 600 has dipped slightly by about 0.67%, while US index futures display mixed results. Benchmark 10-year yields rose in the Asia-Pacific region but fell a few basis points in Europe. The UK’s 10-year Gilt yields have increased 5-6 basis points, while the US 10-year Treasury yield has risen 3-4 basis points, reaching nearly 4.39%, the highest level since February 25. May WTI remains below $70 a barrel. The US Dollar Index reached 104.70 yesterday, its highest level since March 5, and is consolidating today. Support is observed in the 104.00-20 area, indicating constructive momentum. The five-day moving average might soon exceed the 20-day moving average for the first time in two months. The latest Q4 GDP report is less critical as Q1 2025 concludes. Yet, the Atlanta Fed’s GDP tracker suggests a 1.8% economic contraction, contrary to most economist predictions. January’s goods deficit surged to a record $155.6 billion, a 70% increase from January 2024, as businesses attempted to outpace tariffs. February’s deficit is expected to be approximately $138 billion, with potential risks if increased gold inventories indicate more imports. Wholesale inventories are expected to rise again, following a 0.8% increase in January. Weekly jobless claims present headline risks, but next week’s job report is more pivotal, with job growth expected to slow and unemployment anticipated to rise.
### Eurozone
The euro has dropped below its 20-day moving average of approximately $1.0770 for the first time this month. It fell below yesterday’s low of nearly $1.0745 but found buyers in the $1.0725-30 range before rebounding to about $1.0790 today. The euro’s decline correlates with the US’s growing two-year premium over Germany, currently at about 188 basis points, which is 20 basis points off the low from March 10. Eurozone credit growth is improving with money supply figures showing M3 rose by 4% year-over-year compared to 3.8% in January, supporting a nascent economic recovery. However, the euro is less sensitive to this time series data.
### United Kingdom
The British pound experienced a sell-off following a decrease in February’s CPI and Chancellor Reeve’s budget statement, pushing it below the 20-day moving average of $1.2885 for the first time since mid-February. It reached a new low of $1.2870 before rebounding to nearly $1.2930. Support is anticipated in the $1.2840-60 range and further down at $1.2785-$1.2800. Momentum indicators for sterling are declining, and the five-day moving average may soon fall below the 20-day moving average, marking another two-month period.
### China
The offshore yuan has weakened against the dollar for seven consecutive sessions, marking the longest decline since October 2022. No resistance has been observed from Beijing as the US dollar hit a high of CNH7.2825 yesterday, the highest since March 4, staying slightly below today. An interesting resistance point is near CNH7.2945, representing the halfway mark of the dollar’s Q1 2025 decline from February 3’s high of CNH7.2735. The People’s Bank of China adjusted the dollar’s reference rate after four periods of increases, initially decreasing it yesterday before raising it again today (CNY7.1763 up from CNY7.1754).
### Japan
The dollar’s recovery from its five-month low on March 11 (~JPY146.55) appears incomplete. It almost reached JPY150.95 on Tuesday and consolidated yesterday. The dollar remains within yesterday’s range today, holding at JPY150.00. The month’s peak near JPY151.30 may encounter stronger resistance between JPY151.65-70. Momentum indicators reveal upward trends, with the five-day moving average surpassing the 20-day moving average on March 20, the first since mid-January. The US 10-year yield approaches the month’s range high. Japan’s 2025 weekly MOF portfolio reports show a decline in average weekly foreign bond purchases compared to the same period last year, though purchases of foreign equities have increased. In contrast, foreign investors have increased Japanese bond purchases but reduced equity holdings.
### Canada
The US dollar hit a marginal new low for the month against the Canadian dollar near CAD1.4235. However, the threat of US auto tariffs and sharp equity market losses prompted a risk-off adjustment, elevating the greenback to nearly CAD1.4300 later, and further to CAD1.4320 today. The election campaign is intensifying, with both leading candidates pledging fiscal support to various groups. Canada’s 10-year discount to the US has fallen from a record 150 basis points in early February to nearly 120. The two-year differential has reduced by approximately 20 basis points from last month’s peak of 164.
### Australia
The Australian dollar reached a four-day high near $0.6330 before reversing lower, dipping below Tuesday’s low by 0.01 cents amid a North American risk-off afternoon, settling around $0.6280. It remains within yesterday’s range today. Last week, it dipped below $0.6230. Preceding the May election, the government announced tax cuts and fiscal measures. When the Australian dollar hit a low near $0.6090 in early February, it was at a two-year yield discount to the US of over 50 basis points. The discount reduction supported the Australian dollar’s recovery, with the two-year discount reaching just eight basis points earlier this month, the narrowest since early November. It widened to about 30 basis points but is now around 25 basis points.
### Mexico
The dollar is strong against the Mexican peso, nearing last week’s high around MXN20.27. Yesterday, it stayed above MXN20.00, nearly reaching MXN20.17. The dollar briefly moved above the 20-day moving average of MXN20.2150 today but remains below it, not closing above since March 4. While US tariffs take center stage, Mexico is set to release trade data before a central bank meeting. Over the past 18 years, Mexico’s February trade balance has consistently improved from January, which saw a $4.56 billion deficit—the largest since August 2022. Both imports and exports have declined for three months through January. January exports fell 14% (14.5% in January 2024, 13.6% in January 2023). Imports are less consistent, falling 0.25% in January 2025, rising 2.8% in January 2024, and declining nearly 3.4% in January 2023. As inflation is within target, with a weak economy and a resilient peso, all but one economist in Bloomberg’s 29-member survey predict a 50 basis point rate cut by Mexico’s central bank. With a second consecutive half-point cut today bringing the target rate down to 9.0%, Banxico is expected to indicate future easing at a slower pace. With this cut largely accounted for, the cost of this additional monetary support before the adverse effects of US tariffs appear manageable, with the peso around its four-week average.
