EU delays counter-treasury tariffs against the US, US dollar sell-off may slow down

Asian Market Review

On Thursday, the US dollar index reached the 104 mark in the early trading session, hitting a new high in the past two weeks. As of now, the US dollar price is 104.07.

Trump urged the Federal Reserve to cut interest rates, saying that U.S. tariffs are beginning to affect the economy.

Mexican Economy Minister: Heading to Washington for trade talks on Thursday.

EU Trade avatradescn.commissioner: Consider postponing the implementation of the first round of counter-tariffs against the United States until mid-April.

Trump: India will be subject to reciprocal tariffs starting April 2.

The United States and Israel will hold high-level consultations on the Iranian nuclear issue next week.

Hamas fired rockets at Tel Aviv, and the Israeli army said it would continue to conduct ground military operations in Gaza.

Russia said that the Russian-US delegation will hold negotiations in Riyadh on the 24th.

The number of initial unemployment claims in the United States recorded 223,000 in the week from March 15, slightly lower than the expected 224,000, and the previous value was revised from 220,000 to 221,000.

Bank of England: Keep interest rates unchanged at 4.5% with 8-1 votes; retain the wording "It is appropriate to take step-by-step and cautious easing measures."

The Turkish central bank urgently raised interest rates by 200 basis points, saying it had introduced lira and foreign exchange liquidity measures to limit market volatility.

European CentralPresident Lagarde: U.S. tariffs on 25% on Europe will reduce euro zone growth by about 0.3% in the first year, and tariffs and retaliation measures may increase inflation by 0.5%.

It is reported that Canadian Prime Minister Carney is expected to hold a general election ahead of schedule on April 28.

The Swiss National Bank lowered the benchmark interest rate by 25 basis points to 0.25%, the fifth consecutive rate cut, in line with market expectations.

Summary of institutional views

Wells Fargo: If the Fed pays more attention to...'s goal, it is likely to cut interest rates by 75 basis points

FOMC avatradescn.committee unanimously passed the decision to keep interest rates unchanged at its March meeting, and at the same time, with a high number of votes, the pace of quantitative tightening (QT) was reduced to only $5 billion of Treasury bonds per month allowed to mature naturally from the balance sheet. avatradescn.compared with the policy statements at the last meeting, this statement emphasized in particular that "the uncertainty of the economic outlook has increased", which is obviously directed at the uncertainty of the prospects of the U.S. trade policy and its potential economic impact.

There is a two-way adjustment in the latest economic forecast. While downgrading the median GDP, it also raises the forecast for core PCE at the end of the year. The latest dot map median continues to point to the policy path of a 50 basis point cut this year, but the number of officials supporting a rate cut below 50 basis points has exceeded the number of officials supporting a larger easing.

Based on the results of last night's meeting, we maintained the forecast that the Federal Reserve will cut interest rates by 75 basis points this year, but also noticed that this forecast was not recognized by most FOMC members. If the economic slowdown we predict ultimately prompts the Federal Open Market avatradescn.committee to focus more on the "full employment" goal rather than the "price stability" goal in its dual mission, we believe that decision-makers will initiate a cycle of interest rate cuts, which may implement easing as early as this summer.

HSBC: The Fed is unlikely to act in advance and is expected to cut interest rates X times this year

The Fed overnight, as market expectations are expected to keep the policy interest rate unchanged, but it particularly emphasized in its policy statement that "the uncertainty in the economic outlook has intensified" and reiterated that FOMC "is closely monitoring the two-way risks of its dual mission goals." In a subsequent press conference, when Fed Chairman Powell was asked whether he would start interest rate cuts in May, he made it clear that the Fed "will not be rushing to take action" and stressed that the current policy stance "has sufficient conditions to wait for clear guidance to more economic data."

However, in the latest economic forecast, the corrections for GDP and core PCE this year have exceeded our expectations. According to our model, the annual core PCE rate may remain above 2.5%, and the unemployment rate may rise to around 4.6%. Although the slowdown in net immigration this year may alleviate the upward pressure on unemployment from the labor supply side, the key variable lies in whether the avatradescn.company's annual labor demand can continue to exceed the "balanced employment creation" level required to maintain the stability of the unemployment rate.

Based on the above calculations, we maintain that the Federal Reserve will cut interest rates in 2025The forecast of 75 basis points remains unchanged, with the timing of interest rate cuts meetings in June, September and December respectively, and it is expected that the policy interest rate will remain unchanged in 2026. The downside risks of U.S. economic growth and upside risks of inflation (partially due to uncertainties in tariff policies and trade policy) are posing avatradescn.complex challenges to the monetary policy outlook.

Citi: The Fed's actual rate cut this year may exceed expectations

The overall policy stance conveyed by Powell and FOMC overnight seems dovish in our opinion. Although they revised their core PCE to 2.8% in their economic forecasts, the unemployment rate forecast remained at a relatively low of 4.4%. In addition, the latest dot chart shows that the Fed still plans to implement interest rate cuts this year. According to our forecasts, there is an upside risk for the performance of the real unemployment rate, while the core PCE may be lower than the Fed's expectations. The Federal Reserve also announced that it will officially start a gradual adjustment to the balance sheet reduction pace from April 1. Based on the above speculation, we believe that the Fed's final rate cut within the year will exceed the forecast of 50 basis points on the dot chart.

Powell emphasized at the press conference that under the "benchmark scenario", the price increase effect caused by tariff policies is characterized by "temporary" and policy makers can adopt a penetrating observation strategy for such fluctuations.

Goldman Sachs: After the Federal Reserve meeting in March, the balance sheet reduction plan may end at this time of this year.

In the FOMC interest rate resolution announced overnight, the policy interest rate will remain unchanged as market expectations, and decided to slow down the balance sheet reduction rate by lowering the monthly cap on Treasury bond share reduction from US$25 billion to US$5 billion. However, Fed Director Waller objected to the decision to slow down the pace of balance sheet shrinking and advocated maintaining the original pace of reduction. In addition, in the policy statement, it was specifically pointed out that "the uncertainty of the economic outlook has increased." There was no special change in the median prediction of the dot matrix graph, and the median prediction of long-term neutral interest rates remained at 3.0%.

Although we previously expected the FOMC to slow down the balance sheet at its May meeting, given the interference of debt ceiling dynamics on money market signals, we long-term predict that FOMC will reduce the scale of quantitative tightening (QT) by slowing down Treasury bond share reduction. Therefore, we maintain our original judgment and expect the balance sheet reduction plan to end at the end of the third quarter.

Fanong Credit: The Federal Reserve may find it difficult to meet market aggressive expectations, and the selling wave of the US dollar is expected to slow down in the short term

As expected, the Federal Reserve decided to keep policy interest rates unchanged at its March meeting, and at the same time sent a signal that the pace of balance sheet reduction may slow down this summer. Although the median long-term interest rate forecast (i.e. dot matrix) remains basically stable, the avatradescn.committee has support for the two interest rate cuts this year.weakened. In the latest economic forecast, policymakers have significantly lowered their expectations for U.S. economic growth, while God adjusted their inflation forecasts. Federal Reserve Chairman Powell clearly pointed out that this avatradescn.combination of weak economic growth and stubborn inflation is the core consideration of the Federal Reserve's inability to cut interest rates.

However, at the press conference, Powell sent a "subtle" dovish signal. On the one hand, he stressed that the FOMC will regard any surge in inflation caused by tariff policies as "temporary" phenomenon; in addition, he also affirmed that long-term inflation is still in an effective anchor state. This statement actually alleviated the market's concerns about long-term high inflation levels, which is also the main reason for the slight decline in the US dollar index and US Treasury yields after the meeting.

In our opinion, the US dollar has now fully absorbed the negative factors of most Federal Reserve policy adjustments. Not only that, according to the statement of FOMC last night, we believe that the market's aggressive expectations for the Federal Reserve to cut interest rates by 60 basis points this year are likely to be unsatisfied. avatradescn.combined with the reality that the trade policy premium in the foreign exchange market was basically cleared during the Trump era, the recent selling wave of the US dollar is expected to slow down in the short term.

The above content is all about "[Ihua Foreign Exchange]: The EU postpones countermeasures against the US tariffs, and the US dollar sell-off may slow down". It was carefully avatradescn.compiled and edited by the Avatrade Foreign Exchange editor. I hope it will be helpful to your transactions! Thanks for the support!

Every successful person has a beginning. Only by having the courage to start can you find the way to success. Read the next article now!