Trump's words shocked the market! The US dollar's status is in jeopardy!

On March 31, the dollar index hovered below 104 during the Asian session on Monday. Before U.S. President Trump planned to announce reciprocal tariffs this week, the dollar weakened last Friday due to concerns about economic growth, falling stock markets and falling U.S. Treasury yields have benefited from inflows of safe-haven funds.

Traders had been optimistic that trade tariffs would not be as severe as people feared, but they remained worried that this would affect economic growth and rekindle inflation. Investors are more cautious because they are not clear about what tariffs will be implemented. Marc Chandler, chief market strategist at Bannockburn GlobalForex, New York, said one word I keep hearing from clients, and on earnings call is uncertainty. The same goes for central bank decision makers, and one thing we know is that on April 2, we will receive news of peer-to-peer tariffs. We don't know what this means. "

Trump announced Wednesday that a 25% tariff on imported cars and light trucks will be imposed from April 3. Bank of America's foreign exchange analysts Athanasios Vamvakidis and Claudio Piron said in a report that we believe that the risk is balanced before the next week's deadline arrives. We believe that tariffs on specific products are already expected by the market. avatradescn.comprehensive tariffs will be a negative surprise. However, we do not expect the dollar to continue to strengthen in this situation, as the market remains concerned about a slowdown in the U.S. economy. The implementation of new tariffs may also take time due to logistics difficulties, which will leave room for negotiations."

Data shows that the U.S. core in FebruaryThe personal consumption expenditure (PCE) price index rose 0.4% month-on-month, higher than expected, exacerbating market concerns about stagflation.

Overall PCE rose 0.3% month-on-month, the same as expected. Consumer spending in the United States also rebounded that month. In addition, a survey by the University of Michigan showed that consumers' 12-month inflation expectations soared to their highest level in nearly two and a half years.

The US dollar fell 0.69% against the yen to 150.01 yen, and its biggest single-day decline since March 3. The euro rose 0.2% against the dollar in New York to $1.0823. The euro was supported by technical factors after approaching the 200-day moving average of $1.0727 and a key Fibonacci retracement last Thursday.

Early European data showed that inflation rates in France and Spain were well below expectations in March, while consumer expectations for price growth remained low, supporting bets on the ECB’s interest rate cuts again. The pound fell 0.09% against the dollar to $1.2935.

Asian market

China's official PMI data in March showed mild optimism, with the manufacturing index rising from 50.2 to 50.5, in line with expectations, the highest level in a year.

The production sub-index and the new order sub-index rose to 52.6 and 51.8 respectively. However, the employment index fell to 48.2, highlighting the continued weakness in the manufacturing labor market conditions.

Non-manufacturing activities also improved slightly, with the Purchasing Managers index climbing from 50.4 to 50.8, surpassing the expected 50.5.

Nevertheless, non-manufacturing employment worsened, with the index falling to 45.8 as both the service and construction industries laid off.

New Zealand's ANZ business confidence index fell slightly from 58.4 to 57.5 in March. The outlook for my own activities has increased from 45.1 to 48.6.

However, this data also gives a clear warning about inflationary pressures. Cost expectations soared from 71.3 to 74.1, the highest level in a year. Pricing intention climbed from 46.2 to 51.3, the highest level since May 2023.

Perhaps more importantly, the one-year inflation expectation also rose slightly from 2.53% to 2.63%, further above the Fed's 2% midpoint target.

ANZ marked the rising inflation signal as "a little disturbing" and warned that these developments could impact the Fed's enthusiasm for further rate cuts.

The rate cut appears to be locked at the April meeting and is believed to be likely to make a second rate cut in May. However, ANZ pointed out that the possibility of a third rate cut in July is now "more like a coin toss."

Japan's industrial production increased by 2.5% month-on-month in February, higher than market expectations of 1.9%. Strong growth is driven by key technology-related industries, with chip manufacturing machinery output growing by 8https://avatradescn.com.2%, electronic parts and equipment grew by 10.1%.

A survey project by the Ministry of Economy, Trade and Industry continued to maintain a 0.6% month-on-month increase in March and a 0.1% month-on-month increase in April.

While the overall data are encouraging, the Ministry of Economy, Trade and Industry recognizes that the outlook may change rapidly. Although the proposed U.S. tariffs have not yet been reported to have a direct impact on production, METI stressed the need to monitor future situations more closely.

In terms of consumers, retail sales increased by only 1.4% year-on-year, lower than expected 2.4%.

European market

Swiss KOF economic barometer rose to 103.9 in March, surpassing the expected 102.6 and higher than the revised 102.6 in February. The index has been above the medium-term average since the beginning of the year, strengthening the view that the Swiss economy is "still strong".

KOF points out that improvements are broad-based and signals from manufacturing, services and construction industries are stronger. Private consumption indicators also showed improvements, while foreign demand remained the same.

UK retail sales volume increased by 1.0% month-on-month in February, far higher than market expectations, down -0.3% month-on-month.

This growth is driven by strong performance in all non-food store categories, including department stores, clothing and household goods, indicating that consumers are more willing to spend on non-essentials. The only noteworthy drag came from supermarkets, with sales dropping slightly after a sharp increase in January.

From a broader perspective, sales in the three months to February increased by 0.3% avatradescn.compared with the previous three months and 2.0% avatradescn.compared with the same period last year.

GfK consumer confidence index in Germany rose slightly from -24.6 to -24.5 in April, lower than expected -22.2.

According to NIM's Rolf Bürkl, this slight improvement may reflect the "reduction of pessimism" after the recent elections and hopes for a stabilization of the new government. However, the willingness to save continues to indicate significant uncertainty in German households.

Bürkl stressed that “rapid government formation and early adoption” could play a key role in boosting consumer confidence and future spending.

U.S. market

U.S. PCE inflation data in February is largely surprising. Overall PCE increased by 0.3% month-on-month and remained stable by 2.5% year-on-year, both in line with expectations. However, core PCE, excluding food and energy, rose 0.4% month-on-month, slightly higher than expected 0.3%. This pushed the annual core PCE rate to 2.8% from 2.7%, which was also higher than expected.

In terms of households, personal income increased by 0.8% month-on-month, much higher than expected 0.4%, reflecting strong wage growth andStrong labor market. But personal spending rose only 0.4% month-on-month, slightly lower than the expectation of 0.5%, suggesting that consumption speed is more cautious.

Canada's GDP grew by 0.4% month-on-month in January, exceeding the expected 0.3% month-on-month growth. The growth base is broad, with 13 of 20 industries contributing.

The avatradescn.commodity production industry led the rise, up 1.1% month-on-month, marking the biggest monthly increase since October 2021, as all major avatradescn.components expanded. The service production industry grew by 0.1% month-on-month, relatively moderate.

However, early estimates for February indicate that the reading is flat, indicating a pause in momentum. Strong momentum in manufacturing and financial services was offset by a pullback in real estate, oil and gas and retail trade.

The above content is about "[Aihua Foreign Exchange Decision Analysis]: Trump's words shocked the market! The US dollar's status is in danger!", which was carefully avatradescn.compiled and edited by Aihua Avatrade Foreign Exchange editor. I hope it will be helpful to your transactions! Thanks for the support!

Spring, summer, autumn and winter, every season is a beautiful scenery, and it stays in my heart forever. Leave~~~