The dollar index fluctuates, and the trade war continues to disturb the market

On the Asian session on Wednesday, the US dollar index hovered around 102.56. Although the weaker dollar and trade tensions provide safe-haven support for gold, market concerns about weak demand for U.S. bond bids, the prospects of the Federal Reserve's policy and intensified stock market volatility still dominate short-term sentiment. Investors need to focus on the quarterly results of today's 10-year Treasury bond bid, the minutes of the Federal Reserve's March meeting and JPMorgan Chase's financial reports.

Analysis of major currencies

Dollar: As of press time, the U.S. dollar index hovers around 102.56, and the U.S. dollar index (DXY) trades around 103.00, which tracks the performance of the U.S. dollar (USD) against six major currencies, after U.S. Treasury Secretary Scott Bessent made some avatradescn.comments. Overall risk aversion sentiment has depreciated the dollar sharply over the past few days, but DXY has begun to rebound since the release of last Friday's strong non-farm employment data (NFP). The question is whether the index can maintain this recovery when more U.S. data is released. Technically, the first level to pay attention to is 103.18, and the daily closing must be seen above it. Above this level, the integer mark of 104.00 and the 200-day simple moving average (SMA) at 104.86 will be the focus. On the downside, 101.90 is the first line of defense and should be able to trigger a rebound as it has maintained support over the past two trading days.

Euro: As of press time, the euro/dollar hovered around 1.0975, up 0.17% during the day. Euro/USDIt rebounded slightly on Tuesday, ending a two-day straight decline and recorded some last-minute gains before the Trump administration's extensive "peer" tariffs came into effect on April 9. Fed rhetoric from key policymakers began to conflict with market expectations of rising interest rate cuts for the Fed for the remainder of 2025, putting the market under the negative impact of widespread tariffs. Technically, the outlook remains cautiously optimistic. The Relative Strength Index (RSI) shows a neutral 58.60, while the Moving Average Convergence/Diver (MACD) is bearish and sends a sell signal. At the same time, the avatradescn.commodity channel index (CCI) is 73.12 and the random RSI rapid index is 35.32, both of which remain neutral, showing that there is currently a lack of clear directional momentum. However, strength is reflected in the moving average. The 20-day simple moving average (SMA) is 1.08646, the 100-day SMA is 1.05377, and the 200-day SMA is 1.07364, all pointing above, reflecting a wide range of basic support. Similarly, the 10-day index moving average (EMA) and the 10-day SMA hover around 1.08880 and 1.08662, respectively, providing additional short-term bullish signals.

GBP: As of press time, GBP/USD hovered around 1.2789, and GBP/USD ended a severe two-day downtrend on Tuesday, finding a technical rebound from the 200-day index moving average (EMA) level slightly above 1.2700. Price movements remain in no-man’s land before the U.S. planned to implement tariffs, with investors awaiting key U.S. inflation and sentiment data released later this week. Overall, the UK economic data schedule was relatively light this week, and Tuesday's situation was a welcome relief to the recent normalized geopolitical and trade headlines of the Trump administration. However, several key Fed policymakers seized the opportunity to speak out, warning that uncertainty and the adverse inflationary impact of U.S. tariffs will make it more difficult, not easier, the Fed began to cut interest rates. Technically, the GBP/USD showed a bullish breakthrough on Tuesday, finding a slight rebound from the 200-day EMA slightly above 1.2700. Bullish momentum is still on the verge of weakening, but buying pressure is just enough to end the two-day downtrend, during which GBP/USD has dropped by more than 3% from high to low. Buyers still need to extend from the 200-day EMA to confirm a bullish recovery, but short-term momentum seems to be disappearing too quickly to allow new selling positions.

Summary of news from the foreign exchange market

1. Key U.S. Treasury yield curve has hit the steepest level in 2022, and long-term supply has put pressure on the market

U.S. Treasury yield curve hits its peak since February 2022 on TuesdayThe steepest level is that longer-term Treasury yields jumped due to concerns about supply, and some Treasury holders are also believed to be forced to sell due to recent market volatility. The growing trade war has also sparked concerns about slowing economic growth, which has caused shorter-term bond yields to fall intraday. The curve between the two-year and 10-year Treasury yields has steepened significantly to 57 basis points, as Treasury yields for these two maturities have been in opposite directions in a sharp fluctuation. "There will be a 10-year Treasury sale tomorrow, so I think that puts some pressure on the market," said Kim Rupert, managing director of ActionEconomics.

2. European pharmaceutical avatradescn.companies warn the EU that tariffs are imminent and they will move to the United States

A industry organization said after a meeting on Tuesday that pharmaceutical avatradescn.companies warned European avatradescn.commission President von der Leyen that they may move to the United States as tariffs approach. "From capital availability, intellectual property, approval speed to innovation rewards, the United States is now ahead of Europe in all investor indicators," said the Federation of European Pharmaceutical Industry Associations (EFPIA) in an emailed statement. "Now, with tariffs increasing, there is little motivation to invest in the EU, and there is a lot of motivation to move to the United States." According to the trade organization's survey of 18 multinational avatradescn.companies, up to 85% of capital expenditure investment and up to half of R&D spending are at risk. This will translate to 103.2 billion euros ($112.9 billion). Drugmakers are asking the EU to "completely change its policies", including stronger intellectual property provisions, and a coherent policy on environmental and chemical legislation. EFPIA represents about 40 pharmaceutical avatradescn.companies operating in Europe, including Bayer, AstraZeneca and Novartis.

3. Democratic Senator Wyden: A bipartisan bill to end tariffs will be proposed

Oregon Senator Ron Wyden said he would propose a new bipartisan bill to "end a new round of global tariffs against American families and businesses." Wyden, the Democratic leader of the Senate Finance avatradescn.committee, did not disclose how many Republicans signed his bill. "Senator-generals both parties know that this is a time to call for action, and Congress must intervene and restrain the president on trade issues." Wyden condemned Trump's "purposeless, chaotic and disorderly tariff frenzy" at the trade hearing, repeatedly questioning what the real reason for the imposition of tariffs is.

4. The British Chancellor said she would meet with the U.S. Treasury Secretary “soon”

On Tuesday, British Chancellor Reeves said she would meet with U.S. Treasury Secretary Becent “soon” as part of a broader negotiation on a new economic partnership. Reeves said,The government is seeking to establish stronger trade relations with the United States, while also providing a stable environment for domestic families, businesses and investors. "All decisions we make as governments will be based on the stability of fiscal rules that we cannot negotiate," she said. "The trade war is not in the interest of anyone. That's why we must keep a pragmatic and calm mind and reach the best agreement with the United States that is in our national interests."

5. Market Analysis: The market has priced too much interest on the Fed's interest rate cuts

BlackRock said in a report that the money market's expectations of the Fed's multiple interest rate cuts were too high, and the risk of rising inflation was ignored. "We tend to cut interest rates by 4 to 5 times this year, with market pricing of 25 basis points each." BlackRock expects global borrowing costs to be higher than before the pandemic as upcoming tariffs push up inflation. “We believe that the new U.S. tariff plan and reaction from other countries reinforce this point that we will be in a world where interest rates and long-term bond yields are still higher than those before the pandemic.” Tariffs and loose fiscal policies in some parts of the world may push up inflation.

Institutional View

1. Morgan Stanley: The ECB will cut interest rates at the next four meetings

Analysts of JPMorgan Chase said that as the economic costs caused by US tariffs rise, the ECB will cut interest rates at the next four meetings. Eurozone economic growth will be hit harder in the short term than previously expected, leading to "very weak" growth in the next three quarters, said analysts such as GregFuzesi in a research note. "It is important for the ECB to have inflation returned to its target level and any further shock will bring the risk of inflation falling below its target level," they said. "The global environment will be very difficult in the avatradescn.coming months." The ECB has cut interest rates six times since June last year. With four more interest rates cuts, deposit rates will drop to 1.5%, and JPMorgan even believes that the risk of this forecast tends to decline. In another institutional survey last month, economists predicted the benchmark interest rate would only drop to 2%.

2. Market Analysis: Domestic British banks perform steadily in market turmoil

Jefferie said in a research report that in the foreseeable future, if UK interest rates do not collapse and the economy does not deteriorate substantially, domestic banks in the UK will continue to distribute more than one-tenth of their market value every year. Analyst Jonathan Pierce and partner Priya Rathod wrote that the industry is sensitive to macroeconomic events because it affects interest rates and growth forecasts, as shown by a sharp decline in stock prices since U.S. President Donald Trump announced tariffs. Analysts say UK banks are still in a good position as structural hedging brings a huge boost. Structural hedging is to mitigate the impact of interest rate changes. In addition to that, they also believe that loans will not increase significantly and that credit risks are not high. "In general, we are not very worried at the moment."

3. Market analysis: The pound may not continue to perform poorly

Ebury's analyst Matthew Ryan said in a report that the pound's recent poor performance may not continue because the Bank of England may respond cautiously to U.S. tariffs. "We do not expect the Bank of England to overreact tariffs and the impact on the economy may be relatively small." The United States imposes a low 10% tariff on British goods, coupled with the UK's limited exposure to global demand, which makes the United Kingdom relatively unaffected. The pound has fallen due to risk aversion and the Bank of England has room for a larger rate cut than other countries.

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