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Hello everyone, today Avatrade Aihua Foreign Exchange will bring you "[Aihua Foreign Exchange Market Review]: The US dollar index returns to the 104 mark, and the market pays attention to US PMI data." Hope it will be helpful to you! The original content is as follows:
On the Asian session on Monday, the US dollar index hovered around 104, and non-US currencies fluctuated narrowly. The PMI data of European and American countries in March will be released this trading day, and investors need to pay attention.
Analysis of major currencies
Dollar: As of press time, the US dollar index hovered around 104, and rose slightly last Friday, driven by geopolitical unrest. The dollar has risen slightly despite the fall in Treasury yields and the Federal Reserve reiterated its path to cut interest rates in 2025. The index is trying to break through the March lows for the third straight day. Market participants focus on geopolitical hotspots, including ongoing instability in the Middle East and Eastern Europe, which continue to support the US dollar. Technically, the U.S. dollar index shows early signs of recovery from its March lows, supported by defensive inflows and Fed's stability guidance. The relative strength index (RSI) gradually rises, while the moving average convergence/divergence (MACD) histogram shows that the action energy is weakened. Recent resistance is around 104.20, followed by 104.80 and 105.20, while 103.40 is the nearby support and 102.90 is the further support. The bearish crossing of the 20-day and 100-day simple moving averages around 105.00 may be a technical selling signal. However, as market sentiment stabilizes, the index looks likely to recover further from the bottom in March.
1. The United States arbitrarily adjusts its tariff policy Moral Think Tank: The global economy refuses to inject uncertainty in the United States
U.S. President Trump has frequently introduced trade protectionist measures recently, which has aroused widespread concerns among the international avatradescn.community about the global economic prospects. Analysts pointed out that U.S. policy uncertainty will disrupt the global economic and trade order. As an important part of the global economy, Europe is bound to be damaged. German think tank expert Ainmeier said: What we are seeing now is that the Trump administration has further intensified the trade conflict, and we all hope that the situation will not continue to worsen. Trump adjusts his tariff policy at will, sometimes increasing, sometimes reducing, sometimes suspending. This arbitrary is the least needed thing of the global economy, that is, uncertainty.What is needed is stability. Historical experience shows that imposing tariffs will only cause harm in the medium and long term. Many Europeans are worried that the United States' escalating unilateralist policies will not only put the United States in a "Trump recession" or even "stagflation", but its negative spillover effect will also spread to the world, impacting Europe's originally unstable economic recovery momentum and may even become the fuse of a new round of "European debt crisis".
2. The Federal Reserve lost $77.6 billion? It was a huge loss for the second consecutive year.
On March 21, local time, the Federal Reserve released an audited financial report showing that the Federal Reserve's operating loss for the whole year in 2024 reached $77.6 billion (approximately RMB 560 billion), and it suffered huge losses for the second consecutive year. Analysts believe that the main reason for the Fed's huge losses is the violent interest rate hike from 2022 to 2023. When the Fed can resume profitability depends on its subsequent path to rate cuts. The forecast of the New York Fed shows that if the short-term interest rate remains above 4%, the Fed will continue to lose money this year; if interest rates continue to be lowered, the Fed may make a profit.
3. The German President’s formal signing of fiscal plan and fiscal policy will usher in a major turning point. German President Steinmeier officially signed the amendment to the Basic Law, clearing the last obstacle for the German government to pass a huge fiscal plan for new debt financing. The huge fiscal plan will provide hundreds of billions of euros to invest in defense, infrastructure and climate. This decision marks a major turning point in Germany's fiscal policy. According to the amendment, the German government will relax the debt ceiling set in the Basic Law in specific areas, allowing new debts to be used for national defense, civil defense, intelligence agencies and cybersecurity construction. This means that the government can raise funds through debt for any related expenditures exceeding 1% of the GDP. Based on the current economic scale, this amount will exceed 44 billion euros in 2025. In addition, the government will set up a special fund of up to 500 billion euros, which is not subject to debt ceilings and is mainly used to repair Germany's aging infrastructure. 4. The UK plans to invest 600 million pounds to solve the skills shortage in the construction industry
The UK said on Saturday that it would invest 600 million pounds ($775 million) to train construction workers and help solve the serious skills shortage. The shortage could impact its plans to build 1.5 million units by 2029 and hinder economic growth. "We are determined to make the UK vigorously build again, which is why we need to clear the obstacles, build 1.5 million new housing units and rebuild our roads, railways and energy infrastructure," she said. "We have reformed the planning system that hinders the development of the country, and now we need to solve the shortage of skilled workers in the construction industry."
Institutional Perspective
1. Institutional: The market is waiting for more tariff "clearity" Canadian dollars maintain a moderate weekly increase.
The Canadian dollar fell slightly against the dollar on Friday as domestic Canadian data showed retail sales fell in the first two months of 2025 and tariff uncertainty lingered, but the Canadian dollar continued to maintain a moderate weekly gain, which would be the third consecutive week of gains in the currency. Shaun Osborne, chief foreign exchange strategist at Scotiabank, said in a note that the Canadian dollar may continue to remain flat to some extent as the market awaits the "clearity" of U.S. tariff proposals. Avery Shenfeld, chief economist at the Imperial Bank of Canada, said in a report: "In terms of the impact on Canada, misfortunes are the blessings. If many other U.S. trading partners work together, the impact on our exports to the United States and the chances of us reducing these tariffs to a controllable scale through negotiations will be improved."
2. FASHINE: With rising global and domestic risks, the Bank of England's position is closer to hawks
FASHINE said that the Bank of England's Monetary Policy avatradescn.committee held the bank interest rate unchanged at 4.50% with an 8-to-1 vote, so the meeting became more hawkish avatradescn.compared to the previous two meetings. This hawkish voting shift is mainly due to rising global uncertainty, failure of domestic data to clarify supply and demand, and higher inflation expectations pose an upward risk to future avatradescn.compensation dynamics. We believe that the upcoming data should show sufficient progress in anti-inflation, which prompts the Monetary Policy avatradescn.committee to cut interest rates three more times in May, August and November this year, at 25 basis points each, but we agree with the Monetary Policy avatradescn.committee that there are some two-way risks.
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