Dollar collapses safe-haven currencies soar, pay attention to Fed officials' speeches this week

On the Asian session on Monday, the US dollar index fluctuated downward, falling below the $100 mark. Investors need to continue to pay attention to changes in the International Trade Bureau and market risk aversion sentiment this week, with economic data mainly paying attention to the monthly U.S. retail sales rate (commonly known as "terrorist data") and the European Central Bank interest rate resolution.

Analysis of major currencies

Dollar: As of press time, the U.S. dollar index hovered around 99.73, and the U.S. dollar index (DXY) continued to decline in trading last Friday, falling to nearly 100, after hitting a three-year low earlier in the day. The downward trend reflects a widespread deterioration in investor confidence as the latest data and central bank avatradescn.comments paint a dark outlook for the U.S. economy. The University of Michigan's consumer confidence index fell sharply in April, while the producer price index was lower than expected, further exacerbating market deflation concerns. Several Fed officials pointed out that rising inflation expectations pose risks, although short-term economic data suggest demand is weakening. Technically, momentum is still strongly bearish, and DXY continues to fall. Moving average convergence/divergence (MACD) continues to send a sell signal, while the Relative Strength Index (RSI) is at 29.37, reflecting weak momentum but not oversold. The reading of kinetic energy (10) is -3.303, confirming the continued downside risk. All major moving averages—including the 20-day simple moving average 103.52, the 100-day moving average 106.48, and the 200-day moving average 104.79— all show selling pressure. Resistance is expected to be 102.29, 102.72 and 102.89, and no significant support is identified below the current range. Technical background shows that the decline in DXY may not have ended yet.

Euro: As of press time, the euro/dollar hovered around 1.1361, the dollar index fell to 100.23, which provided upward momentum for the euro, and the market's optimistic expectations for the economic outlook of the euro area further pushed up the euro. In addition, tariff remarks and the situation in Russia and Ukraine pushed up market volatility, and the euro, as a non-traditional safe-haven currency, is still favored by funds. Technically, support levels are 1.11728, 1.1103 and 1.10273 respectively. On the upside, if the bullish breakthrough remains, traders may look for potential continuation to the 1.14 mark, although a slightly overbought situation may prompt a short-term suspension or a minor correction.

GBP: As of press time, GBP/USD hovered around 1.3093. GBP/USD rose moderately against the US dollar last week, climbing steadily from 1.29800 last Monday, closing at 1.30540 on Friday, up 0.67%, and the cumulative increase of about 0.9% for the whole week. The GBP performed smoothly against the euro, and the euro rose 0.27%, indicating that the GBP benefited from the US dollar-dominated market. The GBP trend was generally stable, not significantly dragged down by volatility in US Treasury yields and stock market fluctuations. Tariff rhetoric pushed up global market volatility. The GBP, as a non-safe currency, was not significantly impacted, indicating that the market's confidence in it was stable. . Technically, trade uncertainty keeps GBP/USD above 1.30. This opens the door to retesting the six-month high of 1.3207 on April 3, which once broke through, will make 1.3300 a battleable target. The Relative Strength Index (RSI) shows buyers are building momentum. On the other hand, if GBP/USD falls below 1.30, the daily low of 1.2968 on April 11 will be instant support. A breakthrough will expose 1.2900 and 200-day simple moving average (SMA) 1.2815.

Summary of news from the foreign exchange market

1. The escalation of the trade war and the US dollar credit crisis

Global trade tensions have deteriorated sharply due to repeated U.S. policies. Asian powers announced that they would impose a 125% tariff on U.S. imported goods, marking a new stage of international trade confrontation.

WisdomTree avatradescn.commodity strategist Nitesh Shah pointed out that the trade war weakened the market's confidence in the United States as a reliable trading partner, resulting in a sell-off of US dollar assets. The US dollar index plummeted 3% in a single week, hitting a new low since April 2022 (the lowest hit 99.01). The US dollar's status as a traditional safe-haven currency has shaken, prompting funds to turn to alternative safe-haven assets such as gold, the Japanese yen and the Swiss franc. JefferBrad Bechtel, global foreign exchange director at ies, analyzed that the weakening of the "speciality" of the US economy and the rising risk of recession have accelerated the migration of funds from the US dollar to gold.

2. The shift in the reserve policy is high and inflationary pressure is high. US economic data sends out a signal of contradiction, aggravating market concerns about stagflation. The University of Michigan's consumer confidence index plummeted to 50.8 in April (the lowest since June 2022), while one-year inflation expectations soared to 6.7%, a new high since 1981. Although PPI fell by 0.4% month-on-month in March, it still maintained a 2.7% year-on-year increase, indicating that the pressure on the cost side has not been fundamentally alleviated.

Acting New York Fed Chairman Williams warned that tariffs could push inflation to 3.5%-4%, and lead to less than 1% growth in real GDP. The interest rate futures market has been priced. The probability of the Federal Reserve cutting interest rates in June is 75%, and it is expected to cut interest rates three times throughout the year. The loose expectations avatradescn.combined with inflation stickiness strengthens the anti-inflation attributes of gold.

3. Re-allocation of volatility and safe-haven funds

The US Treasury market experienced a historic selling wave last week, with the 10-year U.S. Treasury yield gaining a weekly high since 2001 (closed at 4.478%), and the 30-year yield gaining the highest weekly increase in 1987. Trade policies have repeatedly triggered margin collection and basis trading closing positions, exacerbating the liquidity crisis in the bond market. Lawrence Gillum, chief strategist at LPLFinancial, called this a "perfect storm". Sovereign funds, institutional investors and retail investors sold bonds simultaneously, forcing capital to seek hedges for low-related assets such as gold. Bond market fluctuations resonate with the stock market pullback, further highlighting the risk aversion advantages of gold.

4. Reciprocal tariffs have declined. Pay attention to the speeches of Federal Reserve officials this week.

Last week, the price of avatradescn.comEX gold rose 6.51% to $3,254.90/ounce, and Shanghai gold owners rose 2.47% to 757.30 yuan/gram.

In terms of tariffs, the US side announced a relevant memorandum on the 12th, exempting "peer-to-peer tariffs" from some products such as avatradescn.computers, smartphones, semiconductor manufacturing equipment, integrated circuits, etc. In terms of interest rate cuts, the latest CME "Federal Observation" data shows that the probability of keeping interest rates unchanged in May is 80.0%, the probability of cutting interest rates by 25 basis points is 20.0%, the probability of keeping interest rates unchanged by June is 22.0%, the probability of cutting interest rates by 25 basis points is 63.5%, and the probability of cutting interest rates by 50 basis points is 14.5%. Overall, the intensity of reciprocal tariffs has weakened, and we pay attention to changes in market risk aversion sentiment.

5. Bank of England member Green: The fall in the dollar makes the mystery of tariff inflation even more difficult to solve.

BoE Monetary Policy avatradescn.committee member Green said on Saturday that it is unclear at presentWhat impact will Trump import tariffs have on UK inflation, and the unpredictable trend of the dollar makes this mystery even more difficult to solve. Green said in a panel discussion at the Delphi Economic Forum in Greece that the rise in trade barriers could drag down economic growth in European countries, "However, the implications for inflation are vague." But Green said the most important thing to pay attention to is exchange rate changes: "The key channel is actually exchange rate, and this is really difficult because the exchange rate has not run as the model shows in the past week." "The dollar exchange rate fell, not as it appreciated as expected."

Institutional View

1. Market Analysis: The decline in the U.S. and British bond markets may partially reflect the forced sell-off of hedge funds. Elmar Volker, senior fixed income analyst at LBBW, said in a report that part of the rise in U.S. and UK bond yields may be due to the need for liquidity after stock prices plummeted earlier this week. “Hedge funds were forced to sell off due to sharp declines in stock prices, which provides another explanation for the weakness in the bond market in the United States and the United Kingdom.”

2. Market Analysis: The strengthening of the Canadian dollar eases concerns of the Bank of Canada

The Canadian dollar is heading towards a six-month high against the dollar, which may ease the Bank of Canada’s previous concerns in the short term. According to TullettPrebon, the dollar fell to CAD 1.3859, or the level in early November. Doug Porter, chief economist of the Montreal Bank capital markets, said the Bank of Canada had previously been concerned about the inflationary impact of the U.S.-Canada trade conflict, partly due to the weakening of the Canadian dollar. Porter told clients that the weak Canadian dollar was “not a big problem now”, adding that the Canadian dollar has returned to levels before Trump first announced plans to impose 25% tariffs on Canada and Mexico.

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