18/03/2025 - 08:26 UTCThe US dollar continues to move lower on Monday, with the USDX down by another 0.32% on the iFOREX trading platform. On a monthly basis, the dollar is down by approximately 4.12% early on Tuesday, hovering around 5-month lows. Investors are eagerly anticipating the Federal Reserve's policy meeting, beginning Tuesday, where rates are likely to stay unchanged. The Fed's assessment of trade policies, particularly Trump-era tariffs, will be closely watched due to recession fears. These tariffs have negatively impacted Asian emerging markets by reducing exports, disrupting supply chains, and fueling a shift to safe-haven investments.
Elsewhere, the Bank of Japan is anticipated to maintain its current interest rate at its March 18-19 meeting, despite growing inflationary pressures. This decision is largely attributed to concerns about escalating trade tensions arising from U.S. tariffs. The USD/JPY pair as well as the Japan 225 both saw a moderate recovery ahead of the announcement. While the BOJ raised rates by 25 basis points in January, a hawkish stance is expected at this meeting, driven by strong wage hike expectations from spring wage talks.
Fueled by growing optimism about China's economic prospects, Hong Kong stocks surged on Monday, with the Hong Kong 50 index trading close to three-year highs on Tuesday, driving Asian markets upward. The Hong Kong 50 made a remarkable year-to-date gain of over 20%, the strongest among major global markets. This surge reflects investor confidence in recent data and China's pledges to stimulate consumption.
On Monday, U.S. stock indices saw gains following reports of a February rebound in U.S. retail sales, indicating continued first-quarter economic growth. However, this growth was moderate, influenced by import tariffs and federal government worker layoffs that dampened sentiment. In corporate news, Nvidia began the week with a nearly 1.6% decline, a day before its annual GTC conference on March 18. Nvidia is expected to present data supporting the resolution of issues surrounding its Blackwell next-gen AI chip and to reinforce strong AI-driven demand amidst increased competition. Tesla Inc. experienced a drop of more than 4.7% after Mizuho lowered its stock price target to $415 from $430, citing a weaker outlook for EV sales. Later in the day, quarterly earnings reports are anticipated from Xiaomi, Xpeng, and Tencent Music Entertainment Group.
For Tuesday the focus could shift to monthly inflation figures from Canada along with U.S. building permits, housing starts, import prices and industrial production data. Later this week interest rate decisions from the FOMC, the PBOC, the Bank of Japan and the bank of England will be in the spotlight.
The EUR/USD pair rose for the second consecutive day on Monday, climbing above the 1.0900 mark as the US Dollar continued its decline. The USD weakness was driven by mixed US Treasury yields and a drop in Germany’s 10-year bund yields.
Adding to the downward pressure on the USD, the latest US Retail Sales report came in below expectations, raising concerns about a slowdown in consumer spending.
Beyond economic data, persistent trade concerns continue to weigh on investor sentiment, largely driven by President Trump’s shifting stance on tariffs. While Canada and Mexico have been granted a temporary extension until April 2, uncertainty surrounding potential trade restrictions remains a key risk factor.
On the other hand, the Euro may find additional support from diplomatic developments on the Russia-Ukraine front. Tensions appeared to ease slightly after a high-profile meeting between Presidents Trump and Zelenskyy, boosting market sentiment for risk-sensitive assets.
Gold prices hit a record high early on Tuesday, driven by strong safe-haven demand amid persistent trade tariff concerns and escalating geopolitical tensions.
Investor sentiment was further rattled as the US reaffirmed its commitment to striking Yemen’s Houthi forces until they cease attacks on Red Sea shipping. On Monday, US President Donald Trump warned that Iran would be held accountable for any Houthi-led assaults, escalating tensions in the region. Meanwhile, the Israeli military launched extensive airstrikes on Hamas targets in Gaza.
Investors are now turning their attention to upcoming central bank policy meetings, particularly the US Federal Reserve’s interest rate decision later this week.
Oil prices continued their upward momentum early on Tuesday after Israel launched airstrikes across Gaza, reportedly violating a ceasefire following stalled hostage negotiations. However, gains remained limited as investors exercised caution ahead of the Federal Reserve’s policy decision later in the day.
The Middle East remains a critical hub for global energy markets, and any significant escalation in the region could raise concerns over potential disruptions to oil supplies.
Both benchmarks WTI and Brent had settled higher on Monday, supported by geopolitical tensions in the Red Sea and optimism over China’s latest economic stimulus measures.
Meanwhile, China which is the world's largest importer announced a comprehensive economic plan on Sunday aimed at stimulating domestic consumption. Expectations of increased oil demand from China, coupled with ongoing geopolitical uncertainties, have helped limit downside pressure on crude prices.
The US 500 gained on Monday as investors looked ahead to the Federal Reserve’s policy meeting and Nvidia’s annual conference for further insights into AI demand.
U.S. retail sales rebounded in February, suggesting that the economy continued to grow in the first quarter, albeit at a more moderate pace. The recovery comes amid persistent concerns over the impact of tariffs on imports and widespread layoffs of federal workers.
Market participants are closely watching this week’s Federal Reserve meeting, where the central bank is widely expected to leave interest rates unchanged. However, investors remain cautious about the Fed’s policy trajectory, particularly as President Trump’s shifting stance on trade tariffs continues to inject uncertainty into markets.
Nvidia slipped on Monday ahead of its highly anticipated GTC conference, set to begin today. Investors will be looking for updates on the company’s next-generation Blackwell AI chip, particularly whether any reported issues have been resolved. Nvidia is also expected to highlight ongoing strong AI-driven demand, despite growing competition in the sector.
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