15/04/2025 - 07:30 UTCThe U.S. Dollar Index (USDX) registered a 0.24% decline on Monday according to iFOREX platform data, trading near three-year lows against the euro. This weakness stemmed from U.S. President Donald Trump's unpredictable tariff implementation, which continued to erode confidence in the world's reserve currency. Fed Governor Christopher Waller commented on Monday that the Trump administration's tariff policies represent a significant shock to the U.S. economy, potentially compelling the Federal Reserve to lower interest rates to prevent a recession, even amidst persistent high inflation.
In early Tuesday trading, Atlanta Fed President Raphael Bostic cautioned that the Federal Reserve still faces a considerable path to bring inflation down to the 2% target. His statements served to moderate market expectations for further near-term interest rate reductions. In addition, Deutsche Bank has revised its previous forecast and now anticipates a 25 basis point interest rate cut in December, their initial projected cut for 2025, followed by two more cuts in the first quarter of 2026. The bank now projects a terminal rate falling within the range of 3.5% to 3.75%
Asian markets followed Wall Street’s positive lead, which had seen two consecutive days of gains fueled by optimism regarding potential tariff exemptions. Gains in the Japan 225, the China SZSE and the Hong Kong 50 indices were led mainly by tech and autos on tariff hopes following the White House's indication that Trump’s 145% reciprocal tariffs on China would exclude electronics, signaling reduced near-term disruptions for the industry. However, Trump countered this, stating that the exclusion was temporary and that he would soon unveil separate tariffs on electronics. Nevertheless, Trump suggested on Monday that he might scale back some of his 25% tariffs on automobiles to mitigate their economic impact, triggering a rally in auto stocks with significant U.S. exposure. Japan’s Honda Motor and Toyota Motor Corp surged by more than 3% each, while South Korea’s Hyundai added 4.35%.
U.S. stock indices closed higher on Monday, buoyed by investor reactions to potential further tariff reprieves and mostly strong Wall Street bank earnings. President Trump announced upcoming tariffs on pharmaceuticals but suggested possible temporary relief for automakers, sending General Motors, Ford, and Stellantis shares sharply upward. This followed a temporary White House exemption on tariffs for electronics like smartphones and semiconductors, though Trump noted this was temporary and semiconductor tariffs would follow. This provided some relief to tech giants Apple and Dell, whose shares rose. The White House stated the electronics exclusions aimed to give firms time to move production to the U.S. Separately, Intel's stock gained over 2% after agreeing to sell its majority stake in Altera to Silver Lake.
Looking ahead to the week, some key economic indicators and events that could draw significant market focus include U.S. Core Retail Sales data, providing insights into consumer spending; the Bank of Canada's Monetary Policy Report and subsequent interest rate announcement, which will signal the central bank's near-term policy stance; the European Central Bank's interest rate decision, a crucial indicator for the Eurozone's monetary policy; U.K. inflation data, offering a gauge of price pressures in the British economy; and a closely watched speech on the economic outlook by Federal Reserve Chairman Jerome Powell at the Economic Club of Chicago. Furthermore, the upcoming week will also witness the release of quarterly earnings reports from several significant market participants, including luxury goods conglomerate Louis Vuitton, streaming giant Netflix, healthcare provider Unitedhealth, and cosmetics powerhouse L’Oreal.
The EUR/USD pair held within a tight range on Monday, oscillating between 1.1400 and 1.1300, as the Euro’s recent rebound against the US Dollar appeared to stall.
Attention now shifts to the upcoming European Central Bank (ECB) policy meeting, where a 25 basis point rate cut is widely anticipated. Markets view the expected move as a precautionary step amid mounting concerns over the Eurozone’s economic outlook, particularly as global trade tensions continue to cast a shadow.
Price action on Monday reflected market hesitation, with the pair rotating through familiar levels before settling near the middle of its intraday range. The US Dollar extended its decline, pressured by the Trump administration’s latest reversal on tariff threats. Still, broader sentiment remained subdued, with investors staying cautious in light of ongoing geopolitical and trade uncertainties.
Looking ahead, a series of mid-tier sentiment indicators from the Eurozone are due on Tuesday, followed by US Retail Sales data on Wednesday. However, the ECB’s rate announcement on Thursday remains the key event risk for the pair and is likely to set the tone for the Euro in the near term.
Gold maintained its bullish tone early on Tuesday, trading comfortably above the $3,200 mark and holding near the all-time high reached earlier this week. Safe-haven demand continues to support the metal amid rising fears of an escalating US-China trade war and its potential drag on global growth.
Contributing to gold’s upward momentum are growing expectations of further monetary easing by the Federal Reserve. Mounting concerns over a possible US recession and a broadly weaker US Dollar have also helped sustain investor interest in the non-yielding asset.
Although recent White House announcements regarding temporary tariff exemptions on smartphones, computers, and potentially automobiles have somewhat eased near-term concerns, uncertainty remains.
Traders are now eyeing Tuesday’s release of the Empire State Manufacturing Index, which could offer fresh insight into the health of the US economy. However, the spotlight remains on Wednesday’s speech by Fed Chair Jerome Powell, which may provide critical guidance on the trajectory of interest rates and influence the next move in gold.
Oil prices posted minor gains on Monday, supported by U.S. tariff exemptions on select electronics and a significant rebound in China’s crude imports in March. However, concerns over the potential economic slowdown from the ongoing trade war between the U.S. and China kept price gains in check.
A key driver for Monday's upward movement came late on Friday, when the Trump administration granted temporary exclusions for several electronic goods, including smartphones and computers, from the steep tariffs imposed on Chinese imports. This move added to a series of policy shifts that have created uncertainty, as tariffs are both enacted and subsequently relaxed.
President Trump also indicated on Sunday that he would announce new tariff rates on imported semiconductors within the coming week, further complicating the trade landscape.
On the geopolitical front, there were signs of potential supply disruptions that could provide support to oil prices. U.S. Energy Secretary Chris Wright stated on Friday that the U.S. could take further steps to halt Iranian oil exports as part of its broader strategy to pressure Tehran over its nuclear program.
U.S. stocks ended the day on a positive note Monday, with Apple providing the biggest lift to the US 500 after the White House announced exemptions for smartphones and computers from new tariffs. However, persistent uncertainty over future tariff decisions capped broader optimism, leaving the major indexes off their session highs.
The exemptions were revealed on Friday, but President Donald Trump indicated on Sunday that the tariff rate on imported semiconductors would be announced within the week, keeping markets on edge.
Global tech stocks saw widespread gains in response, particularly those with significant exposure to Chinese imports. Apple shares surged 2.32%, while Dell Technologies rose 4.04%
Markets are bracing for the upcoming earnings season, with U.S. companies beginning to report first-quarter results for 2025. However, the looming tariff uncertainty has some corporate executives hesitant to provide robust forward guidance.
Notable earnings report this week include those from Goldman Sachs, which saw a 1.9% rise in its stock price following a stronger-than-expected profit report. Netflix and UnitedHealth Group are also set to release quarterly results, providing more clarity on the health of corporate America.
The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.
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