The Morning Update

Thursday April 17th, 2025

‍

The trading day begins with a rebound in the USD and equity markets, while both oil and bond prices are also moving higher. Yesterday’s warning from Fed Powell that Trump’s tariffs could worsen inflation and create a dilemma for the Fed, complicating future rate cuts and forcing a choice between curbing inflation and supporting growth, was the cause of the equity sell-off. However, these hawkish comments weren’t enough to substantially help the greenback.

‍

News Headlines. The trump administration continues to pressure Harvard University requesting records on its foreign student visa holders' "illegal and violent" activities. As the U.S.–China trade war intensifies, both sides claim leverage. The U.S. cites China's heavy reliance on U.S. consumers, while experts argue China can inflict more damage and endure more pain. Italian PM Meloni will meet President Trump, becoming the first EU leader to do so since his tariff move. Seen as a bridge between the EU and U.S., Meloni has coordinated closely with EU leaders ahead of the visit.  President Trump signaled that U.S. troop deployments in South Korea and Japan could be tied to tariff talks, saying defense cost-sharing would be part of broader trade negotiations. Trump’s envoy and top diplomat meet European leaders in Paris to push for an unconditional Russia-Ukraine ceasefire.

‍

In currency markets. Concerns over Trump's tariffs are likely to lead the ECB to cut interest rates for the seventh time, aiming to boost economic activity. Donald Trump touted "big progress" in trade talks with Japan, though little was achieved beyond agreeing to meet again. Chinese leader Xi told Malaysia’s leader that China will be a collaborative partner and stand with its Southeast Asian neighbors in the wake of global economic shocks. China wants the Trump administration to take steps—including curbing cabinet members' disparaging remarks—before agreeing to trade talks. The JPY pulled back from a multi-month high, falling 0.47%, while the CNY dropped 0.08% and the THB weakened by 0.68%. The AUD and NZD showed mixed performance, with the AUD down 0.23% and the NZD up 0.10% against the USD. Among emerging market currencies, the ZAR lost 0.37%, while the MXN saw a slight gain of 0.04%.

‍

In commodity markets. Oil prices rose 0.91% as U.S. Treasury Secretary Bessent said the Trump administration will apply maximum pressure to cut Iran’s oil exports to zero, citing its support for terrorist proxies.  OPEC are discussing additional output cuts to address past overproduction. Gold dips (0.8%) amid improved risk sentiment and USD strength from strong US data and hawkish Fed comments. However, trade war fears and expectations of US rate cuts may limit further losses. Agricultural commodities are moving higher with Soybean down 0.18%, wheat up 0.59% and lumber 0.05%.

Current level USD Index                99.501         Up 0.12%

‍

USD/CAD rose to in early Thursday, supported by hawkish comments from Fed Chair Powell and stronger US Retail Sales. Powell's remarks reduced expectations for a June rate cut, strengthening the USD. The Bank of Canada kept rates unchanged, citing economic weakness and uncertainty. Markets now expect a 50% chance of a rate cut in June, with two cuts by year-end.

Current level USD/CAD                   1.3895            Up 0.26%

‍

EUR/CAD continues it slow march higher as we move toward 2025 highs.

Current level EUR/CAD                   1.5797            Up 0.03%

‍

EUR/USD dips ahead of the ECB's expected 25bps rate cut. This would mark the seventh reduction since June, driven by soft inflation and a slowing economy. Traders will focus on ECB President Lagarde’s press conference for clues on future policy direction and economic outlook.

Current level EUR/USD                   1.1370            Down 0.26%

‍

GBP/EUR cross remains under pressure ahead of the ECB’s expected 25bps rate cut. A stronger US Dollar weighs on the Euro, while the British Pound outperforms on hopes of a UK-US trade deal.

Current level GBP/EUR       1.1639 (0.8590)         Up 0.22%

‍

GBP/USD edges higher as UK inflation falls to 2.6% YoY in March, missing BoE forecasts and boosting May rate cut odds to 86%. The softer CPI adds pressure on the BoE, while focus shifts to Fed Chair Powell’s speech for further direction.

Current level GBP/USD                   1.3234          Down 0.10%

‍