Dollar Declines on Recession Fears
GBP
GBP/USD is currently hovering around 1.2828 (interbank), while GBP/EUR trades near a 17-month low at 1.1704 (interbank).
This morning, the Halifax House Price Index showed a monthly decline of 0.5% in March, underperforming expectations and marking a further contraction in the housing market, although the annual reading remained stable at 2.8%.
Markets are still reacting to last week’s broad tariff measures introduced by U.S. President Donald Trump, with the UK among the less severely affected countries due to a reciprocal 10% duty on British imports.
Prime Minister Keir Starmer reaffirmed his commitment to shielding UK firms from external shocks, pledging to support domestic industry through targeted industrial policy and efforts to reduce trade barriers.
Meanwhile, the BoE remains cautious on interest rate policy, reiterating its “gradual and careful” approach amid lingering inflation risks, particularly with energy prices expected to fuel further price pressures in the short term.
Attention will now shift to Friday’s release of UK GDP data for further indications on the health of the economy.
Today’s Events (GMT+1):
07:00 - Halifax House Price Index (Mar) – Actual: 2.8% vs Previous: 2.8%
EUR
EUR/USD is slightly lower and currently trading at 1.0954 (interbank) following last week’s gains.
German industrial production fell by 1.3% in February, exceeding market expectations of a 0.9% drop, while Eurozone retail sales rose by 2.3% year-on-year, reflecting a modest improvement in consumer activity.
Focus is now firmly on the European Union’s response to the newly imposed U.S. tariffs, with EU policymakers gathering in Luxembourg to discuss potential countermeasures.
President Ursula von der Leyen has warned that the global economy faces significant headwinds from rising protectionism, and while the EU remains open to dialogue, it stands ready to respond decisively if trade talks falter.
Markets are also eyeing speeches today from key ECB figures, including Vice President De Guindos, alongside the latest German CPI data, which will help shape expectations for further monetary policy action.
Today’s Events (GMT+1):
07:00 - German Industrial Production (Feb) – Actual: -1.3% vs Forecast: -0.9%
USD
The Dollar Index, which tracks the U.S. dollar against a basket of six other currencies, has softened to 102.87 after briefly touching a six-month low last week.
The dollar remains under pressure amid rising concerns over a potential U.S. recession and broader global disruption stemming from President Trump’s expansive trade tariffs.
Trump has reaffirmed his commitment to these policies, describing them as essential to redressing long-standing trade imbalances with major partners such as China and the EU.
These developments have placed added pressure on the Federal Reserve, with markets increasingly anticipating more aggressive rate cuts later this year to counterbalance a potential economic downturn.
Fed Chair Jerome Powell noted on Friday that it is too early to determine the appropriate course for monetary policy, though acknowledged the inflationary risks and economic drag created by the new trade barriers.
The focus for this week will be on further tariff developments and the latest inflation data due on Thursday.
No significant events are scheduled for today
CAD
USD/CAD is slightly lower at 1.4254 (interbank), easing from last week’s four-month high.
Canada has thus far avoided the brunt of the U.S. tariff increases, though uncertainty remains following Prime Minister Mark Carney’s confirmation that retaliatory tariffs will stay in place.
Carney further warned that 25% tariffs would be imposed on all U.S. vehicles not compliant with the USMCA agreement, escalating trade tensions ahead of the 28 April snap election.
Adding to the Canadian dollar’s headwinds, the domestic labour market posted its first net job loss in over three years last Friday, with unemployment rising to 6.7%, reinforcing concerns that trade tensions are starting to weigh on hiring and business sentiment.
Moreover, Oil prices have fallen sharply, with Brent crude down to $63.93 per barrel and West Texas Intermediate crude dropping to $60.16, further pressuring the Canadian dollar.
This week data is light from Canda with the latest Ivey PMI figure due tomorrow.
Today’s Events (GMT+1):
15:30 - BoC Business Outlook Survey
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