Dollar Near 3-Year Low on Fed Independence Threat
GBP
GBP/USD is currently trading at 1.3377 (interbank), easing slightly after hitting a six-month high of 1.3415 yesterday, while GBP/EUR remains steady at 1.1631.
This week, attention turns to the latest PMI figures and speeches from Bank of England Governor Andrew Bailey and MPC member Huw Pill, as markets seek clarity on the UK’s monetary policy path.
Investor sentiment remains cautious amid fears that Trump’s international trade stance could disrupt global growth, prompting speculation that the BoE may reduce interest rates at its May meeting.
Last month’s cooler-than-expected CPI reading and deteriorating labour market outlook—exacerbated by the recent hike in employers’ National Insurance contributions—have added weight to dovish expectations.
The BoE's Financial Policy Committee has already warned that a major shift in global trade dynamics could pose a risk to UK financial stability by curbing growth.
No significant events are scheduled for today.
EUR
EUR/USD is trading at 1.1503 (interbank), holding firm after climbing to a three-year high, buoyed by dollar weakness and stabilising investor sentiment.
The euro has remained resilient despite the European Central Bank announcing a 25-basis-point rate cut last week, lowering the deposit rate to 2.25% and the main refinancing rate to 2.40% in response to slowing growth and increasing pressure from US tariffs.
ECB President Christine Lagarde confirmed that rising US tariffs on EU exports—from an average of 3% to 13%—were already weighing on the bloc’s economic prospects.
The European Commission is reportedly exploring options to amend methane regulations on US gas to ease trade negotiations, while energy, particularly natural gas, could be a central pillar in any future transatlantic trade deal.
Today’s speeches by Lagarde and ECB Vice-President De Guindos will be closely scrutinised for signals on the potential for another rate cut in June.
Today’s Events (GMT+1):
15:00 - ECB President Lagarde Speaks
18:00 - ECB's De Guindos Speaks
USD
The Dollar Index, which tracks the U.S. dollar against a basket of six other currencies, has gained 0.25% to 98.36, recovering modestly after reaching its weakest level since March 2022 in the prior session.
The dollar continues to face pressure following the Trump administration’s trade measures, which have raised doubts about the resilience of the US economy and undermined global investor confidence.
Markets were further unsettled by President Trump’s criticism of Fed Chair Jerome Powell for not cutting interest rates fast enough, fuelling concerns over central bank independence.
Last week, Powell reiterated the Fed’s view that it would be prudent to maintain rates for now, awaiting more clarity on inflationary risks from tariffs before adjusting policy.
Markets will now turn their attention to ongoing tariff developments and the upcoming PMI data, which could further shape Fed expectations.
Today’s Events (GMT+1):
14:30 - FOMC Member Harker Speaks
19:00 - FOMC Member Kashkari Speaks
CAD
USD/CAD remains firm at 1.3828 (interbank), with the Canadian dollar supported by stronger oil prices and broader macroeconomic sentiment.
Last week, the Bank of Canada opted to pause its rate-cutting cycle, holding at 2.75% and citing growing uncertainty over US trade policy as a key risk to the Canadian economic outlook.
The central bank acknowledged that while inflation remains near target and growth has held up, an escalation in tariffs could tip Canada into a downturn and add inflationary pressure.
Markets are also monitoring political developments, with the federal election campaign gathering pace and fiscal policy proposals from Prime Minister Mark Carney adding further uncertainty.
Today’s Raw Materials Price Index (RMPI) figures will be released ahead of Friday’s closely watched retail sales data.
Today’s Events (GMT+1):
13:30 - RMPI (Mar) – Forecast: 0.0%
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