Written by the Market Insights Team
Data to drive dollar
George Vessey – Lead FX & Macro Strategist
The US dollar continues wallow near 3-year lows against a basket of currencies. FX volatility has eased off from multi-year highs though as traders turn to US data – focused on gauging the real-world impact of tariff stress.
Recent tariff turmoil has eased, with the worst-case outcome averted for now. Still, global tariff levels remain far higher than pre-‘Liberation Day.’ Current measures include a 10% universal tariff and sectoral charges on key industries such as steel, aluminium, cars, and possibly pharmaceuticals, which could significantly impact the global economy. Even with the temporary 90-day suspension, these elevated tariffs risk pushing global trade conditions back to levels not seen in decades
The recent rally in equity markets appears vulnerable as hopes for a meaningful de-escalation between the US and China fade. The fragile optimism, driven by temporary easing in trade tensions, could face further headwinds if the dialogue stalls or tensions escalate again. This uncertainty may weigh on risk sentiment across global markets, keeping a lid on risky assets.
On the data docket, key releases include the first-quarter US GDP report and Friday’s April jobs report this week. GDP consensus sits at 0.4% q/q annualized, but expectations vary widely, shaped by front-loaded imports and optimistic investment trends.
Plenty of supporting factors for euro
George Vessey – Lead FX & Macro Strategist
Expect EUR/USD to continue trading around $1.13 to $1.14 in the very near term. The worst case for EUR/USD is probably $1.1250, should US data surprise on the upside. However, $1.15 could be achievable should any of this week’s job releases suggest that tariff uncertainty has already triggered layoffs. The pair remains circa 10% higher year-to-date, well above long-term moving averages, with FX options traders eying $1.20 later this year.
Although the European Central Bank is expected to lower interest rates again, it also looks as though the June Federal Reserve meeting is live for a rate cut. That will provide underlying support for the euro and keep it on a medium-term path higher.
Meanwhile, European assets could also gain from Ukrainian President Zelenskiy’s optimism for lasting peace after discussions with President Trump.
Plus, global energy demand may decline due to the US recession threat, China’s economic slowdown, and OPEC+ rifts—factors favoring cheaper oil prices. Oil-producing nations face budget challenges amid lower crude prices, while net importers like Europe benefit from reduced energy costs in transportation and industry. As a result, Europe’s energy importer status positions the euro for potential additional support.
Resilient sterling in risk-on conditions
George Vessey – Lead FX & Macro Strategist
GBP/USD’s rose by around 1% on Monday, back above the $1.34 mark and near its highest rate in three-year highs, but upside momentum appears to be waning, pressured by a modest US dollar rebound and a cautious market mood.
The pound is also under pressure amid solid expectations that the Bank of England (BoE) will lower interest rates by 25 bps to 4.25% in May. Investors are paying close attention to Tuesday’s speech from BoE official Dave Ramsden. Should his tone lean dovish, it could add further downside to the pound in the near term.
Still, sterling is trading above most of its key long-term averages against many of its major peers barring the safe haven USD alternatives of the JPY, EUR and CHF. Against the euro though, sterling is back above its 21-day moving average in a sign of potential trend change beckoning to the upside.
GBP/EUR should remain supported if global risk sentiment stays sturdy given its higher beta to risk than the euro.
Oil down 4.5% in a week
Table: 7-day currency trends and trading ranges
Key global risk events
Calendar: April 28-May 2
All times are in BST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
