Dollar Slips, Euro Bounces, Aussie Awaits CPI

Dollar is once again under pressure as markets head into the US session, with its recent rebound losing steam in the absence of any clear-cut catalyst. While new headlines on tariffs continue to emerge almost daily, these “leaks” could only be seen as reflective of ongoing deliberations within the White House, rather than firm policy. For now, the tariff outlook remains mired in speculation, and traders are growing weary of chasing news that is yet to be confirmed — or could just as easily be reversed.

The latest development suggests US President Donald Trump is eyeing a two-step tariff strategy, set to commence on “Liberation Day,” April 2. The proposal may include a strengthened legal foundation for a broader “reciprocal” tariff regime, which could also serve to raise revenue for future tax cuts. Additionally, a revival of vehicle import tariffs is reportedly being considered, bringing back a national security investigation from Trump’s first term.

In Europe, German DAX is staging a notable rebound, while Euro tries to firm up against Dollar. . German Ifo data points to improving sentiment and expectations, buoyed by optimism around fiscal expansion plans. Still, questions remain about the sustainability of recovery, especially with persistent weakness in services and complications from coalition talks.

Overall, the mood in Europe remains cautiously optimistic but restrained. While the idea of a cyclical upswing in Germany is gaining traction, it’s offset by global uncertainty, particularly around US trade policy. The lack of clarity around tariffs is also limiting the extent of positive momentum in risk assets.

Looking ahead, the spotlight will shift to Australia with the release of monthly CPI data during the upcoming Asian session. Expectations are for inflation to hold steady at 2.5% for February. The data isn’t expected to sway RBA’s decision to hold next week. But any downside surprise would be welcomed as a sign that recent inflation upticks since Q4 have already peaked.

Technically, AUD/USD’s price actions from 0.6087 are still seen as a corrective pattern to the fall from 0.6941. This view will hold as long as 38.2% retracement of 0.6941 to 0.6087 at 0.6413 holds. Break of 0.6186 support will argue that the downside is ready to resume through 0.6087 low.

In Europe, at the time of writing, FTSE is up 0.78%. DAX is up 108%. CAC is up 1.24%. UK 10-year yield is up 0.034 at 4.755. Germany 10-year yield is up 0.056 at 2.831. Earlier in Asia, Nikkei rose 0.46%. Hong Kong HSI fell -2.35%. China Shanghai SSE fell -0.00%. Singapore Strait Times rose 0.46%. Japan 10-year JGB yield rose 0.028 to 1.573.

Fed’s Kugler: Reaccelerating goods inflation unhelpful

Fed Governor Adriana Kugler expressed growing concern over the recent behavior of inflation. Speaking today, she highlighted that some inflation subcategories “reaccelerated in recent months.” In particular, goods inflation, which had been negative in 2024 but has recently turned positive.

She warned that this shift is “unhelpful” as goods inflation “has often kept a lid on total inflation and also affects inflation expectations”.

Kugler added that surveys are now pointing to rising inflation expectations among consumers too, with much of the uncertainty tied to ongoing trade policy developments.

Despite these concerns, Kugler reaffirmed confidence in the current policy stance, describing it as restrictive while Fed is “well positioned.

Germany’s Ifo rises to 86.7, hopes build for modest recovery

Germany’s Ifo Business Climate index edged higher from 85.3 to 86.7 in March, While the rise was slightly below market expectations of 87.0, the improvement was broad-based across sectors. Current Assessment Index ticked up from 85.0 to 85.7, above expectations of 85.5. Expectations Index rose from 85.6 to 87.7, though still shy of the 87.9 forecast.

Across sectors, sentiment improved uniformly. The manufacturing index rose notably from -21.9 to -16.6. Services (up from -4.3 to -1.1), trade (up from -26.3 to -23.7), and construction (up from -27.4 to -24.6) all saw smaller improvements, indicating a broad but tentative shift in mood.

Ifo President Clemens Fuest commented that “German businesses are hoping for a recovery,” a sentiment echoed by survey head Klaus Wohlrabe, who projected 0.2% growth in GDP for Q1, after -0.2% contraction in Q4.

BoJ minutes signal readiness to tighten further if outlook holds

Minutes from BoJ’s January 23–24 meeting revealed a growing consensus among policymakers that further tightening would be appropriate, provided the current economic and price outlooks hold.

While the central bank raised policy rate to 0.5%, members acknowledged that real interest rates remained “significantly negative”, ensuring “accommodative financial conditions would be maintained.”

However, the path ahead is clouded by global uncertainty. While BoJ held rates steady at its latest meeting last week, it flagged increasing risks from escalating US tariffs.

Nevertheless, Governor Kazuo Ueda emphasized that stronger-than-expected wage growth and persistent food price inflation could keep upward pressure on underlying prices, indicating that the case for another rate hike remains very much alive.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0769; (P) 1.0814; (R1) 1.0845; More…

Intraday bias in EUR/USD is turned neutral with current recovery. Corrective pattern from 1.0953 could extend with another fall. But downside should be contained by 38.2% retracement of 1.0358 to 1.0953 at 1.0726 to bring rebound. On the upside, break of 1.0953 will resume the rally from 1.0176 towards 1.1274 key resistance.

In the bigger picture, prior strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.