Euro Climbs Amid Global Uncertainty.
In March, the European Central Bank reduced its benchmark rate by 25 basis points, maintaining a data-dependent stance while withholding further forward guidance. At the same time, the Federal Reserve kept rates steady at 4.25%–4.50%, signalling caution amid economic uncertainty. However, remarks from Chair Jerome Powell indicating two possible rate cuts later in the year shifted market expectations and weighed on the dollar.
Amid this backdrop, the euro rallied to a three-year high above $1.14, driven by investor rotation away from U.S. assets in response to protectionist trade policies, Germany’s expansive fiscal plans, and fading confidence in the U.S. economic outlook.
Pound Stays Resilient Against USD.
The British pound experienced downward pressure amid investor apprehension over prospective fiscal consolidation measures expected in the forthcoming spring statement, resulting in pronounced capital outflows. Nevertheless, sterling demonstrated relative resilience against the U.S. dollar, stabilizing around the $1.29 mark and registering a 3% year-to-date appreciation, underpinned by broader concerns surrounding escalating U.S. trade protectionism.
USD Weak and The Tarriff war.
The U.S. dollar faced pronounced depreciation amid intensifying trade tensions, catalysed by a series of protectionist measures enacted by the Trump administration. Early in the month, the U.S. imposed a 25% tariff on imports from Canada and Mexico and raised duties on Chinese goods to 20%, prompting swift retaliatory actions from affected trading partners, notably China and Canada. These developments exacerbated market volatility and heightened investor anxiety.
The U.S. Dollar Index (DXY) slipped below the 106.00 threshold as market participants reassessed the sustainability of U.S. economic policy in the face of an escalating trade conflict. Growing scepticism surrounding the long-term viability of the U.S.’s “strong dollar” policy emerged, with analysts cautioning that dollar hegemony depends on institutional credibility and the restrained use of economic sanctions.
China’s response included a range of countermeasures—tariffs of 10–15% on U.S. energy and automotive exports, as well as export controls on critical minerals essential to electric vehicle production—further disrupting global supply chains and amplifying downward pressure on the dollar. Taken together, these policy shifts and retaliatory dynamics contributed to heightened economic uncertainty and a marked weakening of the U.S. dollar throughout the month.