FX Outlook
Daily FX Report

Daily FX Report

FX Markets Brace for Tariff Rollout

Wed 09 April 2025 07:00

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Daria Efanova Head of Research

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EUR / USD

EUR/USD strengthened yesterday as the pair struggled below the key 1.09 support level, suggesting a relatively stable foundation despite recent volatility. The European Central Bank's likely rate cut in April, with markets pricing in an 89% probability of a 25 basis point reduction, poses a significant headwind for the euro, though this is partially offset by the Federal Reserve's cautious stance on monetary policy.

The pair's immediate trajectory appears contingent on a potential breakthrough of the 1.112 resistance level, which could open the path to 1.120, while a breakdown below 1.09 might trigger a retreat toward the support cluster at 1.07.

The euro's status as a highly liquid alternative to the dollar has provided some resilience in the face of escalating trade tensions between major economies, particularly as markets digest the implications of new tariff announcements and retaliatory measures. The currency pair's stability around the 1.09 handle reflects this underlying strength, even as market participants remain vigilant regarding developments in both monetary policy and international trade relations.

USD / JPY

USD/JPY has shown significant bearish momentum, as it struggled above the 148.00 resistance level and establishing a clear downward trend amid heightened global trade tensions. The appointment of US Treasury Secretary Bessent to lead US-Japan trade negotiations, coupled with President Trump's threats of additional tariffs on China, has intensified risk-averse sentiment and driven safe-haven flows into the yen.

The Bank of Japan's increasingly hawkish stance and potential policy normalization, combined with expectations of Federal Reserve rate cuts, create a diverging monetary policy outlook that continues to pressure the dollar. Technical analysis reveals critical support at 145.8, with a breach potentially triggering a deeper decline toward the September 2024 lows near 139.8, while Japan's record current account surplus and strong wage growth data provide fundamental support for sustained yen strength.

The combination of technical weakness, diverging central bank policies, and ongoing trade uncertainties suggests continued downward pressure on USD/JPY in the near term.

GBP / USD

GBP/USD edged slightly higher as the pair struggled below the previous day's lows, resulting in modest gains to 1.277. Technical analysis reveals a choppy trading pattern, with the pair maintaining levels above crucial support at 50 DMA 1.274, suggesting that the pair's downward momentum might be waning.

Market expectations now indicate multiple rate cuts from the BoE this year, with forecasts pointing to a benchmark rate of 3.75% by year-end, while former Deputy Governor Charlie Bean advocates for aggressive cuts to 4%.

The currency pair's immediate trajectory appears moderately bullish, with 50 DMA now acting as a near-term support. However, a breach back above the 200 DMA of 1.2813 is needed to suggest a return to recent highs.

Economic Calendar

09042025

Disclaimer

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