Market’s Attention Pivoting to How Central Banks Might React to Changing Global Outlook – Currency Thoughts

Market’s Attention Pivoting to How Central Banks Might React to Changing Global Outlook

April 15, 2025

Whereas equities mostly rose Tuesday in Asia and Europe, U.S. stock futures are trading slightly in the red. Share prices closed up by  2.1% in India, 1.8% in Taiwan and Singapore, and 0.8% in Japan and have so far advanced 1.6% in Italy, 1.2% in Spain, 0.9% in Germany and 0.8% in the U.K.

The weighted DXY dollar index recovered 0.2% overnight but is still 9.4% below January’s high. The greenback gained 0.3% versus the euro, remains steady relative to the yen and loonie, and has dipped 0.2% vis-a-vis sterling.

Ten-year sovereign debt yields today are mostly higher, with advances ranging from just a basis point in the U.S. case to five basis points in Germany. The price of gold has strengthened 0.3% to within 0.3% of its record high set earlier this week. Bitcoin’s price strengthened 1.0% so far today but remains 20.8% below its December high. WTI oil eased back 0.5% but is holding above $60.

Central bank officials face different circumstances.

• The likelihood that the ECB will extend its rate-cutting cycle this Thursday was enhanced by today’s monthly ZEW Institute survey of investor sentiment, which exposed huge drop in confidence this month, elicited the observation of a “massive increase in global uncertainty” due to U.S. tariff changes, but also a swing in the measure of expected inflation to a reading this month of -3.1 from +6.0 in March.
• The Federal Reserve faces a murkier picture trying to figure out whether the direct effect of higher costs on imports and import-competing goods or the inevitable drop in U.S. aggregate demand prevails more heavily in guiding future inflation. Recent comments from Fed officials have been diverse, such as Atlanta President Bostic’s warning against bold moves now and Governor Waller’s view that a cut may be appropriate soon.
• The Bank of Japan is operating on a different plane, with a current choice of whether to keep the short-term rate at 0.5% or proceed with a further hike. Governor Ueda observed at the start of this week reiterated that further tightening is coming if Japanese economic trends unfold in line with current forecasts but added that tariff tensions have injected a new uncertainty and the hope of gaining further clarity on its impact before acting.
• The Bank of Canada had been thought likely to undertake another rate cut tomorrow, but markets are now positioned for a decision instead to leave the rate at the current 2.75% level, which represents a drop from the 5% peak until early June 2024.
• The likelihood of the next Bank of England rate cut was enhanced by today’s soft monthly labor market data release. A much bigger drop in employment occurred, resulting in a spike of jobless claims.

Other elements of the aforementioned investor sentiment surveys by the German ZEW Institute were as swing in sentiment toward Germany’s economy to a 21-month low of -14.0 in April from +51.6 in March; an 8-month high in perceived current German economic conditions but a still-highly depressed reading of -81.2 versus -87.6 in March and -93.1 in December; and sentiment toward Euroland as a whole dived from a reading of 39.8 to -18.5, a 21-month low.

Industrial production in the euro area rose by a much larger-than-anticipated 1.1% in February. IP in January-February combined exceeded the fourth-quarter average by 0.7%, and a 1.2% rise compared to February 2023 was the most in two years.

Reconfirmed French consumer price inflation of 0.8% in March matched the 49-month low in Euroland’s second largest economy.

Polish CPI inflation had a 4.9% reading for the third straight month in March, up from 2.0% in March 2024 but down from an early 2023 peak of 10.4%.

CPI inflation in Slovakia and Croatia in March printed at a 15-month high of 4.0% and a 4-month low of 3.2%, respectively.

In India, wholesale price inflation slowed to a 4-month low of 2.05% in March, reflecting lessening upward pressure on food and manufactured goods. Consumer price inflation of 3.34% last month represents a 67-month low.

Food price increases in New Zealand accelerated to a 14-month high of 3.5% year-on-year.

British same-store sales in February and March were each 0.9% above year-earlier levels.

Depressed by tariphobia, consumer confidence in Indonesia sank 4.2% in March to a 5-month low after a 0.6% dip in February.

Not a day goes by without a U.S. policy change. A study was launched of security-related matters related to different metals that will help determine sector-specific tariffs on such items. Meanwhile, Treasury Bessert threw cold water on any steps near term to buttress the recently volatile dollar and Treasury security markets but assured that, if and when that were to become appropriate, there are plenty of available tools for handling the matter.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Euroland and German ZEW expectations index, Euroland industrial production, Indian CPI and PPI, tariffs and possible central bank responses

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on Tuesday, April 15th, 2025 at 6:17 am and is filed under New Overnight Developments Abroad – Daily Update.
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