Key Highlights:

• U.S. Dollar Finds Support

Demand for the dollar strengthened as Q1 inflation data came in hotter than expected.

This uptick reinforces the market's cautious stance on the Fed's potential rate path.

• Japanese Yen Weakens

The yen slipped as traders scaled back expectations of a Bank of Japan rate hike.

Market sentiment suggests Japan may maintain its ultra-loose monetary policy for longer.

Market Recap:

US Data Signals Stagflation Concerns: Fresh US figures revealed the economy shrank by 0.3% in Q1—worse than expected—while core PCE inflation rose to 3.5%, pointing to a troubling mix of slowing growth and rising prices. Notably, these dynamics were already unfolding before Trump’s tariff announcements earlier this month.

Sterling Under Pressure: As stagflation fears dominated market sentiment, investor focus shifted away from the US, weighing on the British pound across major currency pairs.

Today’s Market Overview:

Yen Slides, Dollar Gains on Dovish BoJ

With holidays keeping activity muted across Europe and Asia, early attention turned to the Bank of Japan, which left interest rates unchanged but cut its inflation and growth outlook. This dampened hopes of further tightening and pushed the yen lower, while the dollar continued to benefit from safe-haven inflows.

• 🛠️ Eyes on US Manufacturing Data

Later today, US manufacturing figures will be closely watched as a key indicator of early Q2 economic momentum. A strong reading could reinforce dollar strength and influence expectations for Fed policy.

• 🤝 Trade Developments

Reports suggest the EU is preparing to propose a new framework to the US aimed at reducing tariffs and trade barriers—potentially easing cross-border tensions.

👉 How could easing trade tensions and a weaker yen shift your currency strategy this week?

1st May 2025

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