Global Pause Before the Next Push

With key drivers such as Fed policy and tariff threats entering a period of wait-and-see, currency markets slipped into consolidation mode, mirroring the broader indecisiveness seen across asset classes.

In the US, the Federal Reserve held rates steady, as expected, and reduced the pace of quantitative tightening – arguably the clearest signal yet that QT is nearing its end. The central bank also maintained its projection for two rate cuts later this year. While the DXY rose 0.4% to 104.146, the recovery was modest, and sentiment around the Dollar remains cautious. Updated projections acknowledged weaker GDP growth and slightly higher inflation in the near term, though the Fed maintained a steady view on long-term economic trajectory.

Tariff tensions remain the elephant in the room. With President Trump dubbing April 2 “Liberation Day” for America as reciprocal tariffs are set to kick in, market participants remain on edge. The lack of detail around implementation leaves room for surprises – welcome or not. Until clarity emerges, traders appear content to stay on the sidelines, favouring short-term range trading over directional bets.

The Swiss Franc topped the leaderboard last week, followed by the Canadian Dollar and the Greenback, all benefitting from safe-haven or neutral positioning in this low-conviction environment.

On the flip side, the Australian Dollar underperformed, falling 0.6% as risk sentiment remained fragile. The Euro and Pound also slipped roughly 0.5% against the USD, despite a relatively uneventful week for both currencies. The Mexican Peso was the worst performer, dropping 1.5%.

The New Zealand Dollar and Sterling were largely rangebound, finishing the week with marginal changes, while the Norwegian Krone found support from higher inflation data, rallying 0.9%.

Oil prices extended their rebound, with WTI rising 1.7% to close at $68.25. While this marks the second consecutive weekly gain, the move is widely seen as a technical bounce from major support rather than a reversal in trend. Overall, oil remains in a broader downtrend amid global demand uncertainty.

Equities stabilized, with US indices recovering mildly from the recent drawdown. Still, gains were tepid, reflecting lingering caution as tariff uncertainty continues to cloud the outlook.

Looking ahead, volatility could resurface. A flurry of PMI releases and key inflation data from the US and UK will give markets fresh macro input, while geopolitical tensions and the countdown to April 2 keep risks elevated. With sentiment still fragile and major central banks having fired their shots, traders will be watching incoming data and political signals closely for the next breakout trigger.