March 11, 2025

“Growth fears in the US continue to rattle financial markets this week, after Trump chose not to rule out a recession over the weekend. The dollar is still struggling for momentum, and the safe haven yen is doing particularly well in this scenario. Look out for job openings and small business data today.”

Tim Hallinan – Trading Director

USD

US sentiment took another dive yesterday as markets began to seriously price in Trump’s willingness to accept some economic pain for long-term structural change. Investors appear to be accepting that they can no longer depend on Trump’s sensitivity to market downturns to trigger a policy pivot, and they are trimming valuations accordingly. Yields fell, with markets now pricing 83bps in easing by the end of 2025 and a 60% chance that another rate cut arrives by the May meeting. The plainest expression was in the equity market, however, where the Nasdaq suffered its worst single day since 2022 with a 4% drop. FX has been quieter because of the offset between a weakening US economic narrative (dollar negative) and the hit to risk appetite that spread to European markets yesterday (dollar positive). The dollar has inched lower to a fresh four-month low this morning, however, with sentiment recovering in Europe.

There are a couple of data points to look out for today. The first is the NFIB small business index, which was an early warning sign in January after peaking from the post-election optimism towards the end of last year. The second is the JOLTS job openings data, which will be key for Fed pricing given the focus on the labour market. The expectation is for a stable 7.6M print, and much focus will be on the quits rate.

GBP

Sterling is purely following external developments in the early stages of this week. It continues to grind lower against the strengthened euro and slipped below the 1.19 mark for the first time since January overnight. There are no big data points out of the UK until Friday’s GDP release, so the focus for now is on the US labour market and getting spending reforms through German parliament.

EUR

The euro has touched 1.09 for the first time since November this morning. The headline that the Greens would not support the reforms proposed by the CDU/CSU and the SPD yesterday led to a temporary dip for the euro, but markets quickly calmed as it became clear that the party was looking to negotiate for some environmental guarantees. Constitutional changes in Germany require a 2/3 parliamentary majority – something the two main parties cannot achieve on their own, even with use of the outgoing parliament. That gives the Greens some leverage to pursue their policy objectives, but they are open to general philosophy underlying the bill. Data in the eurozone is quite sparse this week, so these headlines have the potential to move the euro quite a bit. Much of last week’s strengthening relies on these reforms getting through, and any serious obstacles might pose some downside risks.

Markets

US markets retreated sharply yesterday as growth fears swirled, with the Nasdaq extending its losses from the January peak to over 10% and the S&P 500 falling 2.7% in the session. Tesla’s 16% drop was its worst one-day performance since 2020. European stocks were weak too, with the Stoxx 50 sinking 1.5%.

Main Economic Events (All Times CET)

11:00am: US NFIB Small Business Index
3:00pm: US JOLTS Job Openings

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