March 31, 2025

“US ‘Liberation Day’, a non-farm payrolls print, and eurozone inflation are the main events in what is likely to be a huge week for FX. Wednesday is set to bring the biggest tariff measures yet from the new Trump administration.”

Tim Hallinan – Trading Director

USD

This week is all about Wednesday’s ‘Liberation Day’ – Trump’s term for the announcement of what is likely to be the biggest tariff hikes since the 1930s – and some hard data tests for the US slowdown narrative. Neither the markets nor the Trump administration itself really know in detail what this reciprocal tariff regime is going to look like in practice just yet, but it should broadly contain a tariff figure for each country in proportion to how severe its trade barriers are. Trump’s rhetoric over the weekend has been quite aggressive on tariffs, saying that they will start with ‘all countries’ and that he ‘couldn’t care less’ about automakers upping their prices, while apparently pushing his aides to take an aggressive stance, per the Washington Post.

However, it is telling that, while gold is reaching new record highs and the yen is beginning the week on the front foot, the dollar is not seeing the safe haven demand you might expect as investors worry about incoming trade wars and stocks extend their losing streaks. In part that reflects a) a focus on the worsening domestic environment in the US (it is the White House creating the issues), and b) that markets are still relatively hopeful about negotiated deals preventing the worst-case outcomes. The strength of the US economy and its labour market will be a central theme in the data this week, with the likes of JOLTS, the ISM PMIs, and non-farm payrolls

GBP

The pound got through last week’s Spring Statement relatively unscathed, and while we may get some twitchiness in the gilt markets this week, it is all about external developments. The data calendar is relatively quiet after this morning’s mortgage lending data, at which point eurozone inflation and Trump’s tariff announcements are likely to dominate. Remember that trade wars can be bullish for GBP/EUR, as the UK economy would suffer fewer direct impacts than the EU given its more balanced and services-dominated trade relationship with the US.

EUR

Wednesday’s US tariff announcements are a big risk event for the euro. EUR/USD is trading above 1.08 this morning after making some gains in the second half of this week, and of course its huge rally in early March came from a big compression in growth expectations between the US and Europe. If Trump takes a maximally aggressive approach to tariffs this week, it is hard to imagine that the growth optimism in Europe can persist. But if they are relatively benign, that could be a green light for a relief rally. German CPI inflation is the main event today, and the softer 2.4% figure expected should support another rate cut at the next ECB meeting in a few weeks’ time.

Markets

Wall St suffered its third straight day of losses as auto tariffs and Wednesday’s ‘Liberation Day’ approached. A 4% drop in Japan’s Nikkei this morning was its worst session in six months, and futures are pointing to a soft open in Europe today.

Main Economic Events (All Times CET)

10:30am: UK Mortgage Approvals
2:00pm: German CPI

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