The Australian dollar was the strongest major currency last week, while the Japanese yen was the weakest, although the numbers were practically negligible. Volatility decreased over this period, and the coming week will likely see more volatility.
The tariff announcement on April 2 carries a high degree of uncertainty, and the sell-off in US stocks to end the week was just one sign of that. An announcement that is more benign than expected could lead to quite a round of short covering.
The euro witnessed a slightly positive week against the Japanese yen, which is a bit perplexing due to the fact that risk appetite was eviscerated yet again. I think the JPY160 level will continue to be important, and it may even offer support.
The dollar's weakness in Q1 coincided with a pullback in US equities. European investors bought a record amount of US shares in 2024, which helped lift the greenback.
The price of gold rallied sharply on Friday, as it hit a new record high of $3,086 amid uncertainty over US trade policy. Additionally, an uptick in the Federal Reserve's preferred inflation gauge was seen.
The sticky inflation narrative hasn't exactly been the tailwind dollar bulls were hoping for. In fact, the greenback’s muted reaction—despite a hotter-than-expected core PCE print—might be flashing early warning signs.
The US Dollar Index, which measures the value of the US Dollar against a basket of currencies, is currently flat near 104.30 on Friday following the release of the Fed preferred inflation metric — the PCE Price Index.
The higher-than-expected March Tokyo CPI had little impact on BOJ expectations; the pullback in the US 10-year yield, around seven basis points from yesterday's high, has helped underpin the yen.
