The recent downtrend of the US dollar, which began roughly a week before President Trump's second inauguration, has shown signs of stabilizing. Although the decline has persisted, preliminary technical indicators suggest a possible bottom formation. Investor sentiment remains cautious due to the impending announcement of US reciprocal and sector tariffs on April 2, increasing uncertainty among policymakers and businesses. The dollar is holding firm near its best levels of the week against major currencies, while emerging market currencies are mixed.

Asia Pacific Markets

The US dollar fluctuated against the Japanese yen this week, hitting a low near JPY148.20 before stabilizing. This movement correlated with shifts in the US 10-year Treasury yield, which hit a weekly low of 4.17% before rebounding. Market momentum suggests another test of JPY150, though the currency pair has yet to close above this level in March. Meanwhile, Japan's recently released February inflation data did little to stir the markets, as most key indicators were already anticipated.
In China, the dollar strengthened against the offshore yuan, nearing CNH7.27, though resistance remains.

European Markets

The euro experienced downward pressure, falling to an eight-day low near $1.0815. A potential drop below $1.08 looms, with the next significant support level around $1.0700-$1.0725. The common currency has been impacted by Germany's approval of a major 500 billion euro infrastructure program, which aims to address years of underinvestment. However, fiscal tensions persist within the European Commission, particularly regarding joint bond issuance, which Germany and the Netherlands oppose.
Meanwhile, the British pound has struggled to break past $1.3015, remaining confined within a narrow range for most of March. The market awaits updates from the Office for Budget Responsibility and the Chancellor’s Spring Statement. Upcoming economic reports, including inflation and retail sales figures, will provide further insight into the UK’s economic trajectory. Additionally, the government’s reallocation of foreign aid towards defense spending has sparked controversy, adding to domestic uncertainties.

American Markets

Despite its prolonged downtrend, the US dollar has shown signs of recovery, bouncing from a mid-week low of 103.20 to test the 104.00 resistance level. A decisive close above this level could drive further gains toward 104.90-105.00, aligning with key technical indicators such as the 38.2% retracement of this month’s decline. Market sentiment remains cautious due to the upcoming US tariff announcements on April 2, which could significantly impact trade relations. Looking ahead, next week’s economic data includes the PCE deflator, with both headline and core inflation expected to rise by 0.3%. While January’s real personal consumption declined sharply by 0.5%, this is seen as an anomaly caused by winter storms. A rebound in nominal consumption, projected at 0.6%, may provide reassurance that economic fundamentals remain stable, though the overall outlook remains uncertain.