Uncertainly and volatility rise in FX markets as protectionism grows across the globe

Daily Currency Update

Following a week in which the single currency gained almost 4%, markets will be closely watching a number of events which could cement gains for the Euro; (A) If peace talks between Russia and Ukraine progress positively this should lend additional support. (B) If the German lower house pass reforms to the debt brake and approve a large fiscal stimulus and, (C) if the ECB suggest they may pause interest rate cuts at their April meeting. If these events transpire, markets could see the Euro move higher again this week.

The Organisation for Economic cooperation and Development (OECD) said the UK economy will grow slower than previously expected in 2025 as global growth is hit by significant uncertainty. It revised its growth projections from a December forecast of +1.7% down to just +1.4% through 2025. Reeves is expected to echo the lowering of economic forecasts during her budget update on March 26^th that is likely to include spending cuts to keep the UK economy on track to meet budget targets.

One core theme weighing on US interest rates and the Dollar is the fear that US consumers are slowing spending. Consumption in the US has been the primary driver of growth since the pandemic and recent data suggests consumers are ready to spend less and save more as they await clarity on the effects of tariffs on the US economy. Notably, it seems the Trump administration is prepared to accept a slowdown in growth, even a recession, as it ushers in a global reset on trade.