• USD under pressure: Consumer confidence continues to decline, weighing on dollar sentiment, but tariff deadlines and inflation data could offer support later in the week.
• EUR volatility ahead: German economic data and geopolitical headlines could drive short-term fluctuations, with a ceasefire potentially boosting the euro.
• GBP cautious ahead of Spring Statement: Chancellor Reeves’ fiscal policies and spending cuts may impact inflation expectations and BoE rate outlook.
• US data mixed: Strong home sales contrast with weaker manufacturing indicators, adding to market uncertainty.
• FX market remains data-driven: Traders are watching economic releases and geopolitical developments for near-term currency movements.

USD: Consumer Confidence Continues to Slide
The US dollar found support in the 104.0-104.50 range after stronger-than-expected PMI data, but a widening gap between struggling manufacturing and a recovering services sector raises uncertainty. Investors are closely monitoring key economic indicators to gauge the dollar’s direction.

Today’s Conference Board Consumer Confidence survey is a major FX event. Declining consumer sentiment has fueled pessimism about the US economy, contributing to the shift from US to European equities that boosted EUR/USD. The consensus expects confidence to drop from 98.3 to 94.0, with some estimates as low as 93.0.

Even if the decline is less severe, optimism for the dollar may remain limited. However, broader dollar strength could emerge later in the week as the April 2 tariff deadline approaches and core PCE inflation data (Friday) tempers dovish Fed expectations. Additionally, February’s new home sales are expected to be strong, but the Richmond Fed Manufacturing Index could weaken, echoing recent PMI trends.

EUR: Watching Geopolitical Developments
The euro’s prospects remain tied to both economic data and geopolitical news. While German fiscal measures offered some initial optimism, lackluster PMI results tempered expectations. Today’s IFO survey could provide a surprise boost if results exceed market expectations.

More significantly, markets are watching developments from Saudi Arabia, where US and Russian delegations met following earlier discussions with Ukrainian officials. A potential ceasefire agreement could support European sentiment and the euro. Conversely, fading optimism over a quick resolution could lead to near-term weakness in European currencies.

EUR/USD dipped below 1.080 but faces potential upside today due to weak US consumer confidence. However, a move below 1.07 remains the broader outlook for April.

GBP: Focus on the Spring Statement and Inflation Data
The British pound trades cautiously ahead of Chancellor Rachel Reeves’ Spring Statement on Wednesday. Reeves has pledged no further tax hikes while adhering to fiscal rules, raising questions about how economic growth will be supported.

Following corporate backlash over recent tax hikes, Reeves confirmed that government spending cuts will be necessary. This could reduce inflation expectations, increasing bets on Bank of England rate cuts in the near term.

Additionally, UK Consumer Price Index (CPI) data for February is due Wednesday. Headline inflation is expected to slow to 2.9% YoY from 3% in January, while core CPI is forecast to ease slightly from 3.7% to 3.6%. These figures will be key in shaping market expectations for future BoE policy moves.