Dollar Data Dive: Tariffs, Jobs & Rate Cuts in Focus.
USD Focus on Data: The dollar remains highly sensitive to key US economic releases, with a weak ISM or JOLTS report potentially triggering further downside.
Tariffs in Play: Auto tariff tweaks offered the dollar some support, but overall risks remain skewed lower as evidence of economic damage mounts.
EUR Overbought: The euro looks stretched in the options market, and soft eurozone data could lead to a pullback in EUR/USD and crosses.
BoE Dovish Pivot: The Bank of England may accelerate rate cuts amid falling gas prices and weak UK data, posing risks to the pound.
GBP Forecasts Cut: Growth and inflation downgrades from forecasters suggest further sterling weakness is likely if the BoE aligns its outlook.
USD: Dollar Jitters Amid Data-Driven Week
The US dollar’s sluggish start this week underscores how tightly its performance is tied to economic data. While the panic around its reserve status has cooled, markets remain cautious and sensitive to signs of weakness. After last week’s positioning shifts, this week’s data-heavy calendar offers chances to revisit dollar short positions.
The steep drop in the Dallas Fed manufacturing index hints that Thursday’s ISM Manufacturing figure may disappoint, possibly falling closer to 45 versus the consensus 48. Today’s key releases—April’s consumer confidence and March’s JOLTS job openings—will likely keep volatility high. Consumer confidence, previously a prime indicator of tariff effects, is expected to fall from 93 to 88, with some forecasting 86.
However, market focus is likely shifting from soft indicators to hard data like Q1 GDP (due tomorrow) and particularly labor market figures. Persistent signs of job market deterioration—like a jump in layoffs from 1.79m to an estimated 1.82m—could prompt faster Fed action.
On the tariff front, the White House plans to ease car import rules. While auto parts will still face the 25% duty, relief measures include avoiding double tariffs on steel/aluminum and offering carmakers partial refunds. These announcements lifted the dollar slightly and supported US equities, but the overall risks for the greenback remain tilted to the downside.
EUR: Euro Loses Momentum as Overbought Risks Emerge
The euro has seen its momentum stall despite USD weakness, underperforming most G10 peers. Brief disruption from power outages in Spain and Portugal may have played a role, but broader factors are at play.
Option market data signals that the euro is currently the most overbought currency. While speculative data (like CFTC reports) suggest large yen net-longs, the euro looks stretched on other metrics. This comes amid weakening macro fundamentals and persistent doubts about eurozone growth.
Markets may be underestimating soft eurozone data risks. A weak Q1 GDP print (consensus at 0.2%) or disappointing economic confidence numbers today could unwind some euro long positions. Meanwhile, the ECB has sounded more dovish, and US officials speculate it may continue cutting rates—perhaps not deliberately to weaken the euro, but with the welcome side effect of helping tariff-hit exporters.
EUR/USD has dipped below 1.140, with potential to fall further before any fresh upside comes from incoming US data. While another leg up to 1.150 is possible, the euro’s appeal on the crosses is fading.
GBP: Risks Build for the Pound as BoE Looks to Accelerate Cuts
The British pound faces downside risks if the Bank of England signals it’s ready to speed up interest rate cuts. Markets expect a 25bp cut next week, but the tone of forward guidance will be more important. Current valuations assume a steady pace of one cut per quarter, but changing conditions may warrant a shift.
Falling gas prices (with the 2025 curve now 20% below February levels), a stronger pound, and weakening economic data (PMI at 48.2) give the BoE cover to quicken rate reductions. Simon French of Panmure Liberum highlights that this shift, combined with lower oil prices, could result in a more dovish Monetary Policy Report.
The EY Item Club has already downgraded UK GDP forecasts: 2025 growth is now seen at 0.8% (down from 1.0%) and 2026 at 0.9% (from 1.6%). If the BoE’s own forecasts follow suit, it would signal scope for faster easing, dragging the pound lower against both the dollar and euro.