USD Strengthened by Rates, Tariffs, and Energy Shifts.

• USD Strengthened by Tariff Fears & Energy Prices – DXY holds above 108.00 as markets anticipate reciprocal tariffs, while rising natural gas prices and U.S. LNG deals boost demand for the dollar.
• Trump’s Executive Orders in Focus – A fresh round of executive orders at 16:00 CET could introduce broader tariffs, potentially pushing the DXY toward 109.00.
• EUR/USD Remains Pressured – The euro struggles as U.S.-EU trade tensions rise, wide rate differentials persist, and gas prices climb. EUR/USD could drop toward 1.0250/60.
• Scandinavian Currencies Gain Ground – EUR/SEK and EUR/NOK decline as Sweden benefits from stable rate expectations and Norway gains from rising energy prices.
• GBP/USD Eyes 1.2250 – BoE’s Catherine Mann speaks today, and if she reiterates concerns about a slowing UK economy, expectations for rate cuts could increase, pressuring the pound.

USD: Market Focus on Tariffs and Energy Deals

The DXY dollar index remains well-supported above 108.00, with markets closely watching the looming threat of tariffs. The uncertainty lies in whether these “reciprocal” tariffs will target key sectors like autos, pharmaceuticals, and semiconductors or apply more broadly. With President Trump expected to sign another set of executive orders at 16:00 CET today, markets remain on edge.

Energy prices are also playing a key role in supporting the dollar. The global market sees U.S. liquefied natural gas (LNG) exports as a buffer against upcoming tariffs. This week, Indian energy importers are preparing to sign fresh LNG contracts ahead of Prime Minister Narendra Modi’s visit to Washington. Meanwhile, rising natural gas prices—driven by colder weather in Europe and reduced Russian gas flows—are another dollar-positive factor.

On the data front, today’s U.S. calendar is light, with small business optimism expected to hold steady after the post-election surge. However, the main event will be Federal Reserve Chair Jerome Powell’s semi-annual monetary policy testimony to the Senate at 16:00 CET. Given current conditions, he’s unlikely to sound more dovish, making this a neutral-to-positive risk event for the dollar.

If Trump announces wider-ranging tariffs today, the DXY could push toward the 109.00 level.

EUR: Pressured by Tariffs and Rate Differentials

EUR/USD remains under pressure following the weekend’s steel tariff announcement, which primarily affected the EU. Europe is now bracing for potential new tariffs, particularly in the auto sector. While the EU maintains relatively low tariffs, concerns remain that broader measures could emerge in April when the U.S. Commerce Department releases its trade deficit report.

With wide rate differentials keeping EUR/USD near 1.03, any corrective bounce appears unlikely. As our rate strategy team notes, the eurozone’s divergence from U.S. rate spreads could persist, potentially widening further. This, combined with rising natural gas prices, suggests EUR/USD could slide toward the 1.0250/60 range or lower as new tariffs take effect.

Elsewhere, we are seeing declines in EUR/SEK and EUR/NOK. In Sweden, two-year swap differentials have moved in favor of the krona, with markets expecting minimal rate cuts from the Riksbank while the ECB is priced for 88bp of easing this year. Additionally, optimism over a possible Ukraine ceasefire may be bolstering SEK. Any developments from the upcoming Munich Security Conference could impact sentiment, though a breakthrough with Russia remains unlikely.

For now, EUR/SEK could drift toward 11.15, while Norway, benefiting from higher energy prices, may see EUR/NOK test or break the 11.50 level.

GBP: Markets Watch Catherine Mann’s Speech

Former Bank of England MPC hawk-turned-dove Catherine Mann is scheduled to speak at 09:30 CET today, drawing market interest after her recent shift in stance at last week’s BoE meeting. In an interview with the Financial Times, Mann expressed concerns over weakening demand, diminishing corporate pricing power, and a potential sharp rise in unemployment.

If she reinforces these concerns in her speech, markets may increase their pricing for further BoE rate cuts—currently, 66bp of easing is expected, but three more 25bp cuts could be fully priced in.

GBP/USD appears more vulnerable than EUR/GBP, as potential U.S. tariffs on the EU auto sector could weigh on the euro. In the near term, GBP/USD may target the 1.2250 level.