Global Forex Monitor - April 2025

Following the announcement of reciprocal tariffs by the White House, the US dollar corrected against most currencies, notably the other G10 currencies, on concerns of a pronounced slowdown of the US economy and heightened expectations of rate cuts by the Fed, notwithstanding the prospect of higher domestic inflation. In this stagflationary environment, the market is now pricing in more than four 25bps cuts by the end of the year. As a result, the DXY dollar index made a brief foray below 102.Over the short to medium term, investor wariness towards US assets is set to persist, in particular in the context of an escalation in trade tensions, notably with China and the European Union. Similarly, the Fed’s reluctance to be rushed into cutting rates on account of potential inflationary pressures resulting from the application of customs tariffs is likely to keep alive the probability of a recession in the United States. In such an environment, the US dollar could remain downbeat over the medium term in the face of the prospect of more substantial cuts in the Fed Funds rate and a US economy stunted by customs tariffs. The DXY dollar index will test the 100-level by year-end.Over the month of March, the EUR/USD appreciated sharply, climbing to 1.112 at the start of April. The euro’s rebound can be partly explained by the weakness of the US dollar, which was penalised by the announcements of reciprocal customs tariffs and their potential recessionary effects on the US economy. At the same time, the euro benefited from positive factors, such as the ReArm Europe Plan and the German infrastructure spending plan, which will stimulate European growth, particularly in 2026, partly mitigating the negative impact of US tariffs. In the run-up to the quarterly earnings reporting season, the euro will also be supported by European investors repatriating some of the capital invested in US stocks, notably in response to a probable deterioration in US corporate earnings. In this context, the EUR/USD could reach our 1.12 target sooner than expected and go on to test 1.15 in early 2026.