Market Turmoil: Yields Plunge, JPY Rises, and Tariff Fears Loom

31.03.2025

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar 1.4230-1.4460

Euro 1.5410-1.5630

Sterling 1.8480-1.8700

WTI Oil (opening level) $69.55

The CAD/USD is opening at 1.4350 ( 0.6968 )

· With collapsing bond yields around the world on Friday and to kick off this week today, it is no surprise to see the low-yielding Japanese yen coming out on top, as USDJPY has retreated all the way to 149.00 after briefly trading solidly below that level overnight. This after Friday’s intraday high of 151.21, but still far from the low posted in March at 146.54.

· The US dollar has also turned lower versus the euro since last Thursday’s 1.0733 low, as EURUSD rose to close last week at 1.0828 and rising slightly more in the Asian session overnight.

· Weak risk sentiment is seeing weakness in many of the pro-cyclical currencies, from the commodity dollars CAD, AUD and NZD, to a currency like the Mexican peso, which is eyeing the impact of coming Trump tariffs.

Headlines

· Trump said he plans to start his reciprocal tariff push with all major trading partners, thereby reducing speculation the recent market turmoil would limit the initial scope of tariffs set to be unveiled on Wednesday, 2 April.

· The University of Michigan’s final March reading of consumer sentiment fell to 57.0 due to economic concerns. Inflation expectations rose, with year-ahead expectations at 5.0% and long-run expectations at 4.1%. Consumer anxiety remains high amid tariff uncertainty, worsening labor-market outlooks, with future expectations falling to a 2022 low at 52.6.

· US consumer spending in February was weaker than expected while the Fed’s preferred inflation metric rose 0.4% from January, with the core PCE price index rising 2.8% YoY, versus 2.7% expected.

· China’s manufacturing activity expanded in March, with the official PMI index at 50.5, while the construction and services sectors rose to 50.8, higher than the forecast of 50.6.

· Goldman Sachs forecast the Fed and ECB will cut interest rates three more times this year due to Trump's tariffs weighing on economic growth. They predict the Fed will cut rates in July, September, and November, and the ECB will cut rates in April, June, and July.

Key Points

· Equities: US futures down; tariffs looming; inflation worries; Europe/Asia stocks sharply lower

· Volatility: VIX jumps significantly; high anxiety before Trump tariffs and major data releases

· Digital Assets: Cryptos slightly down; XRP notably weaker; cautious investor sentiment; accumulation trends emerging

· Currencies: With global yields in a fresh plunge, the JPY coming out on top.

· Fixed Income: Global yield plunge on weak risk appetite ahead of Trump tariff announcements

· Commodities: Gold rally extends above USD 3100, Grain traders await key planting report

· Macro events: Germany Flash Mar. CPI, US Mar. Chicago PMI

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