US Sentiment Continues to Seek a Floor
Impact on GBP: Cable holds steady near $1.2900 amid ongoing concerns about US economic growth
GBP/USD recoups recent losses, trading near $1.2890 early this morning as the US Dollar struggles amid concerns that tariff policy uncertainty could weigh on the US economy. The pair remains in the upper half of the ascending regression channel, with the 4-hour Relative Strength Index (RSI) holding above 50, indicating limited bearish momentum.
On the downside, initial support is seen at $1.2810- $1.2800, followed by $1.2750 and $1.2720. Resistance levels are located at $1.2950 and $1.3000. In the absence of high-impact data, GBP/USD may see subdued price action in the near term.
The US Dollar Index (DXY), which measures the USD against six major currencies, declined over 3% last week as recession fears weighed on sentiment.
Later today, the Bank of England will release its Quarterly Bulletin for Q1, while US Consumer Price Index (CPI) data for February is due on Wednesday.
No Major Data.
Impact on EUR: German parliamentary challenges have minimal impact on the Euro
Germany's Chancellor-in-waiting, Friedrich Merz, is encountering challenges in advancing constitutional reforms to the debt brake ahead of the 25 March parliamentary session. The Green Party, whose support is required for a two-thirds majority, announced its opposition to the defence spending plan, citing the need for stronger environmental commitments.
The Euro initially weakened on the news but quickly recovered after reports suggested that the Greens remain open to discussions, and CDU officials expressed confidence in reaching an agreement. Markets continue to price in a scenario where the spending plan proceeds as expected.
This week, the Eurozone economic calendar is relatively light, keeping attention on developments in German politics and Ukraine-Russia peace negotiations. However, EUR/USD movements are likely to be driven primarily by US-related news. Additionally, European Central Bank (ECB) policymakers are beginning to share their post-meeting views. On Monday, ECB hawk Joachim Nagel emphasized that policy decisions are not on "autopilot" and that it remains uncertain whether rate adjustments will be made in April. Today, dovish-leaning Olli Rehn is scheduled to speak, followed by several other ECB Governing Council members later in the week.
While EUR/USD could briefly rise above $1.0900, market risks in the US and improved Eurozone fundamentals suggest $1.0700 as a more likely target in the near term.
No Major Data.
Impact on USD: Investor concerns over the US economy deepen
The week began with a fresh wave of risk aversion, as the S&P 500 tumbled over 2.5% on Monday. Unlike previous sessions, the US equity selloff was mirrored in European markets, reinforcing the Dollar’s safe-haven appeal. This led to classic risk-off positioning in FX, with JPY, USD, EUR, and CHF gaining against high-beta and commodity-linked currencies.
Finding a bottom in US sentiment remains challenging, as investors question elevated equity valuations and broader macroeconomic conditions. While data releases may influence short-term sentiment, restoring confidence could ultimately require intervention from the US administration.
Concerns over a potential US recession in the first quarter—though likely overstated—are adding to market uncertainty. Today’s JOLTS job openings report will be closely scrutinised, given the Fed’s emphasis on labour market conditions. While job openings are expected to have remained stable in January, market attention may shift to layoff trends and the quits rate, a key indicator of future wage growth.
Despite the Dollar pricing in significant downside risks, there is potential for upward movement in the coming weeks. However, with ongoing market volatility, a clear bottom may not be established until key economic data is released.
Major Data:
JOLTS Job Openings - 2pm
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