The U.S. dollar ended the day sharply lower, led by a -1.50% drop versus the New Zealand dollar, followed by a -1.35% decline against the euro, and a -1.03% fall versus the Australian dollar. The dollar’s weakest performance was against the yen, falling a relatively modest -0.60%.
The move lower was supported by a string of softer inflation readings, with today’s PPI Final Demand declining -0.4% m/m vs. +0.2% expected, while core PPI (ex-food and energy) fell -0.1% vs. +0.3% forecast. This followed tamer CPI data released yesterday, reinforcing expectations for easing price pressures.
Economists now estimate that Core PCE, the Fed’s preferred inflation gauge, likely rose just 0.1% m/m in March, down from 0.4% in February. This would slow the annual Core PCE rate to 2.6%, from 2.8% previously — a move driven by falling prices for airfares, hotel stays, and used vehicles.
However, headwinds remain. Recent tariff increases on Chinese imports are expected to reignite inflationary pressure in the months ahead, potentially complicating the Fed’s path forward.
Yields soar despite soft inflation
Despite the disinflation narrative, U.S. Treasury yields surged, reflecting lingering inflation concerns and perhaps positioning ahead of next week’s data:
-
Daily changes:
-
2-year: 3.962% (+11.7 bps)
-
5-year: 4.161% (+12.4 bps)
-
10-year: 4.493% (+10.2 bps)
-
30-year: 4.875% (+2.7 bps)
-
-
Weekly gains:
-
2-year: +37.0 bps
-
5-year: +45.4 bps
-
10-year: +49.5 bps
-
30-year: +46.2 bps
-
Stocks bounce back from deep lows
Despite rising yields, U.S. equities posted strong weekly gains, rebounding from sharp drawdowns earlier in the week. The S&P 500 had fallen as much as -21.35%, while the Nasdaq was down -26.83% at its lowest.
Mid-week, however, saw oversized rebounds:
That rally helped the Dow (+5.07%) and S&P 500 (+5.85%) notch their best weekly performance since October 30, 2023, while the NASDAQ’s +8.10% gain marked its strongest week since November 7, 2022.
Fed’s Collins reassures, but remains cautious. Fed’s Williams sees inflation rising to 3.5% to 4%
Fed Governor Susan Collins added to the positive sentiment, stating the Fed is “absolutely” ready to stabilize markets if needed, reinforcing its role as a backstop during disorderly moves. However, she noted that the bar remains “pretty high” for preemptive rate cuts, signaling a continued cautious stance on policy easing.
She also addressed the recent U.S. dollar weakness, suggesting it may reflect expectations of slower economic growth, and added that it’s still too soon to assess whether Trump’s trade policies will disrupt capital flow dynamics.
New York Fed President John Williams warned that new tariffs could lift inflation to between 3.5% and 4% this year, adding significant uncertainty to the outlook. He noted the economy began the year on solid footing but expects growth to slow to just 1% and unemployment to rise to 4.5%–5%. Williams emphasized the importance of keeping inflation expectations anchored and said a modestly restrictive monetary policy remains appropriate for now. His remarks contrast with market expectations for rate cuts, highlighting the Fed’s cautious stance in the face of rising trade-related risks.
Monday:
The week begins with China releasing its March Trade Balance data, offering a key read on global demand and export dynamics as trade tensions and tariff impacts remain in focus.
Tuesday:
A busy day featuring the RBA Minutes, which may shed light on the central bank’s inflation and rate path outlook. The UK Jobs Report (covering February and March) will be closely watched for labor market trends. In the eurozone, attention turns to Industrial Production data and the German ZEW Survey for April. Canada rounds out the day with its March CPI report, which could influence expectations for the Bank of Canada.
Wednesday:
Markets will digest a flurry of top-tier releases. The Bank of Canada (BoC) is set to announce its latest policy decision. China will publish its Q1 GDP and March activity data, offering insight into the post-tariff economic landscape. The UK and Eurozone CPI reports are due, including the eurozone’s final CPI print for March. In the U.S., March Retail Sales take center stage. Lastly, New Zealand’s Q1 CPI will be released, relevant for RBNZ rate expectations.
Thursday:
Central bank decisions dominate the day, with both the European Central Bank (ECB) and Turkey’s CBRT scheduled to announce policy updates. Japan will publish its March Trade Balance, while Australia will release its March Jobs Report, offering fresh perspective on labor and inflation pressures down under.
Friday:
Markets in several regions will observe Good Friday, limiting liquidity. However, Japan will release its March CPI, which could still influence JPY direction into the weekend.
