The Euro (EUR) generally dislikes geopolitical shocks leading to higher energy prices, and has therefore detached from JPY and CHF in early price action after the Israeli strike on Iran.
US Dollar’s (USD’s) rebound found momentum from a US court ruling, saying that Trump’s unilateral imposition of ‘Liberation Day tariffs’ under the International Emergency Economic Powers Act (IEEPA) is invalid. DXY was last at 99.93 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
2-way trades still likely in the near term
“The ruling also blocks the enforcement of fentanyl-related tariffs on China, Mexico, and Canada that were announced earlier this year. In response, the Trump administration had filed a notice that it was appealing the ruling, and ultimately the US Supreme Court may have the final say. The court ruling helps to restore some credibility to the system which has been undermined by the unpredictability of Trump’s tariffs. “
“The check and balance system is at least intact for now, providing a knee-jerk rebound for the USD while US futures jumped over 1%. Adding to FX market volatility was BoK Governor Rhee’s comments that Asian nations had currency talks with the US. This headline saw some knee-jerk reaction, slowing USD’s advance against Asian FX. Nevertheless, Rhee’s comments alongside, uncertainty over the legitimacy of Trump’s tariffs may continue to see more 2-way price action in the USD ahead of core PCE data (Friday).”
“Daily momentum is not showing a clear bias while RSI rose. 2-way trades still likely in the near term. Resistance at 100.80/101 levels (50 DMA, 23.6% fibo retracement of 2025 peak to trough). Support at 99.2 and 97.90 (2025 low).”
USD/MXN has broken below a key consolidation range, forming a bearish rounding top pattern and signaling further downside risks toward multi-month lows, Société Générale’s FX analysts note.
Rebound likely capped below 19.85
“USD/MXN broke the lower limit of a multi-month consolidation and has formed a rounding top pattern which generally points towards potential downside. It is now challenging the trough of last week near 19.30.”
“If a brief rebound develops, lower end of previous range at 19.67/19.85 could cap upside. Next objectives could be located at last September / October lows of 19.10/19.00 and 18.70.”
“The price of Gold went on a bit of a rollercoaster ride on Thursday, Commerzbank’s Head of FX and Commodity Research Thu Lan Nguyen notes.
Gold Swings $100 as trade tensions ease, inflation cools
“After briefly dipping towards $3,120 per troy ounce, it recovered by more than $100 at times over the course of the day. The reason for the back and forth was the recent easing of tensions in the US trade conflict, which reduced demand for safe havens on the one hand, and weak US inflation data on the other. Following the weaker-than-expected consumer price data on Tuesday, producer prices in April yesterday also indicated that price pressure has so far remained subdued.”
“This gave new impetus to expectations of US interest rate cuts, which in turn benefited Gold as an interest-free investment. Ultimately, however, developments in the trade conflict are likely to outweigh short-term economic data and interest rate expectations. After all, the rapid rise in the price of Gold by more than 30% at times since the beginning of the year cannot be explained solely by the market’s expectations of interest rate cuts, but is likely to be largely due to a flight to safe havens.”
“If further ‘deals’ are announced between the US and its trading partners in the coming weeks, the price of Gold is likely to continue its downward trend.”
Artificial intelligence has increasingly become an all-encompassing term in financial circles. But in foreign exchange trading, what does it actually mean?
Banks have been vocal about how they have used AI for years when developing their execution algorithms, making documentation easier, and in their client chatbots.
But from a trading perspective, arguably the more impactful use case for market-makers is applying AI and machine learning models to tick data – looking at previous prices to build up a high degree of confidence in future patterns to ultimately forecast what the price of, say, euro/US dollar will be in the next 30 seconds, 10 minutes, or an hour, and so on.
Having a good idea of where the price will go over a given time horizon can inform a liquidity provider’s hedging strategy. For instance, if it shows the euro will appreciate against the dollar over the next five minutes, it makes sense for the desk to hold on to incoming euro inventory until it appreciates before hedging. That way, they can earn the appreciation on top of any bid/offer spread they capture.
There are a lot of unanswered questions about how much of the price will be dictated by these machines
Of course, this inventory management is what any good trader has always done, and some banks have worked on real-time data and analytics models that reflect the market in the present time. But the arrival of AI and machine learning has given them better forward-looking tools that can quantify those forecasts into their prices.
These techniques have been bread-and-butter for the large non-bank market-makers in recent times. It’s understood the large banks have dabbled in it as well over the years, and that smaller banks may look to take it up as the technology becomes easier to access.
What’s interesting are the time horizons that each group focuses on. Banks, for instance, tend to look at shorter periods such as 30 seconds, given internalisation can take them out of risk quickly, whereas the non-bank market-makers concentrate on longer timeframes owing to their greater appetite for this inventory risk.
Furthermore, when market volatility is much higher – like we saw last month – models that focus on patterns within much shorter timeframes can be stable.
On the bank side, though, the question also is how automated can this be? Dealers are understandably wary of allowing AI to take live decisions that affect pricing, but manual checks aren’t really suitable for such brief time horizons.
Some of the more advanced banks have set up internal teams dedicated solely to developing these kinds of predictive trading models.
But even at those banks that are yet to reach the point where they can take full advantage of AI, e-traders have been deploying it in plenty of other front-office areas.
Some look to AI to assess the price sensitivity of certain clients and then suggest to the human sales trader how the price configuration should be calibrated to that specific client. It’s then up to the human to go away and work out exactly how to adjust the client’s pricing.
A bank can also use AI to forecast expectations of demand. For example, if a corporate or asset manager client tends to trade EUR/USD at the same time of day, in the same size and for the same tenor, this gives the bank confidence about how to plan and adjust in expectation of these flows.
Ultimately, AI models have tremendous potential to become a bigger part of banks’ pricing engines. But there are a lot of unanswered questions about how much of the price will be dictated by these machines and whether any banks will be bold enough – or comfortable enough – to fully utilise them.
Yesterday afternoon, Donald Trump finally presented his first trade deal with the United Kingdom in the Oval Office. However, despite all the fanfare, it must be said that the substance was rather thin once again. There was much talk of the great opportunities that this deal offers both countries, Commerzbank’s FX analyst Volkmar Baur notes.
US-UK trade deal is a warning sign
“The US will probably gain preferential access to UK markets for ethanol and agricultural products, with beef being mentioned repeatedly. The size of these markets is estimated at USD 700 million for ethanol and USD 250 million for agricultural products. Taken together, this amounts to less than a billion US dollars — less than 0.5% of last year’s US exports. In addition, a major UK airline has agreed to purchase USD 10 billion worth of aircraft from the US. At first glance, this sounds like a much bigger deal. However, the United Kingdom already purchased aerospace products worth USD 10 billion last year. Furthermore, no timeframe has been given for when this purchase volume is to be executed.”
“Meanwhile, the 10% reciprocal tariffs on UK exports to the US remain largely in place. With a few exceptions. The tariff on steel and aluminium will be set at zero. However, these two items together only accounted for 2% of UK exports to the US last year. Additionally, the UK will be permitted to continue importing aircraft turbines and parts into the US duty-free. This is likely to ensure that US aircraft manufacturers continue to have access to these products. Lastly, the UK will be permitted to import 100,000 cars per year into the US at the reduced tariff rate of 10%. Otherwise, a tariff rate of 25% applies to cars and car parts imported into the US.”
“The 10% tariff seems to represent a kind of lower limit for the US. Any other countries currently negotiating with the US cannot expect the tariffs to be abolished. Therefore, the effective tariff rate in the US, which was 2.4% last year, is likely to rise to at least 10%. Even in a best-case scenario. No major leaps forward should be expected in the upcoming deals. The US-UK deal contains only cosmetic changes. Negotiations with other countries, especially the EU and China, are likely to be much more challenging. Granting preferential access to the US for the UK’s agricultural markets would contradict the WTO’s ‘most favoured nation’ rule.”
MUFG is bolstering its FX franchise amid a rising interest rate environment that has led investors to renew their attention in the Japanese FX market. MUFG’s domestic success and growing onshore presence have strengthened the firm’s ambition to become an Asia powerhouse in FX
David Wright, MUFG
After decades of ultra-low interest rates, the Bank of Japan’s determination to gradually raise rates has caught the attention of global market participants. Combined with the recent volatility of the yen, Japan’s new interest rate environment has led international actors to seek the services of such firms as MUFG, which can provide access to broad and deep liquidity in the Japanese market as well as low-latency trading, efficient execution and extensive knowledge of the specificities of the Japanese market.
MUFG is the prime FX liquidity provider in Japan. With a banking presence in the country for more than 360 years, the firm has established deep and profound relationships with a wide array of FX market participants. Like its international counterparts, this domestic client base has become more sophisticated. As a result, the bank has invested heavily in its FX franchise to provide corporates, financial institutions, insurance firms and banks with the means to compete in Japan, Asia and worldwide.
MUFG has broadened the scope of bespoke solutions available to domestic and international clients to cater to these evolving needs. The bank has diversified the number of accessible trading channels, with a particular focus on electronic trading, and has invested heavily in this area to help clients trade more efficiently.
“We’ve made great efforts to invest in and extend our technology capabilities that we’ve developed for our core clients, domestic and global corporates,” says David Wright, global head of FX trading and distribution at MUFG. “Straight-through processing of FX transactions is becoming more prevalent in Japan, and this goes hand in hand with MUFG’s push for digital solutions in transaction banking and payments.”
As the activities of Japanese FX market participants have become more mature, their centre of attention has also become more global. To this end, MUFG is actively broadening its outreach across the world, and in Asia in particular. With an onshore presence in 18 markets across the Asia-Pacific region, MUFG is deeply entrenched and determined to use its strong base in Japan to intensify its operations.
“With the recent unprecedented volatility experienced in global markets, we work with our clients to assure access and liquidity to global markets, including FX. As the largest financial institution in Japan, MUFG is the go-to FX bank in the country,” says Wright. “While we appreciate and continue to focus on our clients in Japan, we want to leverage our position to grow globally. We are present in more than 40 markets worldwide, but focused on expanding our footprint in Asia. Our goal is to become an Asia powerhouse, providing exceptional service to clients in the region and global clients accessing markets in Asia.”
To achieve this, MUFG has expanded its e-FX capabilities in line with the expectations of clients at home and abroad. A key component of MUFG’s strategy to extend the reach and scope of its e-FX franchise is its partnership with Morgan Stanley. In 2008, the two banks formed a strategic alliance to collaborate within global investment banking and, in 2010, established their Japanese securities joint ventures. In 2024, the partnership was further enhanced to include the FX business.
“The rapid electronification of FX trading and the introduction of global financial regulations in recent years have brought about operational and technological challenges that required substantial investment in FX trading technologies,” explains Wright. “Given the productive collaboration between MUFG and Morgan Stanley, both banks decided to enhance the scale of that collaboration to leverage the complementary strengths of each party. MUFG’s immense balance sheet and solid infrastructure in Japan, together with the strength of Morgan Stanley, provide MUFG with a truly global capability.”
As part of the initiative, dubbed Alliance 2.0, the collaboration makes it possible for MUFG to leverage Morgan Stanley’s market-leading FX technology and infrastructure to better service MUFG’s clients through enhanced risk management and execution efficiency.
MUFG was named FX house of the year Japan at the FX Markets Asia Awards 2025.
Relative calm continues to be observed this week amid Trump’s de-escalation. Trump continued to speak about how his administration was talking to China about trade even as Beijing denied the existence of negotiations. Chinese Commerce Ministry spokesman He Yadong said that ‘any reports on development in talks are groundless’ and urged the US to ‘show sincerity’ if it wants to make a deal. DXY was last seen at 99.60 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
Bearish momentum on daily chart fades
“Separately, we also shared that the Ministry of Foreign Affairs spokesman Guo Jiakun said that China’s stance on the tariff war initiated by the US is clear: we do not wish to fight, nor are we afraid to fight. If it comes to a fight, we will see it through; if it comes to talks, our door is open. He emphasised that if the US truly wants to resolve issues through dialogue and negotiation, it should stop threatening and coercing and engage in dialogue with China on the basis of equality, respect, and mutual benefit.”
“This morning, Bloomberg headlines reported that China was said to exempt some US goods from tariffs as costs rise. The case of a de-escalation narrative persisting for a while more should not be ruled out and can aid USD short covering (especially against safe haven proxies), following the >10% decline (at one point) since Jan peak. The broad USD bounce may also see some AxJs come under pressure in the interim, despite conciliatory tone towards a trade truce/deal.”
“Bearish momentum on daily chart faded while RSI rose. Resistance at 100.10, 100.80/101.20 levels (23.6% fibo retracement of 2025 peak to trough, 21 DMA). Support at 99.10, 98.60 levels. Elsewhere, we caution that month-end USD rebalancing flows may risk distorting FX price action.”
Goldman Sachs was the top US dealer for foreign exchange trading revenues in 2024, which more than doubled at the firm thanks to increased trading activity at the end of the year, according to regulatory filings.
The investment bank generated revenues of $6.3 billion for the year, up 125% from $2.8 billion in 2023, thanks to just over $4 billion in the final quarter of the year alone. This growth propelled the bank to overtake JP Morgan’s 2023 top spot.
JP Morgan suffered the greatest dip among
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European financial institutions are concerned that any renewed escalation of trade tensions with the US could spill over into actions that would limit their ability to source dollar funding.
A chief risk officer (CRO) at a European wealth manager says this scenario remains “extreme”, but not impossible.
“One of the scenarios I have been starting to play with is if all US dollars have to be held in US banks,” says the CRO. “You have to understand your third-party risk dependencies on large banks.”
U
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Available liquidity for single clips dropped to as low as $20 million ahead of tariff pause
Liquidity conditions in the global spot foreign exchange markets have been strained since US President Donald Trump announced his so-called reciprocal tariffs last week and was getting even worse before yesterday’s decision to temporarily pause the duties.
FX dealers say liquidity collapsed despite volumes spiking across both algorithmic and principal spot trading desks.
“Under typical conditions if you swept all EUR/USD order books, you’d be able to do maybe $70–80 million in one go if you really
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There was a little confusion around the temporary roll-back of US tariffs yesterday. Canada was not included in the round of reciprocal tariffs announced on Liberation Day but Treasury Secretary Scott Bessent said the 10% baseline tariff applied to both Canada and Mexico, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
CAD gains modestly on the day
“It turns out that was incorrect, a reflection of how confused policymaking is right now. Other tariffs, of course, remain in place. The CAD has weathered all the recent uncertainty relatively well, despite headwinds from higher market volatility and weaker commodities. Narrowed spreads are providing some support for the CAD and helping nudge our fair value estimate a little lower.”
“Spot is trading below today’s updated estimated equilibrium though (1.4128) and the USD’s undervaluation may firm up support for USDCAD in the 1.40/1.41 range. The USD is heading for a fourth weekly loss versus the CAD and a weekly close under 1.4107 (50% retracement of the Sep/Feb USD rally) would suggest more downside pressure building on spot.”
“As it is, there is a clearer strengthening of USD-bearish trend momentum on the intraday and daily charts which suggests the USD is at risk of retesting last week’s low at 1.4025/30 and making a run at 1.3945 (61.8% retracement support). Note the 200-day MA sits at 1.4005.”
A new foreign exchange swaps venue that gives voice trading desks the ability to match interest with e-books run by some of the biggest dealers could mark a significant step forward in the electronification of the interdealer market, its founders say.
FXswapX, a dark matching platform built by Fintech incubator FastFin Labs, utilises a technology model where banks can effectively mask their FX swaps streaming data through encryption, which is then aggregated to create a midpoint benchmark rate
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UD Dollar (USD) has gathered downward momentum vs Japanese Yen (JPY), but it might not be able to break below 145.00. In the longer run, oversold weakness has not stabilized; there is a chance for USD to drop below 145.00 again before the risk of another rebound increases, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
USD can drop below 145.00 again
24-HOUR VIEW: “Yesterday, we were of the view that USD ‘is likely to trade in a range between 146.00 and 149.00.’ USD traded in a 145.95/148.12 range and closed at 146.28. While the decline in the early Asian trade today has gathered momentum, USD might not be able to break below 145.00 (there is another support level at 144.40). Resistance levels are at 146.10 and 146.65.”
1-3 WEEKS VIEW: “When USD was at 147.50 yesterday (08 Apr), we pointed out that ‘the oversold weakness in USD has not stabilized.’ We indicated that ‘there is a chance for USD to drop below 145.00 again before the risk of another rebound increases.’ We will continue to hold the same view provided that 148.50 (‘strong resistance’ level was at 149.00 yesterday) is not breached. Looking ahead, if USD closes below 145.00, it will increase the likelihood of a drop to the significant support at 143.50.”
The sharp fall in the US dollar following President Donald Trump’s “liberation day” tariffs announcement saw intense activity on foreign exchange options desks, leaving dealers rushing to buy volatility to re-hedge EUR/USD books as spot surged.
“It was manic… it almost made the Turkish lira [moves] irrelevant,” says one head of FX derivatives at a large European bank.
The US Dollar Index fell 3.2% overnight after the announcement on April 2, one of its worst days since 2022, as investors fretted
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Oil prices opened lower this morning with ICE Brent extending its declines from last week, hovering around $73.5/bbl. This weakness comes after Trump said he would consider ‘secondary tariffs’ on Russian oil and those who buy it if a ceasefire with Ukraine can’t be reached, ING’s commodity analysts Warren Patterson and Ewa Manthey note.
Oil prices opened extend its declines from last week
“Drilling activity in the US slowed over the last week. The latest rig data from Baker Hughes shows that the number of active US oil rigs fell by two over the week to 484 as of 28 March 2025. This is the lowest level since the week ending on 14 February 2025, with the oil rig count down by 22 compared to this time last year.”
“The total rig count (oil and gas combined) stood at 592 over the reporting week, slightly down from 593 a week earlier and 4.7% lower compared to the same time last year. Primary Vision’s frac spread count, which gives an idea of completion activity, also decreased by six over the week to 209.”
Our considerations above on somewhat fading optimism on a speedy ceasefire in Ukraine have likely contributed to softer EUR momentum, ING’s FX analyst Francesco Pesole notes.
EUR/USD to return above 1.090 by Wednesday
“EUR/USD is still around 1% above our estimate for its short-term fair value, as a two-year swap rate gap around -150bp is more consistent with 1.07 than 1.09, and our one-month view on the pair remains bearish. However, this week is quite data-heavy and the euro could squeeze some extra benefit from fiscal optimism.”
“We have a few European Central Bank speakers to watch this week, but we are quite doubtful that any new guidance will emerge before we see more clarity on the impact of US tariffs.”
“Our call for this week is a return above 1.090 in EUR/USD by Wednesday followed by some softness towards the back end of the week as markets look past data and build more defensive positions ahead of the 2 April tariff event. We still doubt there is enough bullish thrust to take the pair above 1.10.”
