The US Dollar has been facing unprecedented pressures since the introduction of reciprocal tariffs by then President Donald Trump. This controversial move has since sent the currency crashing into a downward spiral. Alarmingly, US-based employers recently have announced the highest number of planned job cuts, raising fears of a looming recession. In March, employers projected 275,240 job cuts. This new wave of cuts is up a jaw-dropping 60% from the 172,017 cuts announced in February.
As the global economic picture continues to transition, the US Dollar is without support sources as incoming data is increasingly mixed. Investors moved quickly to the new, uncertain trade regime to voice their concerns about what it would mean for future economic stability. This is the context in which the latest economic reports are raising alarm. Yet, in their words, the “US economy could be in for a rocky road.”
During the other world-changing week, the last full week of March, the US released Initial Jobless Claims, which shot up to 219k. This number was well beyond the expected 225,000 claims. This makes it particularly promising as it provides a glimmer of hope in an otherwise grim employment outlook. The March Challenger Job Cuts report released last week confirmed that with a record-setting spike in dramatic and surprising layoffs. We haven’t experienced numbers this extreme since the initial shocks of the Covid-19 pandemic.
Foremost among them was the EUR/USD currency pair, which reacted strongly to the emerging scenario. It sky-rocketed to 1.1145, blasting more than 300 pips above its weekly opening! While the couple pulled back a bit after that, it did dent enough to hold big intraday gains. Technical readings at the moment indicate that the EUR/USD pair is deeply overbought territory. The Relative Strength Index (RSI) is at a record 86. This implies that though the bullish run of this pair can continue, investors should be careful.
The context of increasing layoffs and uncertain economic signs adds further weight on the US Dollar. Since Trump’s first tariff announcement on March 1st, the currency has lost ground that may prove difficult to recover. The disproportionate impact of the reciprocal tariffs on trade relations has been particularly harmful. They have ignited fears over job loss in the U.S.
As the situation evolves, economists and investors alike are closely monitoring any further developments related to tariffs and employment statistics. These mounting fears of a recession are expected to weigh heavily on investor sentiment over the next few weeks.