The foreign exchange market is highly active with extreme volatility. US Dollar, USD The US Dollar has continued its recent decline as the concern for an imminent recession in the United States leads market sentiment. This plunge comes on the heels of a rising conflict between the US and China. The trade war has escalated further, with reciprocal tariffs between the two countries damaging several sectors. Traders, too, await the most impactful economic news from Canada. Finally, they are most interested in seeing how these tariffs will shape the Federal Reserve’s forthcoming monetary policy decisions.
The Bank of Canada (BoC – Canada’s central bank) is anticipating a high stakes monetary policy meeting next week. So save the date for Wednesday folks! Meanwhile, Canada is looking forward to seeing its March Consumer Price Index (CPI) data on Tuesday. This meeting will prove vital, for the CPI may provide helpful information regarding what inflationary tracks we’re seeing in the Canadian economy. Analysts are keen to see how these economic indicators will shape the BoC’s approach to monetary policy amid broader market uncertainties.
Weaken every day — the orderly collapse of the USD Undoubtedly the ongoing weakness of the USD remains the buzz market. The currency fell through the floor during Friday European trading hours, even dropping to 1.3880 versus CAD cross. This measure isn’t at this high level since than November of 2024. It underscores a larger trend of USD unloading across the global currency exchange, fueled mostly by the deteriorating bilateral trade relationship between the U.S. and China.
As fears of a coming recession here in the US continue to mount, that concern grows with every inflationary pressure added by the costly trade war currently underway. Just last week the Chinese Finance Ministry announced their own tariff increases on US imports—a whopping 125% increase from an average 84% tariff. This unexpected step has turned up the screws on market trepidation. Yet unlike those previous tariffs, these will be felt in a big way. Their impact will extend well beyond bilateral trade and monetary policy decisions in Washington and Beijing; it will reverberate throughout the Pacific.
Our trade conflict continues to get worse. Both of these tariffs pose big questions for analysts looking at how they will shape future economic performance and, in turn, affect central bank policy. The BoC’s upcoming meeting will likely reflect these concerns, particularly regarding how rising costs may influence consumer behavior and inflation in Canada.
Elsewhere, the GBP/USD has remained relatively strong, sustaining its optimistic trajectory and moving towards 1.3100 through the European trading day. Except maybe the British Pound (GBP), which has enjoyed a recent upsurge. This increase occurs despite the adverse effects of the ongoing trade war and its role in undermining global economic stability.
In other news, gold has hit record high prices. In Friday’s European session, they were changing hands at an all-time-high above $3,220. The invasion sent investors flocking to gold, a traditional safe-haven asset. They pocket safety in the middle of the turmoil in equity markets and rising fears over foreign money devaluation due to inflationary pressures from the trade battle.
The combination of these drivers of economic disruption continues to lead to an environment of uncertainty and volatility in the markets. Traders are looking forward to the BoC’s policy meeting next week. They are aware of how the coming surprise release of CPI data and macroeconomic forces stemming from international trade will produce their desired or undesired economic outcomes.