EC Markets foreign exchange platform: the US dollar counterattacks hard to hide the decline, safe-haven currencies become the biggest winners

- Globalforeign exchange marketAfter experiencing severe shocks this week, the Federal Reserve's policy expectations and geopolitical risks dominated the trading logic. Although the dollar index rebounded 0.91% on Friday, it still closed down 1.10% weekly, the worst weekly performance in two months; the yen became the biggest winner, with the dollar/yen weekly falling 1.99%; the euro maintained its strength with the hawkish stance of the European Central Bank, rising 1.22% weekly.EC Markets Forex PlatformThe escalation of trade protectionism has triggered a chain reaction, with the Australian dollar falling to a five-year low, and the pound and Canadian dollar struggling to find their way in the game of economic data and policy.

The dollar: a struggle in a policy dilemma

The US dollar index has shown a "V-shaped" reversal this week.

Monday to Thursday: Markets are betting that the Federal Reserve will cut interest rates four times this year, with the U.S. index falling to a three-month low of 100.80 at one point.

On Friday, Powell admitted that Trump's tariff policy will exacerbate inflation and played down the urgency of interest rate cuts. The US index rebounded 0.98% to 101.94 in a single day.

Key Drivers

1. Federal Reserve policy expectations swing. March non-farm payroll gains 228,000 (expected 135,000) showed economic resilience, but Powell warned that tariffs could lead to "both higher inflation and slower growth", and the market's probability of a rate cut in June fell from 70% to 50%.

2. Trade wars hit liquidity. After the trade situation heated up, risky currencies such as the Australian dollar plummeted, and the dollar was briefly supported by safe-haven buying. Peter Vassallo of BNP Paribas pointed out: "Tariff-induced inflation concerns are reshaping the Federal Reserve's response function."

institutional perspective

Nationwide: Maintain the forecast that the Federal Reserve will cut interest rates only in the fourth quarter, arguing that "inflation stickiness will limit the room for policy easing";

Goldman Sachs: The dollar may test the 100 mark in the short term, but geopolitical risks may provide phased support.

Second, the yen: the return of the king under the wave of risk aversion

USD/JPY rallied 0.59% to 146.03 on Friday, but plunged 1.99% on a weekly basis, its biggest drop since early February. The pair briefly touched a seven-month low of 145.19 on Thursday.

Key Drivers

1. Risk assets sell off. Global stock market capitalization evaporated by more than $3 trillion this week, promoting the return of the traditional safe-haven attribute of the yen.

2. Bank of Japan policy fine-tuning. Market rumors that the central bank may reduce the scale of government bond purchases, 10-year Japanese bond yields rose to 0.85%, carry trade position squaring the appreciation of the yen.

institutional perspective

- Mizuho Securities: If the US-Japan interest rate spread continues to narrow, USD/JPY may drop to the 142 support level.

Mitsubishi UFJ: Under geopolitical uncertainty, the yen is expected to become the "ultimate safe haven".

III. The Euro: The Strength of the Hawkish ECB

EUR/USD retreated 0.81% to 1.1051 on Friday, but still gained 1.22% on a weekly basis, having touched a seven-month high of 1.1147 on Thursday.

Key Drivers

1. The European Central Bank took a tough stance. Executive Commissioner Schnabel said "no interest rate cuts will be considered until inflation returns to 2%", and market expectations for the European Central Bank to cut interest rates this year have been reduced from four to three times.

2. Differentiation of economic data. Eurozone CPI rose to 2.9% year-on-year in March (previous value 2.6%), while the US core PCE fell back to 2.8%, with monetary policy differences supporting the euro.