Instimatch - FX morning commentary - 30/4/25

Good morning

Market sentiment in the Asia region has improved, as US President Trump prepares to ease tariffs on auto parts and give imported vehicles a reprieve from separate levies on steel and aluminium. This will provide the biggest relief for South Korea and Japan in the Asia region, given their larger exposure to the US of auto exports. This latest tariff easing move has added to signs that Trump could look to pare back some of his import tariffs.

Meanwhile, bilateral trade negotiations between several Asian countries and the US have appeared to make some progress, including that for Singapore, Malaysia, South Korea, and India. Asian countries, except China, have chosen to negotiate with the US, rather than retaliating. The latest news from US Commerce Secretary Howard Lutnick is that the US is close to concluding a tariff deal. Trump has also commented that “India’s coming along great”.

Tariffs are starting to have some negative impact on the US economy. Ahead of the nonfarm payrolls data on Friday, the US has released the number of jobs openings in March. Job openings fell to 7.19mn, the lowest since September 2024. This reflects slowing labour demand, as firms have likely slowed hiring amid global trade uncertainties.  The Conference Board consumer sentiment index fell to 86 in March from 93.9 in February, while the Dallas Fed services index also declined to -19.4 from -11.3 in March.

The USD has found some support from the continued positive risk environment, bolstered by de-escalating tariff headlines. The greenback continues to move in tandem with US Treasuries and equities, while diverging from traditional safe havens such as the CHF, JPY, and gold, all of which declined yesterday. The USD index steadied round 99.27 in Asian trade but was set to lose between 4.5% and 5% in April. 

The economic calendar today is fairly busy with GDP numbers in France this morning (printed in line with expectations), Germany and the Eurozone (expected at 0.2% q/q, 1.1% y/y). Those member states also release April inflation numbers. The ADP job report is due in the US and could show employment growth easing from 155k to 115k. Today’s main focus though will be the preliminary US Q1 GDP data later today. Bloomberg consensus expects flat quarter-on-quarter growth, slowing from 2.4%q/q growth in Q4 2024. The pricing for the April 2026 FOMC meeting one year from now is at 3.04%, which is about 126bp below current pricing. This implies 5 US rate cuts from the current 4.25%-4.50% range.

EUR/USD is holding steady below 1.1400 in early Europe, though the pair lacks any follow-through amid a modest USD recovery.

EUR/GBP remained close to the 0.85 mark during yesterday's session.  The more muted UK growth outlook and higher price components presents a challenging environment for the BoE. There seems to be a more dovish tone within the MPC, which will be likely repeated at the meeting next week. 

Among Asian currencies The Japanese yen was the best performer in April, with USD/JPY falling over 5% in the month to currently trade around 142.51. Focus is now on the BoJ, which is widely expected to keep rates unchanged at the conclusion of a two-day meeting on Thursday.

The Chinese yuan moved little on Wednesday, with the USD/CNY pair hovering around 7.2683 yuan. The yuan was set to lose about 0.2% in April amid heightened trade tensions.

In China, we received manufacturing PMIs from Caixin (private version). Caixin fell to 50.4 (prior 51.2), marking the weakest growth since January. However, a figure above 50 still marks the seventh consecutive month of expansion, suggesting that Beijing's stimulus measures are supporting economic recovery.

AUD/USD was trading up 2.4% for April at $0.6414. The pair rose 0.3% overnight following stronger-than-expected Q1 inflation data. While core inflation still fell within the RBA’s target range, the reading sparked some uncertainty over just when and by how much further the central bank will cut interest rates. The central bank is expected to continue with a second 25bp cut at the May 19-20 meeting.

The South Korean won, the Singapore dollar, and the Taiwan dollar were trading down between 2% and 3% for April.

The Indian rupee firmed slightly, with USD/INR falling 0.1% to around 85.057 after a muted performance in April. Tensions between India and Pakistan rose this month following a deadly attack on a tourist site in India’s Kashmir, which New Delhi blamed on Islamabad. Pakistan on Wednesday said it had “credible intelligence” that India was planning to carry out military action against the country in the next 24 to 36 hours, warning against the move.