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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: The foundation of the US dollar's global currency is shaken, and gold hits a record high." Hope it will be helpful to you! The original content is as follows:
In just one week, the US dollar has changed from a "safe haven" to the target of investors' anger. US President Trump imposes chaotic tariffs on all enemies and friends, shaking the outside world's trust in the world's reserve currency over decades.
The most obvious loss of confidence is reflected in the US Treasury market: the massive withdrawal of overseas funds, and the cost of US borrowing has hit the largest single-week increase since 1982.
"The United States has lost its safe-haven attribute almost overnight," said Ray Attrill, head of foreign exchange strategy at National Australia Bank. "To some extent, market confidence has indeed shaken... coupled with the disappearance of the 'speciality' of the US economy, in the short term, the market believes that the United States itself is the one hit hardest by tariffs."
The dollar was originally moving towards its worst performance since 2017, and on Friday, it plummeted against the Swiss franc to its lowest in a decade and fell to its weakest level in more than three years.
Bank of Japan Governor Kazuo Ueda warned today that the recent tariffs imposed by the United States could put "downward pressure" on the global and Japanese economies through "various channels".
While he did not specify the transmission mechanism, these remarks reflect growing concerns that escalating trade tensions could put pressure on exports, curb corporate sentiment, disrupt supply chains and trigger volatility in financial markets, including currencies.
Ueda reiterates the Bank of Japan's sustainable achievement of its 2% inflation targetCommitted and noted that monetary policy will be properly guided in accordance with changing economic, price and financial developments. He stressed that the central bank will maintain a data-dependent approach and continue to review the situation “without any preconceptions.”
New Zealand's service industry was still in a contraction in March, with the BusinessNZ service performance index slightly rising from 49.0 to 49.1. This is another month below the long-term average of 53.0, highlighting the continued weakness.
Although the overall improvement was small, the basic components showed mixed circumstances—activity/sales fell from 49.1 to 47.4. But new orders/business climbed from 49.5 to 50.8, the highest level since February 2024, indicating a rebound in demand in the future. Employment rose from 49.1 to 50.2, ending a 15-month straight contraction and providing early signs that the company may regain hiring confidence.
The proportion of negative comments among survey participants fell slightly to 56.7%, with ongoing concerns about high interest rates, inflation, weak consumer sentiment and broader economic uncertainty. The company also mentioned external pressures such as global tariffs and rising input costs.
EU Economic Commissioner Valdis Dombrovskis admitted that the U.S. decision to suspend reciprocity tariffs of more than 10% for 90 days is a positive step to open the door to negotiations. However, he warned that the existing 10% tariffs in almost all countries remain in effect, which continues to put pressure on the global economy. In addition, the United States has not yet lifted 25% tariffs on steel, aluminum, automobiles and auto parts – measures that remain an important source of transatlantic economic tensions.
Dombrovskis pointed out that a model simulation shows that the current U.S. tariff structure could reduce U.S. GDP by 0.8% to 1.4% by 2027. While the EU's economic impact is expected to be moderate (about 0.2% of GDP), he warned that damage could escalate sharply if tariffs become entrenched or retaliation has intensified.
Dombrovskis said that in this worst case, U.S. GDP could fall as much as 3.3%, EU will lose as much as 0.6%, and global GDP will shrink by 1.2%. The impact on global trade will be particularly severe, with a contraction of 7.7% in the next three years.
The UK economy rose unexpectedly strongly in February, with GDP growing by 0.5% month-on-month, far higher than market expectations, only 0.1% month-on-month. All three sectors contributed to growth: the service industry grew by 0.3% month-on-month, production grew by 1.5% month-on-month, and the construction industry grew by 0.4% month-on-month.
According to three-month rolling calculations, as of February 2025, real GDP increased by 0.6% compared with the previous three months, mainly due to the increase in service industry output by 0.6% and production by 0.7%. However,During this period, the construction industry remained flat.
Preliminary survey of the University of Michigan showed that the U.S. consumer confidence index plummeted to 50.8 in April, far lower than expected 55.0 and lower than 57.0 in March. This marks the fourth straight month of decline in the index, which has fallen more than 30% since December 2024.
The declines ranged: the current condition indicator fell from 63.8 to 56.5, while expectations fell from 52.6 to 47.2, highlighting growing concerns about the economic outlook amid a growing trade war.
The timing of this investigation is worth noting—it was conducted between March 25 and April 8, just before the U.S. partially lifted some tariffs on April 9. Therefore, these data largely reflect the public's response to early escalation.
Perhaps the most worrying data point is the surge in inflation expectations in the coming year, jumping from 5.0% to 6.7%, the highest level since 1981. This marks the fourth straight month of inflation expectations to rise by half a percentage point or more, highlighting the risk that inflation expectations may lose their anchorage.
The U.S. Producer Price Index (CPI) unexpectedly declined in March, with the overall PPI of final demand falling -0.4% month-on-month, well below the expected 0.2% month-on-month growth.
The decline was mainly due to the decline of final demand goods by -0.9% month-on-month, while the decline of final demand services by -0.2% month-on-month.
On the same year, PPI slowed down from 3.2% to 2.7% year-on-year, which was also lower than expected.
PPI, which excludes food, energy and trade services, rose only 0.1% month-on-month and 3.4% year-on-year.
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