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• Wednesday’s US session has witnessed relatively tight ranges in G10 currency markets, allowing the USD index to consolidate its initial move lower across APAC and early European trade. The ICE dollar index currently tracks at 99.50, just 50 pips from the 99.01 cycle lows that were printed last Friday.
• Weakness has been broad based against G10 peers, although the Swiss Franc and Swedish Krona have outperformed. For USDCHF specifically, the pair erased the entirety of the prior session’s bounce and leaves the pair vulnerable to a break below the 0.8100 mark, which would place the pair at fresh ten-year lows. A softer risk backdrop across global markets appears to have resumed the souring sentiment towards the dollar, and USDSEK’s 1% move lower has no idiosyncratic driver behind the move.
• The likes of EUR, AUD and NZD are all rising in line with the adjustment for the greenback, with EURUSD pushing back towards 1.14 and keeping bullish conditions firmly intact. Key focus remains on 1.1495, the Feb 10 2022 high. For AUDUSD, spot continues to edge back towards 0.6400, and a breach of 0.6409 (Feb 21 high) would likely prompt some further short covering for the pair. This may signal scope for a stronger recovery towards the US election highs at 0.6550.
• The Bank of Canada kept rates unchanged at 2.75%, in line with a slender majority of analysts. Together with higher crude prices, the CAD has been a beneficiary which has allowed USDCAD to edge back towards its recent lows. It is worth noting that Monday’s low came within 7 pips of the US election lows, located at 1.3822, a level of key short-term significance. Moving average studies are in a bear -mode position, highlighting a dominant downtrend. Below here, 1.3744 marks the next target, a Fibonacci retracement.
• GBP remains a relative underperformer on Wednesday, reflective of a softer-than-expected set of March inflation data. Although GBPUSD hovers around unchanged on the session, spot remains above the prior breakout level of 1.3207, an important bull trigger for the pair.
• Thursday’s data highlights include New Zealand CPI and Australian unemployment, before the focus turns to the ECB decision, where a 25bp cut of its three key rates is widely expected.

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On Thursday, Italian Prime Minister Giorgia Meloni will become the first European leader to sit for a face-to-face meeting with US President Donald Trump since he imposed his 'Liberation Day' tariffs. On Friday, Meloni will return to Rome to host Vice President JD Vance for a state visit. 

• Politico notes: “Meloni’s personal engagement with Trump has set nerves jangling in other EU capitals. But as the bloc faces up to a potentially ruinous trade war, even her wariest counterparts are coming round to the idea that she may be the only European leader he is willing to listen to.”
• An Italian official said: “Having Trump’s ear is an asset for the entire European Union,” highlighting Meloni’s “ideological affinities with the world of American conservative right-wing politics.”
• However, as Semafor notes that Italy, “is a laggard on the key issues Trump values: Italy spends far below the European average on defense, and has a hefty trade surplus with the US.”
• Bloomberg writes: “The question for Meloni to ask is: What, if anything, does the US really want? Any hint of an answer would be of huge value to a Europe that remains stumped," noting that European Union Trade Commissioner Maros Sefcovic left a meeting with his US counterparts this week still waiting for the US to “define its position.”

Figure 1: EU Trade Balance In Goods With the United States

Source: Politico