In the past week, the financial markets experienced significant volatility amidst subdued trading due to the Easter holiday. The movement of the dollar was particularly noteworthy, briefly dropping below the 99 mark on Monday's early session, hitting a low of 98.88, the lowest level since April 2022.
Despite the global markets being closed for Easter last week, the dollar failed to stabilize, continuing to decline after repeatedly testing the 100 mark unsuccessfully, showing signs that confidence in safe-haven assets is gradually waning. Although there was a slight rebound as the weekend approached, the overall trend remained a downtrend.
Trump Pressures Powell, Fed Independence Raises Market Concerns
The pressure on the dollar is not only due to economic fundamentals but also political interference. Last Friday, the director of the U.S. National Economic Council, Hassett, publicly stated at the White House that the Trump administration is "seriously studying" whether it has the authority to dismiss the current Federal Reserve Chairman Powell. The day before, Trump accused Powell of "playing politics," criticizing him for not cutting interest rates in time, and threatening that he has the power to "swiftly remove" him from his position.
Although Powell insists his term is legally protected until May 2026 and will not end early due to political pressure, these remarks have already caused a stir in the market. Investors are worried that the Fed's independence is facing unprecedented challenges, thereby shaking the dollar's core status as the world's reserve currency.
Trade War Atmosphere Heats Up, Global Currency Turmoil
Another key factor contributing to the dollar's weakness is the increased risk premium caused by escalating trade tensions. Last week, high-level trade negotiations continued among the U.S., Japan, Europe, and the UK. During the U.S.-Japan talks, there was market speculation that the U.S. would pressure the yen's exchange rate, causing the dollar to yen pair to dip to a seven-and-a-half-month low. However, after Japanese negotiator Akazawa Ryoichi denied the currency topic, the dollar rebounded nearly 1 yen against the yen.
Meanwhile, EU Trade Commissioner Šefčovič stated in Washington that the EU hopes to reach a new fair agreement with the U.S. before the 90-day tariff exemption period ends. Italian Prime Minister Meloni also expressed optimism about the potential U.S.-EU trade agreement.
In the UK, U.S. Vice President Pence emphasized the close relationship between the U.S. and the UK, mentioning that Trump's fondness for the British royal family will facilitate the signing of a "great agreement," hinting that political relations may influence future trade policy direction.
Interest Rate Changes in Multiple Countries Amplify Dollar Volatility
Last week, the European Central Bank announced another rate cut of 25 basis points, reducing the key rate to 2.25%, marking the seventh rate cut in the past year. This decision led to the euro rising against the dollar to 1.1389, hitting a new high. At the same time, the yield on German two-year government bonds also fell, indicating that the market has fully anticipated the ECB's easing policies.
In contrast, the Bank of Japan's Governor Kazuo Ueda maintained a relatively hawkish stance, reiterating that if inflation rises as expected, he will continue to pursue a rate hike policy, providing certain support for the yen's exchange rate. The pound against the dollar rose to 1.3298 last week, the highest since early October last year, benefiting from stable UK economic growth, falling inflation, and strong wage growth.
Light Financial Events This Week, Market Focuses on Policy Signals
This week lacks key macroeconomic data releases, with market attention concentrated on the G20 finance ministers and central bank governors meeting, the IMF/World Bank Spring Meetings, and other international financial forums; statements on the direction of fiscal and monetary policies may become the main guidance for the market.
In addition, the upcoming release of the Federal Reserve's Beige Book is also seen as a critical document for analyzing the current U.S. economic situation, with investors closely watching its latest assessments on consumption, employment, and inflation.
