The second week of April was dominated by massive market volatility. First, U.S. indexes officially entered a bear market, followed by one of the best sessions in Wall Street history after the announcement of a 90-day suspension of tariffs — excluding China. Currently, the trade war between the U.S. and China has reached an absolute peak, making any information regarding tariffs and potential agreements crucial for markets heading into the Easter holidays. Of course, a number of macroeconomic reports will also be released, including China's GDP data, while the European Central Bank (ECB) will announce its decision on interest rates. Therefore, this week it's worth paying special attention to markets such as EURUSD, CHN.cash, and GOLD.
EURUSD
The EURUSD pair has reached its highest levels in three years amid growing concerns about the health of the U.S. economy and a capital flight from the country. Investors are seeking refuge in other safe havens, including European bonds, whose yields are falling in anticipation of an interest rate cut by the ECB this Thursday. The ECB is expected to cut rates by 25 basis points to 2.25%, with further cuts anticipated to 1.75% by the end of the year. Despite strong expectations for additional ECB rate cuts, the market may continue to look favorably on the euro if the situation between China and the U.S. does not improve.
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During the second week of April, we received China’s CPI inflation data, which showed that the country has entered deflation.
Ahead lies the release of China's Q1 2025 GDP data, scheduled for Wednesday during the Asian session. The data is expected to show a slight slowdown compared to Q4 2024, with an annual growth rate of 5.2% year-over-year, down from 5.4% year-over-year. However, many economists suggest that real growth is closer to 3–4%.
It is worth noting that despite the full-scale trade war between the U.S. and China (U.S. tariffs at 145% and Chinese tariffs at 125%), Chinese indexes are recovering. There are signs that China may be reducing its holdings of U.S. debt, which could lead to increased purchases in the local market. We are also observing a strengthening of the Chinese yuan. Nevertheless, market sentiment will primarily be dictated by news related to trade relations between the world’s two largest economies.
GOLD
Gold has reached new all-time highs, breaking above $3,200 per ounce. This year's return stands at 22%, and investment firms are raising their year-end forecasts for the metal, with some predicting levels above $4,000. Gold is currently viewed as the best safe haven for free capital, considering the sharp sell-off in U.S. debt amid major uncertainties surrounding the trade war. The gold volatility may persist as markets will remain vulnerable to US macro readings and trade war.
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