The US dollar steadied this week after the Fed held rates unchanged, with Chair Powell striking a careful balance between stagflation concerns and reassuring inflation expectations. While the Fed’s updated projections revealed slower growth and stickier inflation, Powell’s dismissal of tariff-driven price spikes as transitory offered a mildly dovish twist, nudging rates and the dollar slightly lower post-meeting. Still, the FOMC’s reluctance to rush into easing could cap further downside for USD. Add in signs that the Trump trade has been partially unwound, and the recent USD selloff may run out of steam, at least for now. Next week, all eyes turn to Core PCE, PMIs, and durable goods, with markets hunting for clues on whether the US economy is bending or breaking under policy pressure.

The Canadian dollar remains relatively firm, even as trade tensions with the US intensify ahead of the April expiration of USMCA exemptions and a broader review of reciprocal tariffs. While Canada has prepared retaliatory measures, the longer-term stance could shift depending on the outcome of a potential snap election, with reports suggesting PM Mark Carney may call federal elections for late April or early May. Despite the political noise, FX markets remain largely indifferent, with CAD risk reversals near two-month lows. Domestically, the picture is mixed. February CPI showed sticky inflation, raising stagflation concerns. BoC Governor Macklem offered little new guidance recently, and March meeting minutes due Wednesday are expected to reiterate a data-dependent stance. For now, CAD’s outlook is balanced—supported by firm inflation, but capped by rising external risks and political uncertainty.

Expected weekly trading range: 1.42 - 1.46

The euro’s recent rally has run out of steam, with markets now largely priced in for aggressive European fiscal stimulus. While Friday's expected passage of Germany’s debt brake reform in the Bundesrat has cleared the final political hurdle, it’s unlikely to deliver fresh upside for the euro. Looking ahead, March PMIs and Germany’s IFO survey will be key as markets seek evidence that stimulus measures are lifting confidence. But with data unlikely to confirm a clear recovery, and Ukraine-related uncertainty still in play, the euro remains vulnerable to tactical profit-taking. Expect ECB speakers to remain cautious, reinforcing the narrative that the growth and policy outlooks remain murky, and so too does the near-term path for EUR.

Expected weekly trading range: 1.53 - 1.57

The British pound held range after the BoE left rates unchanged at its March meeting, with only arch-dove Swati Dhingra voting for a cut. Looking ahead, a busy UK calendar could inject fresh volatility. March PMIs, February CPI, and retail sales will offer clues on whether the economy is stabilizing while inflation remains uncomfortably sticky. However, Chancellor Reeves’ Spring Statement on March 26 may deliver a more bearish undertone. The OBR is likely to present a downbeat economic outlook, while Reeves is expected to announce fiscal tightening measures worth up to £5 billion in an effort to regain control over the deficit. With data and fiscal signals pulling in opposite directions, GBP may stay range-bound in the near term.

Expected weekly trading range: 1.82 - 1.88

The Japanese yen seesawed within the familiar range this week. Despite the Fed maintaining its median dot plot, the upward revision to inflation forecasts and lower GDP outlook suggest a more cautious stance on easing, keeping the yen well anchored. At the same time, the BoJ maintained its confidence in the economic outlook, reinforcing expectations for another rate hike. Next week’s Tokyo CPI print is expected to confirm headline and core inflation holding above 2%, supporting the BoJ’s case for further tightening. Beyond rates, global equities have emerged as a key driver of JPY, providing a safe-haven bid for the yen. As noise around Trump’s April 2 tariff deadline intensifies, JPY could benefit further from risk-off flows, even as it stays sensitive to shifts in the US-Japan rate spread.

Expected weekly trading range: 102.48 - 105.60

The Swiss franc has steadied with the SNB delivering a widely expected rate cut to 0.25%. The move was partially priced in, and a broader risk-off tone on the day likely tempered further CHF losses. The SNB stuck to its measured tone, offering little in the way of surprise: light-touch forward guidance, minimal recent FX intervention, and a steady macro outlook projecting inflation to rebound. Despite easier policy, the CHF remains fundamentally well-supported. Near-zero rates enhance its status as a funding currency, while Switzerland’s low inflation differential and solid trade performance—with February exports near record highs—continue to reinforce the franc’s appeal.

Expected weekly trading range: 0.61 - 0.63

The Chinese yuan posted a modest gain over the past week as global risk sentiment improved. The move was underpinned by the Fed’s decision to hold rates steady, paired with dovish remarks from Chair Powell, which fueled US equity rallies, softened the dollar, and supported risk-sensitive currencies like the CNY. On the domestic front, Beijing’s latest stimulus measures, targeting consumption and key sectors, have improved the economic outlook, prompting global banks to revise China growth forecasts upward and take a less bearish stance on the yuan. Early signs of recovery have helped boost confidence in the CNY’s near-term trajectory.

Expected weekly trading range: 4.97 - 5.13

The Indian rupee surged modestly over the week, marking its strongest weekly performance in two years. The rally was largely driven by robust dollar inflows, notably from the FTSE All-World Index rebalancing, which is estimated to bring in around $1.5 billion. Additional support came from foreign buying of Indian bonds, with $352.8 million worth of inflows on March 20 alone, and a softer USD, as markets reacted to signs of a potential slowdown in the US economy. However, the outlook for the rupee turns more cautious heading into the next week as forecasts suggest a possible pullback.

Expected weekly trading range: 59.02 - 60.82

The Australian dollar remains stuck in range, with no major shift in AU-US rate differentials and investors still wary of Trump’s looming tariff announcements, especially with the April 2 reciprocal tariff deadline approaching. While Australia may avoid direct US tariffs, China-focused measures remain a key indirect drag on AUD. Domestically, the first employment decline in nearly a year rattled rate expectations, but the underlying picture remains solid. This should keep the RBA on a shallow cutting path, offering some support to AUD. Next week’s monthly CPI print will be key, any downside surprise could reinforce the rate cuts priced, while sticky inflation may challenge that view.

Expected weekly trading range: 0.89 - 0.91

Despite a surprise upside in Q4 GDP, confirming New Zealand’s exit from recession, NZD has retreated, caught in the crosswinds of risk-off sentiment and sluggish signals from Australia and the US. Still, the uptrend remains intact, and further local growth surprises could fuel modest NZD outperformance in the coming weeks. NZD remains sensitive to US economic data, particularly core PCE and consumer confidence. Weaker inflation would help NZD via lower UST yields and stronger equities, while a drop in confidence could cap gains by denting risk appetite.

Expected weekly trading range: 0.81 - 0.83

The Mexican peso depreciated this week as markets reacted to escalating tariff threats from US President Donald Trump. With 80% of Mexico’s exports heading to the US, the threats of new tariffs on Mexican goods raised fears of significant economic disruption and even a potential recession. Despite the headline risk, Mexican markets have shown resilience, with the peso initially strengthening in the wake of the tariff announcement, as investors digested the news and factored in the implementation delay, which offers time for negotiation. Looking ahead, MXN is expected to remain volatile as any progress or escalation during tariff negotiations could sway the peso significantly.

Expected weekly trading range: 13.89 - 14.31