BOE’s Greene Points To US Dollar Rebound In Past Crises

Economic

Forex

Summary:

Bank of England rate-setter Megan Greene said history shows the US dollar has often rebounded during periods of economic strife as she highlighted the importance of exchange-rate movements for UK monetary policy.

“If you look at other crises, if you look at the global financial crisis, or Covid actually, Lehman, the dollar depreciated after those events as well, and then ultimately rallied,” Greene said in an interview with the Atlantic Council in Washington on Friday. “We’re not seeing textbook economics play out here necessarily, but there is some precedent for that.”

The dollar’s decline since Donald Trump launched an all-out trade war earlier this month is seen as unusual as the US currency has historically been a safe haven during times of turmoil. It has even prompted warnings that its world reserve currency status may be under threat, a notion dismissed by BOE Governor Andrew Bailey.

Greene said that it is “too early” to say where the dollar will settle, underscoring how she and other policymakers remain wary over endorsing the view that the trade war will be disinflationary for the UK and push them into a quicker policy easing. Any dollar rebound would push up the cost of imports for the UK.

Greene said that exchange rates will be a key factor in her thinking ahead the BOE’s next interest-rate decision due to be announced on May 8. Money markets are fully pricing in a quarter-point reduction, with two or three more by the end of the year.

“What it really comes down to is probably exchange rates,” she said. “The trade-weighted sterling exchange rate index, it hasn’t moved as much as you might expect, but a lot comes down to what you think will actually happen with the dollar. If it continues to depreciate, then that would, on balance, be disinflationary for the UK economy. If it rallies, then the opposite would be the case.”

The BOE’s trade-weighted pound index is up 0.8% since the start of the year with sterling’s strength against the dollar being partially offset by weakness versus the euro. The pound has jumped over 6% against the dollar this year and fallen 3% against the euro.

Source: Bloomberg Europe

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Grace Montgomery

Economic

Stocks

Shares of Tesla (TSLA 8.32%) are climbing on Friday. The electric vehicle (EV) maker's stock had gained 8.7% as of noon ET. The rise comes as the S&P 500 was mostly flat and the Nasdaq Composite rose modestly.

What's fueling the optimism? Late yesterday, the Trump administration announced regulatory changes that could help Tesla achieve its self-driving ambitions sooner.

Relaxing the rules

The Transportation Department announced it will loosen some of its rules to help U.S. automakers deploy self-driving cars more quickly. The administration appears eager to beat China in a race to develop the next-gen technology. The new rules allow for exemptions from certain federal standards for safety testing, and crash reporting requirements for self-driving software will be streamlined.

"We're in a race with China to out-innovate, and the stakes couldn't be higher," Trump's transportation secretary, Sean Duffy, wrote in a statement, claiming the rule changes will "slash red tape and move us closer to a single national standard." Investors appeared to believe the new framework will speed up Tesla's full self-driving timeline.

Make or break?

The announcement comes at a critical time for Tesla. The company has seen its sales plummet across key markets even as EV sales at large are on the rise. In the company's recent earnings call, Elon Musk said he would devote more time to his duties as CEO after investor discontent grew; many view his role in the Trump administration as taking away from his ability to effectively lead Tesla. And there's been consumer backlash to Musk's government-cutting moves.

Tesla is facing increased competition from Chinese EV makers like BYD as well as legacy carmakers. It appears that the early dominance Tesla once enjoyed has eroded, but delivering on Musk's long-standing promise of full self-driving abilities in Teslas would undoubtedly help the company regain an edge. The question is when will this happen. I'm not convinced it will be anytime soon, and I continue to think the stock is overvalued.

Source: The Motley Fool

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Adam

Commodity

Futures Pressured by Bearish Inventory Data and Weak Demand

Daily Natural Gas

U.S. natural gas futures are slipping lower as traders respond to bearish storage data and a lack of weather-driven demand, with technical factors adding further pressure. Prices are testing the critical 200-day moving average at $2.906, a level that is dictating the broader trend, and risks remain skewed to the downside.

At 13:42 GMT, Natural Gas Futures are trading $2.883, down $0.047 or -1.60%.

Is Technical Pressure Signaling a Deeper Pullback?

The daily chart suggests ample room for additional downside movement, with the next significant support level marked at $2.199. Immediate resistance is seen at the 61.8% short-term retracement level of $2.995. A break above this could spark short-covering activity, but upside momentum would likely stall near the 50% retracement at $3.361. Until a clear reversal forms, price action remains vulnerable to further selling.

How Did the Latest EIA Report Rattle the Market?

Thursday’s EIA report fueled selling after a much larger-than-expected storage build. Inventories for the week ended April 18 surged by +88 Bcf, sharply above the consensus estimate of +75 Bcf and the five-year average build of +58 Bcf. This sizable increase came even as total stocks remain -20.2% lower year-over-year and -2.3% below the five-year seasonal average, underscoring tight overall supply but overshadowed by the near-term bearish build.

Could Renewable Energy Trends Keep a Lid on Prices?

Strong wind and solar generation were cited as major factors behind the weak drawdown in natural gas inventories. As renewable output expands, natural gas demand for power generation continues to face intermittent headwinds, particularly during mild weather periods. This dynamic weighed heavily on sentiment after the bearish EIA miss.

What Role Is Weather Playing in Suppressing Demand?

Weather forecasts through April 30 project near-ideal conditions across most of the U.S., with highs ranging from the 60s to 80s, and localized 90s across the southern states. With only light to very light national demand expected, near-term fundamentals offer little support to prices. Mild conditions reduce both heating and cooling loads, directly limiting natural gas consumption.

Market Forecast: Bearish Bias Prevails

Given the combination of bearish EIA data, weak weather-driven demand, strong renewable generation, and bearish technical signals, the short-term outlook for natural gas remains bearish. Traders should watch the $2.906 technical level closely, but a failure to hold above it opens the door for a deeper correction toward $2.199 support.

Natural Gas Price Outlook – Natural Gas Continues to See Sellers

The natural gas markets continue to look a bit negative overall, as we are out of the seasonal bullish pressure from heating demand. At this point, I continue to look at it as a “sell the rally” scenario. This is a cyclical market move that I see happen almost every year.

Natural Gas Technical Analysis

The natural gas market has seen quite a bit of negativity during the early hours on Friday as we continue to see traders price in the idea of a potential slowdown in demand when it comes to natural gas as the temperatures in the United States and the temperatures in Europe, of course, start to climb now that we are out of winter. Furthermore, you have to question whether or not there will be as much demand for electricity as there once was due to the potential recession that seems to be looming out there. If that’s the case, demand will fall as well.

With that being the case, I think this is more of a “fade the rally” type of market. And now that we are below the $3 level, I find that very interesting as well, due to the fact that there are just too many things lining up at the same time that have broken below this major $3 level. And for me, that is a sign that we are going to fade into the lower levels that we spend quite frankly, most of the year. Rallies, I think, are going to continue to offer selling opportunities to at least the 200 day EMA, if not even as high as $3.50. I have no interest whatsoever in buying natural gas as it has a lot of troubles this time of year. Ultimately, this is a market that I think will continue to drive itself lower.

Source: fxempire

Risk Warnings and Disclaimers

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Adam

Economic

President Donald Trump’s unprecedented tariffs, particularly on China, and recent attacks on Federal Reserve Chair Jerome Powell caused alarm among some of his top advisers and America’s biggest CEOs, who warned of financial chaos and store shelves that could go bare, people familiar with the conversations said.

The warnings — and the markets’ own volatility this week — seemed to have broken through. Trump backed down Tuesday from his threats to try to remove Powell from the job, telling reporters in the Oval Office: “I have no intention of firing him.”

That prompted sighs of relief on Wall Street. A day after markets boomed on comments from Treasury Secretary Scott Bessent that Trump would seek to de-escalate the trade war with China, US markets gained again on Wednesday.

Top administration officials were also relieved by Trump’s Oval Office statement on Powell, the people familiar with the matter said. The officials had become unnerved by the heated rhetoric and wary of a prolonged legal battle should Trump attempt to unseat the Fed chair.

The Dow closed higher by 420 points, or 1.07%. The broader S&P 500 gained 1.67% and the tech-heavy Nasdaq Composite rose 2.5%.

The three major indexes held on to a rally but finished well below their highest levels of the day. The Dow surged nearly 1,200 points in the morning before pulling back: Stocks came off their highest levels after Bessent cautioned that it could take considerable time to rebalance trade between the United States and China.

There is a “2 to 3-year timeline for the full rebalancing,” Bessent told a group of reporters on Wednesday after delivering a speech at an event hosted by the Institute of International Finance, a person familiar with the matter confirmed to CNN.

The comments, previously reported by Bloomberg News and CNBC, underscore how obstacles remain even as investors are eager for trade agreements and CEOs seek clarity on tariffs.

White House press secretary Karoline Leavitt on Wednesday said on Fox News there will be “no unilateral reduction in tariffs against China.”

“The president has made it clear China needs to make a deal with the United States of America, and we are optimistic that will happen,” Leavitt said. “And when that continues, it will be up to the president what the tariff rate on China will be.”

Trump on Wednesday told reporters that his administration will get a “fair deal” with China on trade, adding more broadly that negotiations with countries “are going very well.”

When Trump was asked in an impromptu gaggle outside the White House if he was talking to China actively, he responded: “Actively. Everything’s active.”

“Every country wants to partake, even countries that have ripped us off for many, many years. China is an example, but it’s not just China, European Union. They ripped us off for many, many years, and those days are over,” he added.

US Treasury bonds initially rallied Wednesday before giving back those gains in a stark reversal. The benchmark 10-year yield fellow below 4.3% in the morning before rising back up to almost 4.39%, just below where it had settled Tuesday. Yields and prices trade in opposite directions.

Trump shifts tone after meeting with CEOs

Trump’s notable shift in tone toward Powell and China came a day after he met privately in the Oval Office with chief executives of four major US retail companies who conveyed concerns about rising economic fallout from Trump’s tariff policy and the uncertainty it has created for financial markets.

The CEOs of Walmart, Target and Home Depot, all of whom delivered a blunt message about interruptions in the supply chain and its effects on consumers, were invited to the White House as part of an ongoing internal campaign to make the case to Trump about the real-world impact of his policies, administration officials said.

Trump’s tariffs have placed significant pressure on the retail sector. The business leaders warned that store shelves across America could “soon be empty,” two people familiar with the meeting said, as they presented a dire economic picture that could come into sharper view within weeks.

For weeks, White House chief of staff Susie Wiles and other senior advisers have been fielding alarming calls from business leaders about the fallout from Trump’s tariff policies and his ongoing threats to fire the chairman of the Federal Reserve. Taken together, the president’s words have rattled markets and shaken confidence in the administration’s stewardship of the economy.

Bessent, who has emerged as one of the leading Cabinet officials whose words have calmed financial markets, played a key role in arranging the meeting of CEOs, officials said, as part of an effort to show Trump how serious the economic challenges facing the administration have become.

Doug McMillon, the CEO of Walmart who has developed a cordial relationship with Trump through meetings at Mar-a-Lago and several mutual friends, bluntly told Trump that the trade war with China had already started to disrupt the supply chain, officials said, and would only intensify by summer.

Axios first reported the fallout from the president’s meeting with CEOs.

Bessent urges caution on Powell

Many Trump advisers did not ultimately believe the president would attempt to fire Powell, given the warnings he’d been receiving from his economic team — including Bessent — stretching back several months.

And Trump had seemed to absorb the notes of caution.

But his amped-up rhetoric over the past week had caused fresh uncertainty about his intentions — in particular, his message on social media Thursday that Powell’s “termination cannot come fast enough!” and his follow-up Monday calling Powell a “major loser.”

Trump has argued that the Fed should cut rates soon to speed up the economy, perhaps as a way to counteract the significant economic drag that his massive tariffs are expected to create. But Powell has said repeatedly the Fed will only make a decision to raise or lower rates after careful consideration and would not rush a decision or issue an emergency rate cut before the rate-setting committee’s next scheduled meeting in May.

White House press secretary Karoline Leavitt continued Trump’s line of attack Tuesday in a press briefing, in which she defended the president for criticizing the Fed. She suggested that the Fed’s action to lower rates in the late stages of the Biden administration — but not (yet) under Trump — could be political. There is no evidence the independent Fed is taking a political stance, and Powell has vehemently and repeatedly denied suggestions that the Fed plays politics when making its monetary policy decisions.

“The president believes they have been making moves and taking action in the name of politics rather than the name of what’s right for the American economy,” Leavitt said prior to Trump’s Oval Office comments. “The president has the right to express his displeasure with the Fed and he has the right to say he believes interest rates should be lower.”

Trump’s top economic adviser Kevin Hassett also told reporters the White House was studying whether Trump could fire Powell, and said a potential “new legal analysis” might ease market concerns. That represented a break from Hassett’s prior comments in support of the central bank’s independence.

Leavitt said Tuesday that Hassett had recently changed his mind on the Fed after Powell insisted the central bank wouldn’t rush a decision to cut rates.

“I also spoke to Kevin Hassett about the Fed as well and he has called into question the Fed’s independence and whether they are actually doing things out of the best interest of the economy or are they doing it for partisan reasons,” she said.

But White House officials had long determined that firing Powell would spark legal challenges and market tumult.

And if any study was actually underway, Trump suggested Tuesday it wasn’t necessary. He said in the Oval Office he “never did” have any intention of removing Powell from the job.

source : edition.cnn

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Adam

Bond

It's been a choppy month for US safe-haven assets, with the 10-year Treasury yield swinging sharply from about 3.9% at the start of April to nearly 4.6% following President Trump's April 9 "Liberation Day."

Since then, yields have settled at a still-elevated range between 4.3% and 4.4%.

These fluctuations have puzzled investors. Treasurys typically act as safe havens during times of uncertainty, a sentiment currently dominating Wall Street as concerns mount over shifting trade dynamics and a possible self-inflicted recession.

Since bond prices move inversely to yields, rising yields indicate investors are selling off bonds. This is a counterreaction to the usual flight-to-safety behavior investors have come to expect during volatility, sparking concerns of a broader "sell America" trade.

But despite the unusual market moves, some strategists said they aren't alarmed.

"It's not really concerning to me at this point," Jeff Schulze, head of economic and market strategy at ClearBridge Investments, told Yahoo Finance during a Q&A session earlier this week.

Schulze compared current market conditions to those in 2022, a year marked by several sharp spikes in yields as the Federal Reserve aggressively hiked interest rates to combat soaring inflation. In 2022, the 10-year yield began the year at around 1.6%, climbed to a peak of 4.3%, and ended at 3.9%.

Those moves were driven by a combination of faster growth, persistent inflation, and a rise in the "term premium." This is the extra yield investors demand for holding long-term debt, especially when future conditions are uncertain.

In Schulze's view, the current yield increase is once again being driven by a rising term premium, not fundamental deterioration. After hovering near zero following the financial crisis, the term premium has recently climbed to about 50 basis points — a level more in line with historical norms after years of ultralow growth and accommodative monetary policy.

In the 2000s, for example, the term premium ranged between 50 and 100 basis points. It climbed even higher in the 1990s, often between 100 and 200 basis points.

"The term premium is essentially an uncertainty premium," Kelsey Berro, fixed income portfolio manager at JPMorgan Asset Management, told Yahoo Finance on Wednesday.

"What was the narrative over the last few days? A lot of uncertainty about the [status of] the United States within the global order, and more specifically the headlines and the conversations from President Trump about the performance of [Federal Reserve Chair] Jerome Powell."

In other words, rising yields aren't signaling a collapse in confidence over US debt or the broader economy. Instead, it's a reflection of heightened market uncertainty.

Markets rallied midweek after Trump decided to backtrack on his attempt to remove Powell. More positive trade developments also helped lift investor sentiment, contributing to the fall in long-term yields.

As volatility begins to clear, Berro said Treasury moves will more heavily depend on the fundamentals like the outlook for growth, inflation, and the Federal Reserve, which has taken on a more dovish tone.

"We think the Fed is going to be cutting rates later this year," Berro said. "That ultimately means about a range for 10-year yields of 3.75 to 4.5%."

On Thursday, expectations of a Fed rate cut increased after Federal Reserve Bank of Cleveland President Beth Hammack said policymakers could move forward with a cut in June if the economic data is clear and convincing by then.

'There's really no alternative'

In addition to the rising term premium, other factors, including the unwinding of highly leveraged positions, such as the basis trade, along with derisking from European investors, have also added to upward pressure.

"After 15 years of foreign accumulation of US assets, you're seeing a reversal of that flow," ClearBridge's Schulze said. But while some have speculated that this signals a loss of confidence in the US, Schulze sees the shift as a broader derisking process following years of overexposure to US markets.

Others echoed this viewpoint.

"There's really no alternative," JPMorgan's Berro said, arguing recent moves don't necessarily imply that the US is losing its edge. Rather, markets are adjusting to other opportunities.

"Recent trading activity may hint at waning US exceptionalism," she said. "That doesn’t mean the US is no longer exceptional."

Lawrence Gillum, chief fixed income strategist at LPL Financial, offered a similar perspective, writing in a client note on Tuesday, "Despite recent volatility, US Treasuries remain the world's preeminent safe-haven asset (for now), in our view, underpinned by the dollar's global reserve status (for now)."

"This month's Treasury market sell-off, while severe, does not signal a 'regime shift' away from this status," he added. "Instead, we believe it mostly reflects temporary deleveraging pressures rather than a fundamental rejection of Treasuries' safety."

And while nothing is guaranteed, any shift away from the prevailing safe-haven status of the US would be a slow evolution. As Gillum put it: "We would argue that is something that would take place over decades and not days."

Source: yahoo

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Warren Takunda

Economic

China–U.S. Trade War

When US President Donald Trump announced sweeping new tariffs on 2 April, the world braced for a fresh surge in inflation, but three weeks later, a growing number of economists and policymakers see the opposite happening.

Far from stoking inflation, tariffs could end up being the trigger that pushes European interest rates even lower.

European Central Bank (ECB) officials have already begun adjusting their tone. Earlier this month, the Governing Council unanimously cut the deposit facility rate by 25 basis points to 2.25%, with ECB President Christine Lagarde hinting that a 50-point move was also discussed.

The US tariff announcement appears to have tilted the stance in Frankfurt, with policymakers now prioritising downside growth risks.

"We're seeing the tariff impact in PMI numbers, in intentions to purchase, intentions to hire," Lagarde said in an interview with The Washington Post this week, adding that "tariffs are probably more disinflationary than inflationary."

Lagarde also indicated that the ECB is likely to downwardly revise its growth outlook in its upcoming June meeting.

President Donald Trump arrives on the South Lawn of the White House, 24 April, 2025AP Photo

Lower commodity prices, stronger euro, weaker demand

Oil prices have fallen more than 15% since early April, while the European Dutch TTF natural gas benchmark has dropped over 22%.

This cooling in energy markets reflects expectations of slower global growth, particularly if US tariffs restrict trade flows and reduce business confidence.

At the same time, the euro has strengthened against the dollar, thus limiting imported inflation.

Another force fuelling disinflation, especially in Europe, is the expected redirection of global goods.

Goldman Sachs economist Giovanni Pierdomenico said that US tariffs will create around $300 billion (€280 billion) in excess global supply. With US demand falling, some of that surplus, especially from China, is likely to find its way to Europe.

Past episodes suggest about 15% of excess supply ends up in the euro area, equivalent to a 1.5–2% increase in goods supply. "We estimate this should translate into around -1.5% of downside to the price level of core goods, corresponding to -0.5% downside to core HICP," Pierdomenico said.

"China will have overcapacity, will want to reroute its exports somewhere, possibly to Europe. That would have a dampening impact on prices," Lagarde said.

A view of the European currency Euro sculpture at Germany's main financial district in Frankfurt, 9 April, 2025AP Photo

ECB eyes deeper rate cuts

With inflationary pressures easing, markets are increasingly betting that the ECB will deliver additional rate cuts before year-end. Bank of America now expects the deposit rate to fall to 1.25% by December, citing "lower growth, even lower inflation, and policy rates to drop" further.

The bank recently revised down its euro area GDP forecasts to 0.8% for 2025 and 1.0% for 2026, highlighting tariff-related uncertainty, a stronger euro, and subdued global demand.

Germany, given its export-heavy economy and vulnerability to auto sector tariffs, is projected to shrink by 0.1% in 2025. France and Italy are forecast to grow just 0.4% and 0.7%, respectively.

Falling wage pressures are adding to the disinflationary tilt. Bill Diviney, head of macro research at ABN Amro, said the Indeed wage tracker declined to 2.7% in the first quarter- the lowest since the pandemic. "Disinflationary forces mean the ECB is likely to cut rates further to 1.5% by September," he said.

New German cars are stored at a logistic centre in Essen, 27 March, 2025AP Photo

Diviney added that the euro's recent appreciation, tighter financial conditions, and lower energy prices had all reinforced the case for further easing. "Our conviction in inflation leading to an undershoot of the ECB’s 2% target by the turn of the year has increased."

While the ECB is reacting to European conditions, the risk of a US downturn looms large. Goldman Sachs economist Alexandre Stott noted that in past cycles, most European economies entered recession within three quarters of a US contraction. "We already forecast small contractions for Germany, Italy, and Switzerland in Q3 this year," he said.

Although the full effects of President Trump's trade tariffs have yet to materialise, the early market and policy response suggests that inflation fears may have been overdone.

Instead, falling commodity prices, weaker demand, and a redirection of global supply are creating a disinflationary environment that may compel the ECB to accelerate its easing cycle in the months ahead.

Source: Euronews

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Patricia Franklin

Economic

Bank of England policymaker, Megan Greene, expressed her concerns about weak growth and the potential impact of U.S. tariffs on the UK’s inflation during a discussion with the Atlantic Council think tank. The discussion took place on the sidelines of the International Monetary Fund’s spring meeting on Friday.

Greene said that the U.S. President Donald Trump’s tariffs are more likely to lead to lower inflation in Britain rather than higher. She expressed uncertainty about the final impact of these tariffs, stating, "We have tariffs, and none of us have any idea what they’ll look like when the dust finally settles."

She further added that the risk space has shifted slightly. She believes that the risk is now leaning towards the disinflationary side. In her view, the tariffs on the UK would, on balance, be more disinflationary than inflationary.