​​​​​​​Stocks Rebound but End Week in the Red Amid Trade War Jitters | Weekly Market Analysis

Key events this week:

Monday, March 17, 2025

• USA - Core Retail Sales (MoM) (Feb)
• USA - Retail Sales (MoM) (Feb)

Wednesday, March 19, 2025

• Eurozone - CPI (YoY) (Feb)
• USA - Crude Oil Inventories
• USA - FOMC Economic Projections
• USA - FOMC Statement
• USA - Fed Interest Rate Decision
• USA - FOMC Press Conference

Thursday, March 20, 2025

• UK - BoE Interest Rate Decision (Mar)
• USA - Initial Jobless Claims
• USA - Philadelphia Fed Manufacturing Index (March)
• USA - Existing Home Sales (Feb)

US stocks rallied on Friday, with the technology sector leading gains, but major indexes still logged a fourth consecutive weekly decline due to escalating trade war concerns and weakening consumer confidence.

The Dow Jones Industrial Average climbed 674 points (+1.7%), while the S&P 500 gained 2%, and the Nasdaq Composite advanced 2.6%.

Data from the University of Michigan’s Surveys of Consumers revealed that the Consumer Sentiment Index dropped to 57.9 in March, significantly below the forecasted 63.1 and down from February’s 64.7 reading. This marked its lowest level since November 2022, as uncertainty surrounding tariffs and economic conditions weighed on consumer confidence. While current conditions remained relatively stable, future expectations, including personal financial outlooks and stock market sentiment, deteriorated.

The Japanese Yen continued to lose ground for a second consecutive session on Monday, pushing USD/JPY back above the 149.00 level during Asian trading. Positive sentiment in Asian equity markets, fueled by China’s recently announced stimulus measures, contributed to the JPY’s weakness. However, expectations that the Bank of Japan may proceed with further rate hikes could limit the currency’s downside.

Additionally, concerns about a potential US economic slowdown, driven by tariff disputes and speculation about upcoming Federal Reserve rate cuts, kept gains for the US Dollar in check. Traders are also exercising caution ahead of this week’s key central bank events, including the BoJ’s policy decision on Wednesday and the outcome of the Federal Open Market Committee meeting. Investors may seek confirmation of sustained buying momentum before positioning for a further recovery in USD/JPY from last week’s multi-month low.

The USD/CHF pair edged lower to around 0.8845 during the early European session on Monday, as renewed economic uncertainty and weak US data weighed on the Greenback. Unpredictable trade policies and mounting concerns about a potential recession have dampened sentiment toward the US Dollar, while Switzerland’s safe-haven currency continues to find support amid global tensions.

Recent US economic data showed that consumer sentiment fell to a nearly two-and-a-half-year low, while inflation expectations rose due to ongoing trade disputes. Additionally, escalating geopolitical risks in the Middle East - particularly US military actions in Yemen - have contributed to demand for the Swiss Franc.

Meanwhile, the Federal Reserve is widely expected to maintain its current interest rate stance during Wednesday’s policy meeting. However, investors are pricing in at least two quarter-point rate cuts later in the year, starting in June or July, with the possibility of a third by year-end. Any unexpectedly hawkish tone from Fed officials could provide short-term support for the US Dollar.

The Australian Dollar remains under pressure against the US Dollar after US President Donald Trump announced plans to impose reciprocal tariffs on April 2, including duties on the auto sector and no exemptions for steel and aluminum. However, the AUD/USD pair found some support following the release of positive economic data from China.

China’s retail sales grew 4.0% year-over-year in January-February, up from December’s 3.7% increase, while industrial production rose 5.9%, surpassing the 5.3% forecast. Over the weekend, China also introduced a stimulus plan aimed at boosting consumer spending and stabilizing financial markets, which improved risk sentiment and offered some relief to the Australian Dollar.

Looking ahead, traders will be closely monitoring the US Retail Sales report, which could influence near-term AUD/USD movements. Additionally, market sentiment may be affected by potential ceasefire discussions between the US and Russia, as reports suggest that President Trump and Russian President Vladimir Putin could engage in talks this week.

The USD/CAD pair remained range-bound above the mid-1.4300s on Monday, as a bullish surge in oil prices and positive developments in US-Canada trade negotiations provided support for the Canadian Dollar. Crude oil reached a two-week high, driven by rising geopolitical tensions in the Red Sea, particularly after the US vowed to continue strikes against Yemen’s Houthis.

Meanwhile, the US Dollar Index continues to struggle near multi-month lows amid concerns that aggressive trade policies and retaliatory tariffs could hinder US economic growth. Softer-than-expected inflation data and signs of a cooling labor market are fueling speculation that the Federal Reserve will implement multiple rate cuts this year.

Traders are now awaiting key US economic reports, including Retail Sales and the Empire State Manufacturing Index, for further market direction. However, the main focus will be on the Federal Reserve’s policy decision on Wednesday, which is expected to shape the trajectory of the U.S. Dollar and provide fresh momentum for the USD/CAD pair.