GBP/USD edged lower to 1.3050 amid market concerns that US President Donald Trump's tariffs might trigger inflationary pressures, ultimately affecting the Federal Reserve (Fed) policy stance. US President Trump announced a 10% baseline duty on all products entering the US, along with additional specific levies on most of its trading allies, responding to threats of countermeasures from their leaders. On Thursday, US Commerce Secretary Howard Lutnick stated that he anticipates many nations will begin thoroughly reviewing their trade policies following US President Donald Trump's announcement of reciprocal tariffs. He further mentioned, "We are engaging with all key trading countries; US products will need to be marketed there." On the data front, the economic activity in the US services sector slowed, with the ISM Services PMI falling to 50.8 from February's 53.5, below analysts' expectations of 53.0. The Prices Paid Index, a vital inflation measure, decreased to 60.9 from 62.6, while the Employment Index dropped to 46.2 from 53.9, indicating a decline in labour market conditions within the service sector. On Thursday, the US Department of Labor reported that new unemployment insurance applications decreased slightly to 219K for the week ending March 29, missing initial estimates and coming in lower than the previous week's revised figure of 225K (reported initially as 224K). The seasonally adjusted insured unemployment rate also stood at 1.3%, and the four-week moving average fell by 1.250K to 223K from last week's revised average. Furthermore, Continuing Jobless Claims rose by 56K to a total of 1.903M for the week ending March 22.

On the other hand, sterling weakened against its major peers due to market speculation that the British economy could struggle with potential global economic risks following Trump's reciprocal tariffs. The S&P Global/CIPS UK Services Purchasing Managers' Index (PMI) rose to 53.2, an increase from 51.0 in February, surpassing the anticipated 51.2. Additionally, the S&P Global UK Composite PMI climbed to 52.0 in March 2025, up from 50.5 in February, also exceeding market predictions of 50.3. This indicates modest growth in the private sector and marks the highest reading since September.

With no major UK data scheduled today, the pound is likely to remain vulnerable to shifts in broader market sentiment. The US employment report is expected to significantly drive the GBP/USD exchange rate.

USD/CAD Rebounds Ahead of US/Canadian Jobs Data

USD/CAD recovered near 1.4157 as a rising risk of a further escalation of the US-Canada trade war steered market sentiment around the Canadian Dollar (CAD). On April 2 2025, President Donald Trump announced substantial tariff increases, introducing a standard 10% levy on all US imports alongside additional tariffs targeting specific countries. Canada and Mexico were exempted from these new measures following existing USMCA agreements. However, the 10% tariff will apply to these nations only if the previously imposed 25% duties—originally introduced over concerns related to drug trafficking and border security—are lifted or suspended. While this exemption initially boosted investor confidence in Canada's economic outlook, strengthening the Canadian dollar (CAD) against the US dollar, Canadian Prime Minister Mark Carney's firm response, vowing to introduce retaliatory measures, heightened concerns over rising trade tensions, undermined the currency.

On Thursday, Canadian Prime Minister Mark Carney pushed back against US President Donald Trump's sweeping tariff package, outlining Canada's retaliatory measures, which he described as a barometer for assessing US compliance with the terms of the USMCA (formerly NAFTA) agreement. He further announced that Canada would impose a 25% tariff on all vehicles imported from the United States that do not meet USMCA trade deal requirements. Moreover, crude oil prices plunged sharply on Thursday, hitting a multi-week low amid growing concerns that the escalating trade war could weigh on global economic growth and reduce fuel demand. This added further pressure on the commodity-linked Loonie.

On the other hand, the greenback continues to struggle as fears mount that US President Donald Trump's tariffs could trigger a recession and prompt the Federal Reserve (Fed) to resume its rate-cutting cycle. These concerns have contributed to an overnight slump in US Treasury bond yields. Today's Nonfarm Payrolls are expected to show an increase of 135,000 jobs in March, following a gain of 151,000 in February. The Unemployment Rate is projected to remain steady at 4.1% during the same period. Meanwhile, Average Hourly Earnings—a closely watched gauge of wage inflation—are forecast to rise by 3.8% year-over-year (YoY) in March, down from a 4.0% increase in February.

Investors will pay attention to the labour market data from both the USA and Canada, as well as influential FOMC members' speeches, including Fed Chair Jerome Powell's remarks, for further direction on the USD/CAD exchange rate.

EUR/USD Slips Ahead of US NFP Release

EUR/USD lost momentum near 1.1003, as the euro found support amid heightened fears of a potential trade war between the United States (US) and the Eurozone, following President Donald Trump's announcement of 20% reciprocal tariffs on the European Union (EU). European Commission (EC) President Ursula von der Leyen warned that the consequences of such measures would be "dire for millions of people around the globe". She stated that the European bloc stands ready to retaliate with countermeasures should negotiations with Washington fail to reach a constructive resolution. Von der Leyen further revealed that the EC is finalising its "first package of countermeasures" in response to the US tariffs on steel and is now preparing additional actions to safeguard European "businesses and interests". Last month, she also cautioned that the EU may impose tariffs on up to €26 billion worth of US imports as a direct response to Trump's sweeping 25% duties on steel and aluminium, which occurred on March 12.

On the data front, Germany's Factory Orders remained unchanged in February, indicating stagnation in the nation's manufacturing sector. For the month, contracts for goods labelled 'Made in Germany' stood at 0% in February, following a revised 5.5% drop in January. This data fell short of the projected 3.5%. Germany's Industrial Orders experienced a year-over-year decline of 0.2% in February, contrasting with a previous upward revision of 0.1%. Meanwhile, European Central Bank (ECB) officials have dismissed the notion that tariff-induced inflation could hinder prospects for further interest rate cuts. ECB policymaker and Governor of the Bank of Greece, Yannis Stournaras, stated that US tariffs would not impede an April rate cut since the inflation trajectory remains "unchanged." He noted that US tariffs are likely to reduce the Euro area's Gross Domestic Product (GDP) growth rate by approximately "0.3%-0.4%" within the first year.

In the Eurozone, Services Purchasing Managers' Index (PMI) data displayed mixed results. The HCOB Spain Services PMI fell to 54.7 in March from 56.2 in February, missing the anticipated 55.5 yet signifying ongoing expansion, albeit slower. Conversely, the HCOB Italy Services PMI decreased to 52.0 in March from 53.0 in February, below the forecast of 52.5, marking a fourth consecutive month of expansion in the services sector. On the other hand, the HCOB France Services PMI rose to 47.9 in March from 45.3 in February, surpassing the expected 46.6. Although the industry has contracted for the seventh month in a row, the slower rate of decline suggests a potential stabilisation. HCOB Germany Services PMI slightly decreased to 50.9 in March from 51.1 in February, remaining above the preliminary estimate of 50.2. The HCOB Eurozone Services PMI increased to 51.0 in March, up from 50.6 in February, exceeding the preliminary estimate of 50.4. Simultaneously, the HCOB Eurozone Composite PMI rose to 50.9 in March from 50.2 in February, also surpassing the preliminary estimate of 50.4, indicating a slight expansion in private sector activity.

The persistent worries about the US economic slowdown, driven by tariff announcements and a continuing drop in US stock values, are weighing down the USD. Furthermore, rising speculation about a possible decrease in Federal Reserve (Fed) interest rates adds to the risks facing the US economy, which could adversely affect the USD downside. Friday's US March employment data is due on Friday, including nonfarm payrolls (NFP), unemployment rate, and average hourly earnings, which are expected to limit the downside of the greenback.

In the upcoming session, overall market sentiment regarding global trade issues will influence the EUR/USD exchange rate.

NZD/USD Tumbled on Escalating US-China Trade Tensions

NZD/USD declined near 0.5720, as rising fears of an escalation of a trade war between the United States (US) and China exerted some selling pressure on the China-proxy Kiwi. Trump announced a universal 10% tariff on all imports into the United States, which includes products from New Zealand, negatively impacting the Kiwi. Furthermore, US President Donald Trump plans to apply a total tariff rate of 54% on imports from China effective April 9. Previously, Chinese imports faced a 20% tariff, and an additional 34% in reciprocal tariffs will be introduced, as reported officially. The looming trade war between the two largest global economies may weaken the China-dependent Kiwi, given China's significance as a trading partner for New Zealand. On the policy front, the Reserve Bank of Bank of New Zealand (RBNZ) is expected to cut the interest rates by 25 basis points at its April meeting next week. However, the positive economic indicators from China could help mitigate the AUD's downfall. China's Caixin Services PMI rose to 51.9 in March, up from 51.4 in February, surpassing the anticipated 51.6.

Persistent concerns about a potential economic slowdown in the United States—fuelled by recent tariff announcements and a continued decline in US equity markets—are exerting downward pressure on the US Dollar (USD). In addition, growing speculation around a possible interest rate cut by the Federal Reserve (Fed) is amplifying downside risks to the US economy, further weighing on the greenback. However, Friday's upcoming US employment data for March—including Nonfarm Payrolls (NFP), the unemployment rate, and average hourly earnings—is expected to offer some support and potentially limit further downside. Today's Nonfarm Payrolls are projected to increase by 135,000 jobs, following a gain of 151,000 in February. The unemployment rate is anticipated to hold steady at 4.1%, while Average Hourly Earnings—a key measure of wage inflation—are forecast to rise by 3.8% year-on-year (YoY) in March, easing from the 4.0% increase recorded in February.

In today's session, US March employment data, along with addresses by Federal Reserve (Fed) Chair Jerome Powell, Michael Barr, and Christopher Waller, will be a key driving factor for the NZD/USD exchange rate.

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