The euro is up slightly but remains under pressure near its 50-day average, weighed down by US tariff threats, trade uncertainty, and geopolitical tensions, while the dollar continues to draw support from elevated US yields and expectations the Fed will keep rates higher for longer. Germany’s March GfK consumer confidence is expected to improve modestly, helped by stronger income expectations and easing inflation, though sentiment remains weak and gains are likely to be limited amid economic and geopolitical uncertainty. Meanwhile, Chancellor Friedrich Merz is reshaping Germany’s China strategy toward a pragmatic “de-risking” approach—seeking fair, rules-based trade and reduced dependencies while maintaining cooperation and positioning Europe’s relationship with China as balanced, resilient, and mutually respectful.

The yen is holding steady, but recent political developments point to continued near-term weakness. Prime Minister Takaichi’s nomination of reflation-leaning academics to the BOJ board and her cautious stance on further rate hikes have lowered expectations for near-term tightening, reinforcing the view that Japan’s real yields will remain deeply negative. Combined with soft demand from China and ongoing US–Japan rate differentials, this backdrop favors dollar strength, with USDJPY likely biased higher in the coming weeks, though excessive yen weakness could trigger verbal intervention. Meanwhile, steady services inflation supports gradual policy normalization over time but offers no urgency for the BOJ to accelerate hikes.

The Australian dollar has been bid up after stronger-than-expected January CPI reinforced the view that the RBA may still tighten policy this year. Headline CPI rose 0.4% MoM, bringing the annual rate to 3.8%, above expectations and still well above the RBA’s 2–3% target, highlighting persistent inflation, especially in services. Markets now see a modest chance of another rate hike as soon as March, with slightly higher expectations for further tightening into May. The RBA expects inflation to peak around mid-2026 before gradually easing, though strong demand, higher travel and fuel costs, and ongoing labor market pressures continue to keep price growth elevated for now.