The eurohas held above its March 13 low but remains capped below its 200-day average, reflecting a still-fragile outlook. The sharp drop in German ZEW expectations highlights weakening euro-area growth sentiment, with rising energy costs and inflation uncertainty further clouding the outlook and weighing on domestic demand. At the same time, softer ECB tightening expectations versus a relatively resilient US backdrop tilt rate differentials against the euro. While short-term rebounds are possible on improved risk sentiment or a more cautious Fed, the near-term bias remains subdued, with the pair likely to stay headline-driven and upside limited over the next couple of weeks.

USDJPY is hovering just below 160 as the Bank of Japan is expected to keep rates unchanged this week, with markets focused more on guidance than action. While growth forecasts have improved and domestic demand is stabilizing, softer exports and a return to a trade deficit highlight external headwinds. Rising oil prices and yen weakness complicate the outlook, potentially delaying—but not ruling out—further tightening, with April still seen as a possible window. For now, authorities appear comfortable with current FX levels, leaving Governor Ueda’s communication as the key driver for near-term yen direction.

The Australian dollar is modestly stronger, holding above key technical support, as recent RBA rate hikes signal a still-hawkish stance and help support the currency domestically. However, growth momentum is softening and expectations are for slower GDP ahead. More importantly, AUD remains heavily influenced by global risk sentiment—while higher rates should be supportive, geopolitical tensions and demand for the US dollar as a safe haven are offsetting those gains. In the near term, AUD may hold up better against other currencies, but a sustained rise against the USD will likely require an improvement in overall market sentiment.