Cooling U.S. inflation data looms large - Market Update April 10 2025

Trade War Reshuffles. Markets shift fast! - Moneta Markets Daily Market Update: April 10, 2025

Global markets are adjusting to a volatile landscape as U.S.-China trade tensions escalate, despite a 90-day tariff delay on most nations announced by President Donald Trump. Cooling U.S. inflation data looms large, with the March CPI report set to influence Fed rate expectations and the USD’s trajectory. Safe-haven assets like gold and the Japanese Yen rally, while the Canadian Dollar weakens amid oil’s struggles and Fed rate cut bets reshape currency dynamics.

U.S. CPI Inflation Data in Focus

Forecast: The U.S. CPI is expected to rise 2.6% YoY in March (down from 2.8%), with core CPI easing to 3% (from 3.1%), per the Bureau of Labor Statistics report due at 12:30 GMT today. Monthly gains are projected at 0.1% for headline CPI and 0.3% for core.

Key Drivers: TD Securities anticipates a “firm” 0.26% m/m core inflation pace, with goods cooling and services picking up. A sharp drop in energy prices (-0.07% m/m headline) and flat food inflation signal a slowdown, keeping Fed rate cuts on the table.Market Impact: A softer-than-expected report could boost Fed easing bets (currently 100 bps by year-end), weakening the USD further.

 EUR/JPY: Yen Pressures Euro

Current Levels: EUR/JPY softens to 161.05 in early European trading, down 0.3%.

Key Drivers: Stronger-than-expected Japanese PPI (+2.9% YoY) reinforces BoJ rate hike expectations for 2025, lifting the JPY. Safe-haven demand persists amid U.S.-China tariff escalation, though a neutral RSI (near 50) suggests consolidation. The euro weakens as ECB rate cuts loom (90% chance of 25 bps on April 17).

Technical Outlook: Vulnerable below the 100-day EMA (161.00); support at 160.35, resistance at 162.20. A break below 160.00 could target 159.12. 

Japanese Yen vs. USD: Safe-Haven Strength

Current Levels: USD/JPY slides to mid-146.00s, down 0.4%, after a bounce from sub-144.00.

Key Drivers: Robust Japanese PPI and hopes of a U.S.-Japan trade deal bolster the JPY, amplified by its safe-haven status amid tariff fears. Divergent BoJ (hawkish) and Fed (dovish) outlooks weigh on USD/JPY, though recovering risk sentiment caps JPY gains.

Technical Outlook: Support at 145.50; resistance at 147.00. CPI data could dictate the next move.

 USD/CAD: Loonie Under Pressure

Current Levels: USD/CAD dips to 1.4075-1.4070, down 0.2%, after failing to hold above 1.4100.

Key Drivers: Fed rate cut bets and a risk-on recovery (sparked by Trump’s tariff delay) weaken the USD. However, oil’s inability to rebound from a four-year low ($61) undermines the Canadian Dollar (CAD), limiting USD/CAD losses. Bearish oscillators signal further downside.

Technical Outlook: A break below 1.4055 could test the 200-day SMA (1.4000); resistance at 1.4175-1.4180.

 Gold: Eyes Record Highs

Current Levels: XAU/USD rallies to $3,100, up 1.3%, closing in on its all-time peak.

Key Drivers: Escalating U.S.-China trade tensions (despite tariff delays elsewhere) drive safe-haven flows. Fed rate cut expectations depress the USD, while inflation fears enhance gold’s appeal as a hedge. Elevated U.S. yields (10-year at 3.90%) and risk-on sentiment pose headwinds.

Technical Outlook: Resistance at $3,120 (record high); support at $3,070. CPI data will be pivotal.

 Broader Market Context

Mixed Signals: The CBOE Volatility Index (VIX) eased to 28 as Trump’s tariff delay lifts risk assets—S&P 500 futures rose 0.8%. Yet, U.S.-China tensions keep safe-havens in demand.

Currency Trends: The U.S. Dollar Index (DXY) slips 0.2% to 103.90, reflecting Fed easing bets. The JPY and gold outperform, while CAD lags.

Commodities: WTI crude holds near $61.50, up 0.8%, but oversupply and demand fears linger.

 Looking Ahead:

Key Events: Today’s U.S. CPI data could shift Fed expectations—cooler inflation may lock in a May cut, pressuring the USD further. Japan’s BoJ stance and U.S.-Japan trade talks remain wildcards.

Market Implications: A softer CPI could fuel risk-on momentum, lifting equities and weakening safe-havens, while a hotter-than-expected print might bolster the USD and cap gold’s rally. Volatility is primed to swing.

Key Takeaway:

Trump’s tariff chess game reshuffles global markets—delaying some moves but doubling down on China. Cooling U.S. inflation keeps the Fed in play, driving gold past $3,100 and the yen higher, while oil and CAD struggle. Today’s CPI report holds the next decisive piece in this high-stakes economic match.