Market Summary and Key Outlook (as of April 21, 2025)

Currencies & Forex Markets

• USD: Likely to weaken in the short term if geopolitical risks escalate (e.g., potential scenario of Powell’s resignation or political instability). Strong policy uncertainty and risk-off sentiment point to dollar downside, especially if Trump’s influence on Fed leadership materializes.
• EUR: Short-term bearishness is expected due to dovish ECB stance and ongoing trade tensions. However, longer-term risks include a potential euro appreciation if US tariffs ease or geopolitical risks decline, as European investor demand and valuation considerations shift.
• GBP: Slightly bullish on Sterling due to overall European FX strength, but domestic risks from dovish BoE policy outlook and US tariff escalation limit strong upside. Expect modest gains unless UK data shows clear signal for policy easing.
• JPY: Very bullish with high conviction, as policy uncertainty and recession risks remain elevated. Goldman Sachs favors long JPY against AUD, with targeted move to 85.0 on AUDJPY, reflecting a risk-off environment.
• AUD: Short positioning favored; risks include further downside if US-China trade tensions persist. The recent trade talks do not suggest any immediate currency deal, and policy uncertainty favors Yen strength.
• Chinese Renminbi (USDCNH): Trading around original entry; cautious stance with no strong directional bias unless trade negotiations progress.

Major Asset & Equity Outlooks

• Gold: Strong bullish trend targeting 3400, driven by geopolitical risks and safe-haven demand amid unresolved US-China trade tensions and potential escalation involving Russia. Gold’s rally remains intact, despite recent retracements.
• Equities: Expected to remain vulnerable, with potential retests of the yearly lows (around 4900 for S&P 500). Hawksih Powell, unresolved US-China trade issues, and tariff uncertainties weigh on risk sentiment.
• Oil: Volatile and declining, influenced by US geopolitical tensions, trade fears, and reduced global demand concerns.

Global Financial Condition Highlights

• Elevated policy uncertainty with ongoing US-China trade friction, making risk-off assets more attractive.
• US political risks include possible instability surrounding Powell’s position and Trump’s influence, which could trigger sharp market moves.
• European Growth prospects remain weak due to deflationary pressures and recession risks linked to tariffs and tightening financial conditions.
• Central banks (ECB, BoE) leaning dovish, easing monetary policy to support slowing growth and inflation targets.

Summary

• The short-term outlook favors a risk-off environment with safe-haven assets like Gold, JPY, and CHF strengthening.
• The USD is expected to weaken further unless geopolitical stability improves rapidly, while EUR faces short-term downside but may appreciate if US tariffs ease later.
• GBP remains cautiously optimistic but limited by domestic and global risks.
• Market sentiment remains cautious, with potential volatility driven by US-China negotiations, geopolitical developments, and US political stability.

Overall: The environment is characterized by policy uncertainty and safe-haven strength, with a cautious outlook for equities and currencies, and a strong bullish bias for Gold and JPY.

Happy Easter to all traders!