ECB Cuts Rates, Shifts Focus to Trade Risks

ECB cuts rates as expected; global markets closed for Easter Monday, impacting liquidity and increasing volatility risk.

With nearly every major financial market shuttered in observance of the Easter Monday holiday, global trading entered a period of low liquidity and thin volume to start the week. The most significant market-moving event occurred ahead of the long weekend, when the European Central Bank (ECB) delivered a widely expected 25-basis-point interest rate cut on Thursday, April 17.

ECB Cuts Rates, Shifts Focus to Trade Risks

The ECB reduced its main refinancing rate to 2.40%, signaling growing confidence that inflation is on a sustainable path back to the 2% target. Headline and core inflation, along with services inflation, have all shown signs of cooling. Wage growth has moderated, and firms have increasingly absorbed cost pressures, giving the ECB the comfort to maintain its gradual policy easing trajectory.

Despite the dovish move, the central bank struck a cautious tone. Policymakers emphasized that future rate decisions will remain data-dependent as rising global trade tensions pose downside risks to the Euro Area economy. The euro dipped to a low of 1.1335 following the announcement but found footing near 1.1363.

Asia Session Kicks Off Amid Low Liquidity, Dollar Weakness

Asian markets reopened to thinner volumes on Monday, setting the stage for irregular volatility. The U.S. dollar extended its multi-week slide, driving the Dollar Index (DXY) below the critical 99.00 threshold. Moreover, the selloff in the greenback, fueled by softening economic indicators and shifting rate expectations, has triggered notable strength in commodity currencies and safe-haven assets.

Market Bias: What to Watch in the Next 24 Hours

Dollar Index (DXY):
The DXY remains under pressure ahead of today’s Conference Board Leading Economic Index (LEI) release (2:00 pm GMT). Following February’s pessimistic outlook, another drop is anticipated for March, driven by ongoing tariff concerns and weaker business sentiment.
24-Hour Bias: Medium Bearish

Gold (XAU):
Gold continues to glitter in the face of a weakening dollar. Spot prices surged past $3,350/oz during the Asia session, propelled by safe-haven demand and thin trading conditions.
24-Hour Bias: Strong Bullish

Australian Dollar (AUD):
Despite market closures, the AUD rose strongly toward 0.6400, boosted by last week’s greenback weakness and resilient domestic fundamentals.
24-Hour Bias: Medium Bullish

New Zealand Dollar (NZD):
The Kiwi rallied above 0.5900 last week and retains momentum heading into a holiday-shortened session.
24-Hour Bias: Medium Bullish

Japanese Yen (JPY):
Demand for safe-haven assets has kept the yen in focus. Also, USD/JPY extended its slide, dipping below 141 as traders sought shelter amid rising geopolitical and trade uncertainties.
24-Hour Bias: Medium Bearish

Euro (EUR):
While buoyed by the ECB’s rate cut, the euro remains sensitive to global developments. Nonetheless, rate-cut expectations globally may support relative strength for the euro in the near term.
24-Hour Bias: Medium Bullish

Swiss Franc (CHF):
Safe-haven flows have strengthened the franc, driving USD/CHF under 0.8200. Low liquidity could exaggerate moves.
24-Hour Bias: Medium Bearish

British Pound (GBP):
Cable surged past 1.3350 with momentum building as Asian markets reopened. Despite bank holidays, GBP remains buoyed by broad USD weakness.
24-Hour Bias: Medium Bullish

Canadian Dollar (CAD):
The Loonie’s strength is tied to the U.S. dollar’s decline. USD/CAD fell under 1.3900 and appears poised for further downside.
24-Hour Bias: Medium Bearish

Oil (WTI):
Oil prices saw a sharp rebound last week but fell on Monday as nuclear negotiations between the U.S. and Iran progressed. However, a potential breakthrough could ease supply concerns and pressure prices.
24-Hour Bias: Medium Bearish

So, with most global markets on pause for Easter Monday, traders should expect choppy moves amid light liquidity. The dollar’s continued weakness is driving major FX moves, while gold and safe-haven currencies benefit. Furthermore, the week’s tone will likely hinge on fresh data, starting with today’s U.S. LEI print.

Stay tuned. Markets may be quiet, but volatility isn’t taking the day off.

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