March 19, 2025 – Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: EUR/USD Consolidates as Two Major Drivers Conclude

EURUSD has rallied 5% to 1.09 in March. This was partly driven by US dollar weakness, but the primary driver was fiscal spending packages in the EU. Germany has now agreed its massive spending plan.

Ukraine/Russia negotiations have advanced but are being stalled by Russian demands.

The first of this week’s five central bank meetings took place on Wednesday in Japan with the BoJ. Rates were held steady, as expected, but the bank paved the way for another rate hike, although Governor Ueda would not commit to a set date. Indeed, the threat of tariffs from the US may make the central bank cautious over its hiking policy. Markets appear to have been positioned for a more hawkish outcome as the yen is lower following the meeting, and USDJPY is higher by 0.5%. As ING note:

“The BoJ statement showed that its assessment of inflation and growth hasn’t changed much. However, there was much more emphasis on the uncertainties surrounding US trade policy. Governor Ueda also made several comments on tariff risks during his press conference. Ueda indicated that he would wait and see how the US tariff issues unfold, so markets may be betting more on a July hike than a May hike.”

The “wait and see” approach may be a common theme in the remainder of this week’s central bank meetings as uncertainty of tariffs hangs over decisions. This may change in April when the US Commerce Department releases its report on reciprocal tariffs and we will at least know which countries will be in the firing line. Any significant tariffs on Japan may prevent the BoJ from hiking again.

Later on Wednesday, the US Federal Reserve will announce its rate decision, with no change expected. Markets will focus on the Fed’s

Summary of Economic Projections (SEP), particularly the dot plot, which outlines policymakers’ forecasts for interest rates, growth, and inflation. Any significant revisions from December’s projections could reshape market expectations.

Markets expect dovish adjustments from the Fed, but a significant shift may be premature given that economic data remains solid and the impact of tariffs is still unfolding.

If the Fed holds its current stance and dot plot, the USD could strengthen, while stocks may face pressure. However, these moves may be temporary—rate cut expectations for May/June remain high. Further tariffs in April and potential economic softening could increase the chances of additional cuts later this year.

Euro In Need of New Drivers

The euro has made an impressive rally in March and is by far the best performing currency in the G7. EURUSD is trading at 1.09 after a gain of 5%. This was primarily driven by the massive fiscal spending packages rolled out across the EU in response to the US withdrawing support for Ukraine. The largest of these came from Germany as the new government pushed through a huge €500bn infrastructure fund and changes to the debt brake. This ran into some resistance but was finally concluded this week with agreement between CDU/CSU, SPD and the Greens.

Another key driver in the EU is the ceasefire between Ukraine and Russia which advanced on Tuesday when Putin and President Trump spoke on the phone. Putin agreed to temporarily stop attacking Ukraine’s energy infrastructure but made a series of demands for a full ceasefire, including the halt of all foreign support of Ukraine’s military. This is unlikely but is at least a starting point for further negotiations. While this is encouraging, the euro has not rallied further and fresh drivers may be needed to propel EURUSD over 1.10. A period of consolidation and rest now looks likely, especially now that markets are eagerly awaiting the next round of the trade war in early April, with the EU likely to be the focal point of US tariffs.

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• EUR/JPY may face key resistance at the upper boundary of the ascending channel near 164.50. 
• The 14-day Relative Strength Index stays above 50, strengthening the bullish outlook. 
• Initial support is seen at the nine-day EMA around 161.57.

EUR/JPY pauses its three-day winning streak, hovering around 162.60 during early European trading on Wednesday. Technical analysis of the daily chart suggested that the currency cross is trending higher within an ascending channel, indicating a continued bullish bias.

Additionally, the 14-day Relative Strength Index (RSI) remains above 50, reinforcing the bullish outlook for the EUR/JPY cross. Furthermore, the currency cross’s position above the nine- and 50-day Exponential Moving Averages (EMAs) underscores strong short- and medium-term price momentum, supporting the potential for further gains.

On the upside, the EUR/JPY cross may encounter its first key resistance at the upper boundary of the ascending channel near 164.50, followed by the four-month high of 164.90, recorded on December 30. A decisive break above this critical zone could strengthen the bullish bias, paving the way for a potential test of the eight-month high at 166.69.

The EUR/JPY cross may find initial support at the nine-day EMA of 161.57. A break below this level could weaken short-term price momentum, leading the currency cross toward the 50-day EMA at 160.13, followed by the lower boundary of the ascending channel at 159.30.

A further decline below this critical support zone could erode medium-term momentum, increasing downward pressure on the currency cross. This could push the EUR/JPY cross toward its monthly low of 155.59, recorded on March 4, and potentially to 154.41, the lowest level last seen in December 2023.

EUR/JPY: Daily Chart

March 19, 2025 – Written by David Woodsmith

STORY LINK Pound to Dollar Week Ahead Forecast: GBP/USD Dips as Markets Await Fed

The Pound Sterling (GBP) lost ground against the U.S. Dollar (USD) during Wednesday’s European trading session as investors exercised caution ahead of the Federal Reserve’s latest policy announcement.

At the time of writing, the Pound US Dollar exchange rate (GBP/USD) was trading at around $1.2973, down approximately 0.2% from Wednesday’s opening levels.

The US Dollar (USD) strengthened on Wednesday as investors positioned themselves ahead of the Federal Reserve’s upcoming interest rate decision.

While the Fed is widely expected to keep rates unchanged this month, the primary market focus will be on the bank’s forward guidance.

This has the potential to drive volatility in USD exchange rates, given the uncertainty surrounding the Fed’s policy trajectory.

If Fed Chair Jerome Powell signals growing concerns about a potential US recession, it’s likely to signal a more dovish approach to policy going forward, leading the US Dollar to retreat to multi-month lows.

Conversely, if Powell emphasises the inflationary risks linked to President Donald Trump’s latest tariff policies, speculation could grow that the Fed will maintain a hawkish position to counteract rising prices, potentially boosting USD demand.

The Pound (GBP) was largely directionless on Wednesday as traders refrained from making significant moves ahead of the Bank of England’s (BoE) upcoming interest rate decision.

Similar to the Fed, the BoE is expected to leave rates unchanged this month.

Previously, markets anticipated the next rate reduction would come in May. However, recent data has suggested that inflationary pressures in the UK remain persistent.

If the BoE signals a reduced likelihood of a near-term rate cut, the Pound could strengthen.

Looking to the second half of the week, the Bank of England’s rate decision is expected to be a key driver of movement in the Pound to US Dollar exchange rate.

Before that, however, the UK’s latest employment data is set to be released on Thursday morning.

Economists predict that while unemployment remained stable in January, wage growth likely slowed.

If wage growth has softened, it could weigh on the Pound as it may add to expectations that the BoE will need to loosen policy sooner rather than later.

Meanwhile, US initial jobless claims figures will also be in focus. If the latest data points to a weakening US labour market, the US Dollar could face some downward pressure.

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