Forex markets

For the few dollar bulls out there, the week kicked off with another U.S. data letdown, as weaker-than-expected retail sales reinforced fears of a softening consumer and reignited recession chatter. The only positive takeaway is that US stock markets took some relief from the fact that the data printed 1 % positive in the control group, espeically in light of the increasingly uncertain outlook as the new administration’s policies take shape.

But today, the spotlight shifts to geopolitics and fiscal firepower.

All eyes are on the Trump-Putin ceasefire talks, where any diplomatic progress could send risk-positive ripples through FX and risk assets. Meanwhile, over in Germany, the Bundestag is set to rubber stamp a blockbuster spending package, smashing through debt limits and injecting fresh fiscal stimulus into the eurozone.

If the ZEW economic sentiment index jumps on the back of this fiscal optimism, the euro could catch an additional tailwind, setting the stage for bullish momentum in European FX. . Growth expectations were already climbing in February, with the index projected to jump from 26 to 48—though an upside surprise wouldn’t be shocking and keep in mind it’s the delta which counts.

With FX markets trading US recession fears and an EU fiscal lifeline, it could make for an enjoyable day if you are long Euros.

The long yen trade has been a total disappointment—both on the crosses and outright. With risk sentiment picking up, the move higher in XXX/JPY pairs is wholly mechanical and algo driven, which even forced me to hedge through EURJPY 162.65.

The BOJ kicked off its two-day policy meeting on Tuesday, with policymakers set to gauge just how much of a threat the escalating U.S. trade war poses to Japan’s economy. Markets are already positioned for further rate hikes this year, but if the BOJ signals dovish intent in Wednesday’s statement, expect the yen to take a hit, fueling fresh upside in JPY crosses. With Japan’s economic surprises index sinking to its lowest level since January, traders are already on edge, making hedging for those long JPYs, more so on the cross, a no-brainer ahead of the decision.

For now, it’s a game of patience—the market is betting the BOJ stays on hold this week, but money markets have fully priced in a 25bps hike for June or July. If the central bank wavers, expect JPY to weaken through USD/JPY 150.50.

Germany’s fiscal play and Euro’s next move

Germany’s moment of truth has arrived. Today, the Bundestag votes on a historic fiscal stimulus package, smashing the constitutional debt brake to unlock $1 trillion for defence and infrastructure. A game-changer in the making.?

Germany’s $1 trillion fiscal overhaul is nothing short of a seismic shift, shattering decades of debt aversion and rewriting the country’s economic playbook. The Bundestag is set to scrap the constitutional debt brake, unleashing massive spending on defence and infrastructure. This move could supercharge Europe’s economy and break the austerity shackles. This is a fiscal bazooka for markets that could inject years of growth momentum, bolster European equities, and solidify Germany’s role as an economic engine rather than a fiscal enforcer.

But the political and economic landmines are everywhere. Fiscal conservatives are already sharpening their knives, arguing that this sets a dangerous precedent and could fuel inflationary risks. A lame-duck Bundestag making such a radical decision undermines democratic trust, while future governments may be forced to grapple with soaring debt levels and rising yields. The EU is also in the crosshairs—if Berlin, once the enforcer of fiscal discipline, embraces deficit spending, it weakens its credibility in keeping Italy, France, and others in check. This could fuel Euroskepticism, coalition fractures, and populist backlash at home.

Germany is crossing the Rubicon—whether this is a bold leap into a stronger economic future or a reckless break from fiscal discipline will depend on how the markets, policymakers, and voters respond in the months and years ahead. One thing is clear: Germany’s political and economic identity will never be the same.

As a reminder, I’m heading to Shanghai later this evening for the F1 China GP, so after today's FX report, I will not update my market reports until Monday.

SPI Asset Management provides forex, commodities, and global indices analysis, in a timely and accurate fashion on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.

Our publications are for general information purposes only. It is not investment advice or a solicitation to buy or sell securities.

Opinions are the authors — not necessarily SPI Asset Management its officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.

Recommended Content


Recommended Content

Editors’ Picks

USD/JPY keeps range near 149.50 after BoJ's status quo

USD/JPY keeps range near 149.50 after BoJ's status quo

USD/JPY keeps its range near 149.50 in the Asian session on Wednesday. The Bank of Japan left the policy rate unchanged at 0.50% at its March meeting, offering little impetus to the Japanese Yen (JPY). The focus shifts to Governor Ueda's press conference for fresh cues on future rate hikes.  

USD/JPY News
AUD/USD remains stuck in a range near 0.6350 as Fed decision looms

AUD/USD remains stuck in a range near 0.6350 as Fed decision looms

AUD/USD consolidates in a tight band near 0.6350 early Wednesday as traders turn to the sidelines ahead of the Fed policy decision. The US Dollar languishes near a five-month low amid dovish Fed bets, cushioning the Aussie's downside Meanwhile, geopolitical tensions remain a drag on the pair. 

AUD/USD News
Gold buyers take a breather ahead of the Fed verdict

Gold buyers take a breather ahead of the Fed verdict

Gold price is consolidating the recent upsurge to a record high of $3,038 in Wednesday’s Asian trading hours. Gold buyers take a breather as a sense of caution prevails, heading toward the all-important US Federal Reserve monetary policy announcements due later in the day.

Gold News
Bitcoin, Ethereum and Ripple expect volatility around the FOMC meeting

Bitcoin, Ethereum and Ripple expect volatility around the FOMC meeting

Bitcoin and Ripple prices face resistance around their key levels; a firm close above indicates recovery on the cards, while Ethereum price finds support at its critical level, suggesting a bounce ahead.

Read more
Tariff wars are stories that usually end badly

Tariff wars are stories that usually end badly

In a 1933 article on national self-sufficiency1, British economist John Maynard Keynes advised “those who seek to disembarrass a country from its entanglements” to be “very slow and wary” and illustrated his point with the following image: “It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction”.

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Majors

Cryptocurrencies

Signatures

Best Brokers of 2025