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Weekly Analysis By zForex Research Team (24-28 March 2025)
Dollar Holds Firm as Fed Reaffirms Cuts, Euro and Pound Slip
The US dollar index rose toward 104 as the Fed signaled two cuts this year but saw no urgency. Powell downplayed Trump’s tariffs. The euro eased after Lagarde warned of weaker growth. The pound dipped below $1.30 as the BoE stayed cautious. The yen weakened to 149 as inflation eased but stayed above expectations.
Gold hovered near $3,030, eyeing a third weekly gain on Fed dovishness and safe-haven demand. Silver dropped over 2% to $33 amid China growth worries, but stayed near five-month highs due to supply concerns.
US Treasury yields slipped, with 2-year at 3.94% and 10-year near 4.22%, as Fed maintained a dovish stance. Japan’s 10-year yield was steady, while Germany’s retreated to 2.75%.
US Retail Sales (Feb)
Retail sales rose by 0.2% month-over-month in February, falling short of the 0.6% forecast but rebounding from January's revised -1.2% decline. Seven of thirteen retail sectors recorded contractions, with notable drops in food services (-1.5%), gasoline stations (-1%), and clothing stores (-0.6%). However, nonstore retailers led the gains with a 2.4% increase, followed by health and personal care stores (+1.7%). Core retail sales, which exclude autos, gas, food services, and building materials, posted a solid 1% gain, surpassing the 0.2% estimate and reversing a 1% decline in January.
BoJ Interest Rate Decision (Mar)
The Bank of Japan held its policy rate steady at 0.5%, maintaining the highest level since 2008. This decision follows a rate hike in January. The BoJ emphasized a cautious approach in light of global uncertainties, including US tariffs. Inflation remains elevated between 3.0% and 3.5% year-over-year, driven by rising service costs. Although wage growth is supporting domestic consumption, exports and industrial output continue to underperform. The central bank expects core CPI to rise gradually in the coming months.
EU CPI (Feb)
Eurozone inflation slowed to 2.3% year-over-year in February, down from 2.5% in January. The decline reflects a gradual easing in price pressures across the bloc, aligning with the ECB's broader disinflation trend.
Fed Interest Rate Decision (Mar)
The Federal Reserve left the federal funds rate unchanged at 4.25% to 4.50%, in line with market expectations. Policymakers reaffirmed their projection for two 25-basis-point cuts later in 2025, despite increasing economic risks. The Fed revised its 2025 GDP growth forecast down to 1.7% from 2.1%, while raising its inflation (PCE) forecast to 2.7%. The unemployment rate is now projected to rise to 4.4% next year. Additionally, the Fed announced that it will reduce its monthly Treasury redemptions from $25 billion to $5 billion starting in April, signaling a more cautious balance sheet runoff.
SNB Interest Rate Decision (Q1)
The Swiss National Bank cut its policy rate by 25 basis points to 0.25%, the lowest level since September 2022. February inflation dropped to 0.3%, down from 0.7% in November, mainly due to falling electricity costs. The SNB now forecasts inflation at 0.4% in 2025 and 0.8% through 2026 and 2027. GDP is expected to grow between 1% and 1.5% in 2025, supported by real wage gains, although external trade remains a downside risk.
BoE Interest Rate Decision (Mar)
The Bank of England kept interest rates unchanged at 4.5% in an 8–1 vote. Dissenting member Swati Dhingra called for a 25-basis-point cut. Inflation came in at 3.0% in January and is projected to rise to 3.75% by Q3 2025. The BoE highlighted ongoing risks from trade tensions and geopolitical instability, maintaining a cautious stance on policy easing.
US Initial Jobless Claims (mid-Mar)
Initial claims for unemployment benefits rose by 2,000 to 223,000, slightly under the consensus estimate of 224,000. Continuing claims increased by 33,000 to 1.87 million. Claims under the Disaster Unemployment Assistance (DOGE) program fell by 514 to 1,066. The labor market remains resilient, although some laid-off workers may not have filed yet due to ongoing severance arrangements.
Philadelphia Fed Index (Mar)
The Philadelphia Fed Manufacturing Index fell to 12.5 in March from 18.1 in February but still exceeded forecasts of 8.5. New orders declined to 8.7, and shipments dropped to 2.0. However, employment rose to 19.7, its highest level since October 2022. The prices paid index surged to 48.3, the highest since July 2022. While future activity and orders weakened, hiring expectations remained strong.
US Existing Home Sales (Feb)
Existing home sales increased by 4.2% to an annualized rate of 4.26 million units, surpassing the 3.95 million forecast. The median home price rose to $398,400, up 3.8% year-over-year. Inventory rose 5.1% to 1.24 million homes, representing a 3.5-month supply at the current sales pace.
Currencies
USD: The dollar index approached 104, supported by the Fed’s decision to maintain rates and reaffirm two cuts for 2025. Fed Chair Powell downplayed tariff-induced inflation, calling it transitory.
EUR: The euro fell below $1.085 after peaking at $1.09547 earlier in the week, pressured by ECB President Lagarde’s warning that a 25% US tariff could reduce eurozone growth by 0.3 to 0.5 percentage points. Markets do not expect further rate hikes from the ECB.
GBP: The pound slipped below $1.30 following the BoE’s rate hold and cautious forward guidance. UK unemployment held at 4.4%, while wage growth decelerated to 5.8%.
JPY: The yen weakened to 149 per USD as core inflation slowed to 3.0% in February, slightly above the forecast. The BoJ maintained its 0.5% rate and emphasized vigilance over global and FX risks.
Commodities
Gold: Prices hovered near $3,030 per ounce, closing in on record highs. Safe-haven demand, the Fed’s dovish outlook, and intensifying geopolitical tensions in Gaza and the Red Sea fueled bullish sentiment. Gold is up over 15% year-to-date.
Silver: Fell over 2% to around $33 due to concerns about China’s economic trajectory and ambiguous stimulus measures. Nonetheless, prices remain near five-month highs, underpinned by tightening supply and tariff-related disruptions.
Equities
Equity markets posted a mixed performance over the week. The Nasdaq ended largely unchanged, while the Dow and S&P 500 registered modest gains. Netflix led the upside among major tech stocks, followed by strong showings from Nvidia and Microsoft. On the downside, Meta and Tesla each declined by around 5%, with Amazon and Google also closing the week in negative territory.
