Insights 
VT 
US Tariffs and EU Challenges
The EU faces challenges from US tariffs, prompting the European Commission to consider countermeasures as trade negotiations progress. EU Retail Sales decreased by 0.1% in March, failing to meet expectations, with year-on-year growth at 1.5%, below the forecast of 1.6%.
Market participants anticipate the Fed will maintain interest rates at 4.25%-4.50%. Nonfarm Payroll data shows solid job growth, limiting rate cut options for the Fed. The US Dollar Index stabilises around 99.55, awaiting outcomes from the US-China trade talks, which are crucial for easing tensions in their ongoing trade conflict. EUR/USD hovers near 1.1370, with key resistance at 1.1500 and support at 1.1214.
What we see here is a currency pair essentially parked in neutral, despite several moving parts both in North America and Europe. The EUR/USD is holding near 1.1370, balanced by shifts on either side of the Atlantic. On one hand, there’s expectation that the Federal Reserve will keep policy tight for now—most likely leaving rates within the upper 4% range—while still facing pressure from resilient labour figures. On the other, there’s the European Central Bank pointing squarely towards continued monetary easing. Not much push in either direction for the euro just yet, though tension is building just under the surface.
With Merz now installed in Berlin, the assumption is a certain policy certainty will benefit both investor sentiment and business conditions in Europe’s largest economy. He is unlikely to shift from Germany’s typically conservative fiscal approach, though the real test will lie in how upcoming industrial and consumer data respond over the next quarter. If purchasing demand fails to shift upwards meaningfully, the ECB may accelerate its rate cut timeline, giving added weight to its dovish signalling. That could anchor the single currency further, especially if growth expectations in major member states remain subdued.
Impact of German Industrial Orders
Retail figures within the EU gave little to cheer about—with March’s contraction, albeit a minor one, falling short of forecasts. A weak print isn’t damning on its own, though back-to-back disappointments might begin to influence trader bias more sharply. In the current setup, small macro readings—particularly any from Germany or France—will likely get outsized attention. We should position accordingly.
The Federal Reserve, by contrast, has more room to wait, because American hiring data continues to surprise. Payrolls haven’t shown signs of real fatigue, which restricts the Fed’s justification to pivot sooner than markets initially expected. Interest rate traders looking for early 2024 cuts have been slowly scaling back bets, and that’s been helping the dollar to hold its footing just under the 100 mark on the DXY. Any softening around inflation or consumption could reprice longer-term expectations, but so far the evidence isn’t there. As for US-China relations, they mostly hang in low-grade uncertainty. If negotiations falter, defensive positioning may increase across both equities and currency futures.
Taking note of 1.1500 as resistance and 1.1214 as support for EUR/USD, we are roughly mid-channel and in wait-and-see mode. That matters for short-dated contracts in particular, as implied volatility is currently understated relative to headline risk. Stretching positioning without confirmation, especially ahead of the Fed’s statement, looks premature. Hawklike tones out of Washington would compress the pair towards its lower barrier. On the flip side, any dovish surprise—say, a rollback in quantitative tightening targets—might challenge that 1.15 ceiling more decisively.
From our perspective, watching the speed and sequencing of ECB messaging in the next fortnight offers more information than larger averages. Each rate path already diverges, but the language from Lagarde and company could tilt directional plays. Additionally, German industrial orders or forward-looking PMI figures can quickly sharpen risk edges. The dollar’s drivers, meanwhile, are very much domestic—for now. Short-term prospects are likely binary post-Fed: status quo and support remains; dovish hints and the greenback could soften.
Our present stance would favour keeping premium exposure light, with option structures more attractive than outright direction at current levels. Higher data sensitivity weeks often precede breakouts—not during them. Patience may turn out to be productive.
