The US dollar rebounded sharply as Federal Reserve Chair Jerome Powell emphasized patience in monetary policy, despite intensifying tariff-driven growth and inflation concerns. Powell acknowledged tariffs posed complex risks, urging caution even as markets priced in four rate cuts by year-end. Robust U.S. employment data—March payrolls jumping by 228,000—further complicated rate outlooks.

Global Tensions Escalate on Trump Tariffs

President Trump reaffirmed his unwavering stance on tariffs, criticizing China’s retaliatory moves and extending TikTok’s U.S. divestiture deadline. Trump's openness to negotiations with Vietnam provided limited optimism, overshadowed by escalating EU-U.S. tensions. EU Trade Commissioner Sefcovic labeled U.S. tariffs unjustified, deepening diplomatic friction.

Equity Rout, Volatility Spike Trigger FX Turmoil

Severe market distress saw the S&P 500 plunge over 5%, sending the VIX above 40, levels reminiscent of crisis periods. Risk-sensitive currencies suffered steep losses: AUD/USD plummeted nearly 5%—its sharpest decline since 2008—while the Swedish krona hit a three-year low versus the euro.

Euro and Sterling Reverse Gains

EUR/USD reversed abruptly, losing around half of its previous rally, amid revived risk aversion and heightened expectations of an ECB rate cut (95% probability). Sterling slumped nearly 1.6%, pressured by falling UK equities and gilt yields, approaching critical support at its 200-DMA near 1.2811.

Yen Weakens on Short-Covering; Commodities Collapse

USD/JPY surged above key resistance at 146.55 on significant short-covering, targeting 147.87. Treasury yields fell 4–9 basis points, flattening the 2s–10s curve. Commodities were hit hard: oil plunged 5.6%, gold retreated nearly 3%, and copper collapsed 9%, underscoring recession fears.

Markets closed with EUR/USD down 1.10%, GBP/USD -1.70%, AUD/USD -4.80%, while the dollar index rose 1.10%, signaling intense investor flight toward safety.