Markets on Pause

April 28, 2025

6 min read

Elias Haddad

USD is mixed and global equity markets are treading water. No policy relevant economic data releases today.

UK-EU relations are warming-up. This bodes well for GBP.

Canadians head to the polls today. Highlights this week include the Bank of Japan policy rate decision Thursday and US jobs data Friday. All the details in our Drivers for the Week report.

Markets on Pause

USD is mixed just under technical resistance at 100.00 and global equity markets are treading water. Despite US claims of progress in trade talks, we remain skeptical that any agreement of substance can be reached so quickly. Meanwhile, both US and China economic activity are expected to show signs of softening from the trade war and that will be negative for the dollar and risk assets.

UK-EU relations are warming-up. A joint summit to agree on a defense and security pact is scheduled to take place on May 19. Germany’s ambassador to the UK said over the weekend that if the talks in May are successful, they could pave the way in 2026 for a second wave of reforms. Closer UK-EU trade relations can lead to a more favorable UK business investment outlook, which bodes well for GBP. A new UK-EU special partnership is one of our main 2025 macro themes.

EUROZONE

EUR/USD is consolidating around 1.1350 after soaring to a multi-year high at 1.1573 last week. ECB Governing Council member Martins Kazaks summed up the main policy debate facing the ECB. Kazaks noted yesterday “We are at 2.25% — the question is more about whether we will have to go much lower below 2%...We’ll do it if we have to, but the economic picture would have to become much weaker for that to happen and to weigh down on inflation further…Currently it is not the case.”

The swaps market price-in a total of 65bps of ECB easing over the next 12 months that would see the policy rate bottom between 1.50% and 1.75%. Regardless, the outlook for EUR is positive underpinned by the EU moving towards greater integration.

CANADA

CAD is directionless ahead of today’s federal election. The first results will come in between 7:00pm and 7:30pm Eastern Time, when voting hours end in the four Atlantic provinces. Nearly all the results will be released at 9:30pm Eastern Time.

The latest CBC News poll tracker show Prime Minister Mark Carney’s Liberals holding a consistent lead of over 40% since end-March and are likely to win a majority government. Carney is viewed favorably by financial markets due to his experience navigating the 2008 financial crisis and impacts of Brexit.

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