Five FX pairs you should be watching this month and why

Following the conclusion of Q1, the fourth month of 2025 is already underway.

Here are five currency pairs to add to your watchlist this month, alongside some technical and fundamental analysis points to consider.

With March boasting EUR/USD’s best performance in over 27 months, the US dollar currently trades at relative lows versus the euro at a level not seen since Trump’s victory in the 2024 presidential election.

• Tariffs: Tariffs and their potential impact on the world economy remain among the most dominant themes in currency markets globally, with EUR/USD proving no exception. Writing ahead of Trump’s fabled ‘Liberation Day,’ rumblings of a sweeping tariff applying to all US imports will be an outcome many countries hope to avoid.

As for EUR/USD, the conversation around tariffs can now be summed up in a single word: uncertainty. This uncertainty has weighed negatively on dollar pricing in recent times and allowed EUR/USD to regain some ground in recent memory on the back of a weaker dollar.

For now, markets remain cautious.

• Interest rates: As in previous months, monetary policy decisions from either the ECB or the Federal Reserve remain a hot topic among EUR/USD traders.

In the next thirty days, however, it will only be the ECB that will vote on monetary policy, with traders having to wait until May before the Fed’s next move is made clear.

At the time of writing, the room is relatively split¹ on whether the ECB will maintain rates or cut to 2.25% in their upcoming decision, so traders will keenly await the next two weeks’ worth of commentary from Frankfurt.

Read more: How to Trade EUR/USD: Top 5 Tips to Boost Your Trading

• At the time of writing, the euro trades at its highest point versus the US dollar in over six months. Price must hold and break above the current daily consolidation before a potential move higher.
• Using the relative strength index (RSI) on the daily timeframe, price is currently close to ‘overbought’ territory, suggesting some likelihood of short-term pullbacks.

Expected on the second Wednesday of the month, the FOMC is to meet for one of their eight annually scheduled meetings.

With no interest rate decision scheduled for April, traders will be keenly watching for any commentary suggesting how the Federal Reserve will likely vote in their May decision.

In a company of only three major central banks with interest rate decisions in April, the ECB will meet in Frankfurt on April 17th to vote on monetary policy.

With eurozone inflation recently falling to four-month lows, some expect the ECB to continue cutting rates, while others predict rates will be maintained, having already been cut twice this year.

With US protectionist policy the flavor of the month, transatlantic tensions are currently palpable, especially since UK PM Keir Starmer’s visit to the White House in late February - which received nothing short of a mixed reception.

Unsurprisingly, the most significant talking point between the two nations currently is tariffs, with the United Kingdom caught in the Trump administration’s crosshairs, much like the rest of Europe.

As for trading GBP/USD in April, traders would be well-advised to monitor general risk sentiment, especially given recent pressure on world equity markets.

Currently fraught with uncertainty on recession fears and tariffs, markets will likely remain cautious until a higher risk appetite is achieved. With the pound seen as a ‘riskier’ currency than the US dollar, we can typically expect the dollar to strengthen and the pound to weaken should markets become more risk-averse.

As for now, markets will have to wait for further announcements regarding tariffs and how the United Kingdom’s economy will be affected, with automobile exports looking particularly vulnerable.

• When using the daily timeframe, GBP/USD has recently closed below the 21-day EMA. This could suggest that further downside pressure is likely, at least in the short term.
• Following bear pressure, GBP/USD currently trades at 146-day lows at around 1.27908.

Non-farm Payrolls are scheduled for the usual first Friday of the month, the BLS is expected to release jobs numbers on April 4th.

With the past two releases falling short of consensus, the Trump administration will be hoping to see a change of tune in April, especially with the promotion of American jobs a major justification for the implementation of tariffs.

Happening in the early hours of Wednesday morning, the United Kingdom will release inflation numbers on April 16th.

While currently tied on rates at 4.5%, neither the Federal Reserve nor the Bank of England is expected to vote on interest rates in April. However, the UK CPI report may offer insight into how the BoE will likely vote in their May decision.

For many of the reasons above, USD/JPY is a currency pair to watch this month.

• Tariffs: Until recently, commentary suggested that Japan may be spared in the next round of tariffs.

Ultimately, this was proven untrue following “liberation day,” with the Japanese economy now subject to a 24% reciprocal tariff on Japanese goods and a 25% levy on auto imports.

The latter will undoubtedly be a tough pill to swallow for the Japanese economy, with automobiles making up Japan’s largest export to the United States by some margin².

• Safe-haven flows: Unlike most other pairs, USD/JPY is somewhat unique in the fact that both currencies that make up the pair are typically coined as ‘safe-haven’ currencies.

With ‘safe-haven’ currencies typically bought in periods of economic downturn, the question for April becomes whether markets will become risk-averse in broad or whether this will primarily pertain only to the American economy.

Notwithstanding, the perceived health of the American economy has a knock-on effect on a global scale, but as seen in 2020, if markets become risk-averse on a global stage, the yen typically strengthens over the dollar.

Read more: How to Trade USD/JPY: 5 Tips for your Trading

• When using the Chaikin’s Money Flow (CMF) indicator on the daily timeframe, USD/JPY is currently in a period of accumulation. In a vacuum, this would suggest a bullish trend, at least in the short-term.
• Year-to-date in 2025, USD/JPY is currently down 6%. In comparison, in 2024, USD/JPY gained 11.46% in value.

A leading indicator of consumer spending, the US Census Bureau is due to release retail sales numbers on April 16th.

Especially relevant to future rate decisions, how Americans spend every day not only gives an impression of the health of the economy, but also how confident they are for the future.

Having fallen short of consensus in the last three releases, markets will be keen to see if this trend will continue.

Falling on the last day of April, the Bank of Japan is scheduled to meet in Tokyo to vote on monetary policy.

Unlike the Federal Reserve, the BoJ has committed to gradually increasing interest rates in 2025, but when these individual hikes will happen is the million-dollar question.

At the time of writing, most predict that rates will be maintained at 0.5% in their April decision.

A currency pair and relationship almost synonymous with Donald Trump and his policies, USD/MXN is likely to remain in the spotlight this month.

Despite historically having tariff-free trade with the United States under the USMCA agreement, tariffs are set to be imposed on Mexican imports under the Trump administration.

Especially as a relatively low-value currency, tariffs will reduce the competitiveness of Mexican exports to the United States, which, at least according to Trump, will help boost American domestic industries.

Otherwise, the same dynamic of risk sentiment applies to USD/MXN, but perhaps more so when considering how typically ‘risky’ the Mexican peso is perceived compared to the US dollar.

This dichotomy is perhaps best explained when looking at USD/MXN price action in 2020, where once market fear set in, the Mexican peso lost over 30% in value versus the dollar.

What is certain, however, is that the current relationship between the US and Mexico is undergoing some changes, which may allow for some trading opportunities within the USD/MXN pair.

• Suffering from poor performance in 2024, the Mexican peso currently trades at relative lows versus the dollar. With dollar downside somewhat limited due to current safe-have flows, a bearish USD/MXN move could be somewhat limited.
• When using the Average True Range (ATR) indicator on the daily timeframe, USD/MXN is currently gaining volatility. When placing a position, traders should consider this when managing risk.

A leading metric of economic growth, the US Bureau of Economic Analysis is expected to release GDP numbers on April 30th.

In light of recent tariff announcements, the GDP will need to be seen to continue growing if the Trump administration hopes to build confidence in the US economy.

Continuing a trend of gradual devaluation since as far back as 2008, the one US dollar now equals almost 40 Turkish lira, an increase in value of over 3500%. Renewing new all-time lows in March, USD/TRY is one to watch this month.

Notwithstanding, the Turkish lira's recent achievement of fresh all-time lows is nothing out of the ordinary, at least in recent memory.

However, amid political instability involving the arrest of key political opposition to current president Erdogan, USD/TRY rallied almost 10% in a single trading day in mid-March, representing its most volatile trading day in some time.

For the foreseeable future, USD/TRY traders would be well-advised to approach trading opportunities cautiously and keep risk management tight to limit potential losses.

In the past 43 months, USD/TRY has closed lower in value for the month only thrice. In the same period, the dollar-lira now trades almost 332% higher.

Footnotes

¹https://ecb-watch.eu/

²https://tradingeconomics.com/japan/exports/united-states

This article is for general information purposes only, not to be considered a recommendation or financial advice. Past performance is not indicative of future results. It is not investment advice or a solution to buy or sell instruments.

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