USD lower, markets wait to see if Trump will rollback recent tariffs

Good morning

USD weakness has been an going theme for a while now and the move shows no signs of abating, with GBPUSD now at 1.2820 and EURUSD at a whopping 1.0670.  The push higher in EUR has taken GBPEUR down from its recent highs around 1.2130 to 1.2010.  US equities closed lower again, DJIA and S&P500 were down around 1.5 and 1.2% by the close and although futures pricing is currently suggesting some of those losses may be recovered, there is certainly something of a rout taking place.  And it isn’t just the US equities that are lower.  European stocks have followed suit, German DAX was down some 3.5% yesterday, while the FTSE 100 shed around 1.25%. 

Weaker incoming economic data is of course to blame, the threat of stagflation, ie low growth and high inflation, is being talked about, as it is expected tariffs will only drive inflation higher.  There is already talk that Trump could scale back tariffs on Canada and Mexico as early as today although I’m not so sure, he has imposed and withdrawn them once already and even he must know this is not something to be announced on a whim.  Still, the talk of a possible rollback has, along with the weaker USD, seen USDCAD trade down from yesterdays highs of 1.4535 to 1.4400 where it currently trades.

There has been some tough backlash from Canada over the tariffs, with Ontario’s Premier Ford threatening to cut off electricity supplies to some US states if tariffs persist, and suggesting US companies should be banned from any involvement in Canadian government procurement.  Trudeau too has been vocal in his opposition of tariffs, saying they will be met with harsh retaliation, although Trump has countered this by making it clear he can raise US trade tariffs if Canada do retaliate.  Trump and Trudeau are due to speak later today.

Trump has said Zelensky has sent him a letter saying their recent argument was regrettable, Ukraine really does appreciate US support and that he’s willing to talk peace and mineral deals again.  Trump of course has intimated he is now holding out for a better deal.

RBNZs Gov Orr has resigned unexpectedly, with no reason given as yet.  Orr will officially leave on 31st March, DepGov Hawkesby will replace Orr until a replacement is officially announced.  GBPNZD is 2.2635, just 50 pips off the highs late yesterday that we in turn the highest levels we’ve seen since Nov 2015.  GBPAUD briefly broke above 2.0500 late yesterday, marking a high since March 2020, now 2.0465.

Congratulations to Aston Villa and Arsenal who both won in their Champions League matches yesterday, Arsneal scoring an incredible seven goals on the way to victory.  Liverpool are in action this evening, taking on PSG.  In cricket, India secured their place in the Champions Trophy final with a good win over Australia, the legendary Kohli leading the way with 84 runs.  South Africa will be taking on New Zealand shortly to decide who will face India in the final. 

US data today includes ADP employment numbers and the all-important ISM services PMI, anything weaker than expected should add to the pressure on the US dollar, although perhaps more attention will be on any tariff talk from Trump today. 

-  09.00 EU composite PMI

-  10.00 EU PPI

-  13.14 US ADP employment change

-  14.45 US S&P composite PMI

-  15.00 US ISM services PMI

-  19.00 Fed Beige book

-  00.30 AUS trade balance