Tag Archive: Currency Movement

Eerie Calm in FX Market

2025-02-11

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2025-02-11

(On a business trip and attending Trade Tech FX USA in Miami.  Commentary to resume with the Week Ahead on February 15.) Overview: The US announced that the 25% steel and aluminum tariffs will not be effective for a month (March 12), and this gives the impression that they are a negotiating tactic, which may help explain why there has been a muted reaction. Some observers argue that the broader steel tariffs than in 2018 are meant to crackdown on...

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USD Surrenders Most Gains Seen after Trump Threatens Steel and Aluminum Tariffs

2025-02-10

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2025-02-10

Overview:  The US is continuing to brandish the tariff threat. On top of the "reciprocal tariff" threat signaled before the weekend, yesterday, President Trump indicated he would announce 25% tariffs on all US steel and aluminum imports. As is true to the pattern, the greenback jumped in early Asia Pacific turnover. However, after the initial mark-up, the greenback has come off. By late European morning turnover, the US dollar was mostly...

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Downside Risks on January Jobs Data, but Benchmark Revisions may Not be as Bad as Feared

2025-02-07

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2025-02-07

Overview:  The week began with a bang with the US tariff threat, which at the last minute was postponed by the US for a month. Narrow ranges in the foreign exchange market are prevailing ahead of the US jobs data, which will likely be distorted by the poor weather in parts of the country and the California fires. Nevertheless, it is clear that the Federal Reserve is on hold until the middle of the of the year at least and today's report is not...

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The Dollar Comes Back Bid

2025-02-06

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2025-02-06

Overview:  After the tariff scare on Monday, which saw the US dollar surge, it has pulled back in the last couple of day. But it has returned bid today in what looks like position-squaring ahead of tomorrow US employment report. Despite some Fed officials recognizing that the tariffs may pose a supply shock that has to be taken into account, the odds of a June cut and two before the end of the year increased marginally yesterday, even as coupon...

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Yen Leads Further Unwinding of the Dollar’s Tariff-Threat Inspired Gains

2025-02-05

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2025-02-05

Overview: The US dollar is trading heavily as the pullback from tariff-threat extreme continues. It is weakest against all the G10 currencies and most emerging market currencies. Stronger than expected wage growth and softer US 10-year yields has driven the yen to new highs for the year, to lead the major currencies with more than a 1% gain. The weakest among the G10 currencies is the Canadian dollar, which is up about 0.35% and is approaching the...

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Brinkmanship and Theater

2025-02-04

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2025-02-04

Overview: After yesterday's wild gyrations, the foreign exchange market is calm. US dollar losses seen as the tariffs on Mexico and Canada were postponed with what many observers see as minor concessions, though Canada is going to have a fentanyl czar have not been extended, and a consolidative tone has emerged. The 10% tariffs om China were implemented but Beijing's response has been sufficiently restrained that it still appears to leave room for...

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Tariffs Roil Markets

2025-02-03

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2025-02-03

Overview: The US made good on its threats to levy 25% tariffs on Canada and Mexico, and 10% tariffs on China. There still seems to be skepticism in the market, with many thinking the tariffs on Canada and Mexico may not last the week. Trump will reportedly talk with Trudeau and Sheinbaum today. The dollar did not trade high so much it was marked sharply higher in initial activity. That the Canadian dollar and Mexican peso was hit the hardest is not...

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Renewed US Tariff Threat Doesn’t Stop Equities from Marching Higher

2025-01-31

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2025-01-31

Overview: The renewed threat of a 25% tariff on Canada and Mexico as soon as tomorrow has lifted the US dollar broadly and has not derailed the firmer tone in global equities. There are still many unknowns and questions, and this will keep investors and businesses on tenterhooks. The greenback is mixed against the G10 currencies in Europe and is mostly +/- 0.25%. The Canadian dollar and Mexican peso are little changed now after selling off late in...

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Nervous Calm Shrouds FX, while February 1 US Tariffs Look Less Likely

2025-01-30

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2025-01-30

Overview:  There is a nervous calm in the foreign exchange market. The Federal Reserve indicated that the relatively good economic performance allow is to bide its time for the economic and policy picture to clarify and policy remained "meaningfully" restrictive. The disappointing GDP figures from Germany, France, and Italy today provide a weak backdrop for the ECB, which is set to deliver a quarter-point cut. The BOJ signaled its...

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Fed Day: Vigorous Defense of Independence While Standing Pat

2025-01-29

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2025-01-29

Overview:  Tariffs and the Federal Reserve meeting are center stage today. Yesterday, the White House reiterated that tariffs on Canada and Mexico could be announced this weekend. The Canadian dollar is softer, and the Bank of Canada is widely expected deliver a quarter-point cut today and hint at a pause. There is practically no question about the Fed. It will stand pat, and we expect it to defend its independence. The Mexican peso, on the other...

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New Tariff Threat Fuels Turn Around Tuesday ahead of Tomorrow’s FOMC Decision

2025-01-28

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2025-01-28

Overview: The US dollar recorded lows for the month against many of the major currencies yesterday but has come back bid today. We had anticipated some consolidation ahead of the conclusion of the FOMC meeting tomorrow, and the dollar's downside momentum faded. Yet, today’s gains have been fueled by new tariff threats. In particular, Bessent, the new Treasury Secretary, said to be a moderate, reportedly was advocated increasing a universal tariff...

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DeepSeek Sends US Stocks Sharply Lower, Dragging Rates Down, while Resolution of Tiff with Colombia Weighs on the Dollar

2025-01-27

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2025-01-27

Overview: There have been two significant developments that are rocking US equities and sending US yields sharply lower. First, Chinese-made AI has taken the world by storm. Apparently, DeepSeek is cheaper to build, consumes less energy, and is faster than the other AIs. There seems to be innovations outside of replication. The second is a brouhaha over Colombia's initial refusal to accept US military planes bringing back illegal immigrants. There...

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Dollar Slides

2025-01-24

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2025-01-24

Overview: The US dollar is broadly lower. The tariff-threat inspired gains stalled and the BOJ rate hike and stronger PMI in Europe have dragged the greenback lower against all the G10 currencies and nearly all of the emerging market currencies. While the market remains vulnerable to pronouncements from Washington, and next week's policy divergence as the ECB, Bank of Canada, and probably Sweden's Riksbank cut interest rates while the Federal...

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Foreign Exchange Market Becalmed (Momentarily?)

2025-01-23

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2025-01-23

Overview:  After wild swings in recent days, there is a nervous calm in the foreign exchange market so far today. The US dollar is narrowly mixed against the G10 currencies and is +/- about 0.15%. The dollar bloc and Scandis are softer. Among emerging market currencies, central European currencies and the Mexican peso lead the advancers, while Asia Pacific currencies, including the Chinese yuan and Indian rupee are sporting softer profiles. It is...

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US Dollar Extends Losses after North America Faded Yesterday’s Tariff-Threat Induced Gains

2025-01-22

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2025-01-22

Overview: The US tariff threat was extended to China and the EU yesterday but after the North American market shrugged it off yesterday, for the most part, the market seemed to take it in stride. It is too early to say the market is becoming immune to the rhetoric. Still, the dollar is mostly softer today. Ironically, despite high confidence of a BOJ rate hike on Friday, the yen is the only G10 currency is lower on the day as the North American...

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Tariff Tuesday

2025-01-21

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2025-01-21

Overview: The little emphasis on tariffs initially yesterday saw the US dollar pullback, the renewed threat of 25% tariffs on Canada and Mexico as of February 1 roiled the foreign exchange market and the dollar has come back bid. The Canadian dollar, among the G10, and the Mexican peso, among emerging market currencies have been the hardest hit, but the greenback is broadly higher. All the G10 currencies, but the yen and Swiss franc are off at...

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Chinese Economy Grew 5% in 2024 (if You Believe it), UK Retail Sales Disappoint, and “Day One” Looms

2025-01-17

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2025-01-17

Overview: The US dollar is firmer against most of the G10 currencies, but the tone is one of consolidation. Trump's inauguration on Monday, and the US markets are closed for the Martin Luther King holiday. Investors, businesses, and foreign countries have been warned of action on day one. Meanwhile, the yen is paring yesterday's gains, though the market anticipates a BOJ rate hike at the end of next week. The UK's retail sales cap a string of soft...

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Japan’s Tankan was Uninspiring and UK Disappoints with Contracting Economy in October

2024-12-13

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2024-12-13

Overview: The US dollar is mixed against the G10 and emerging market currencies to finish out the week. Among the G10, sterling and the yen are the heaviest. Japan's Tankan survey was unimpressive and does nothing to reanimate speculation of a BOJ rate hike next week. Sterling has been dragged down by unexpected news that the economy contracted in October for the second straight month. The euro is being aided by the unwinding of cross positions...

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SNB Slashes Policy Rate in Half

2024-12-12

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2024-12-12

Overview:  The US dollar is mostly softer today, but the tone is mostly one of consolidation. The Swiss National Bank surprised with a 50 bp cut and the franc is the only G10 currency that has not edged up against the greenback today. Australia reported a stronger than expected employment report. This boosted Australian yields and the Aussie, which is the strongest of the G10 currencies. Shortly, the ECB is expected to announce a quarter-point rate...

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Greenback Bid Ahead of CPI

2024-12-11

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2024-12-11

Overview: The dollar is on fire. Ahead of today's US November CPI and tomorrow's anticipated rate cuts by the European Central Bank and the Swiss National Bank, the greenback is rising against all G10 currencies and nearly all emerging market currencies (but the Hong Kong dollar and the Indian rupee, which slipped to a record-low earlier today). There is a press report claiming that Beijing is considering allowing the yuan to fall further but it is...

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