Tag Archive: Currency Movement

Asia and Europe Seem Less Keen about the Dollar than North America

2025-03-03

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2025-03-03

Overview: The dollar rallied in the second half of last week even as interest rates fell amid a new growth scare. The 25% tariffs on Canada (10% on energy) and Mexico that were postponed a month ago, could be implemented as early as tomorrow.  The only tariffs that have been imposed so far were 10% on Chinese imports, and another 10% threatened tomorrow, and apparently in April, too.  The economic disruption that the tariffs and tariff threats seem...

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Now What?

2025-02-28

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2025-02-28

Sorry for the disruption of the regular commentary.  Still, the monthly will be posted tomorrow.  There is a key divide in the market.  One camp sees the US tariff threats as bluster and a negotiating tactic.  The other camp, which I find myself in, thinks something more serious is happening.  The US voted against Europe and with Russian and Iran at the UN for the first time in 45 years on European issues.  Martin Wolf, the erstwhile economic...

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Fragile Stability Today after Yesterday’s Growth Scare Saw US Rates, Equities, and the Dollar Tumble

2025-02-26

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2025-02-26

(Business travel disrupts the commentary for the next two days.  New monthly drops March 1.)  Overview: A growth scare, perhaps spurred by the Philadelphia Fed's non-manufacturing activity survey and the sharp drop in Conference Board's consumer confidence measure, sparked a sharp drop in US yields, a sell-off in US equities and a weaker US dollar. There is a fragile stability today. The greenback is firmer but mostly within yesterday's ranges...

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US 10-year Yield Falls to New Low for the Year, while Dollar has Muted Reaction to Trump’s Affirmation of Tariffs on Canada and Mexico

2025-02-25

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2025-02-25

Overview: The US 10-year yield has fallen to a new two-month low near 4.33% today, ahead of the $70 bln sale of five-year notes, following strong demand at the two-year floating note sale yesterday. The 200-day moving average is near 4.25%. The 10-year yield peaked in mid-January near 4.80%. The dollar initially rallied on President Trump's acknowledgement that tariffs on Mexico and Canada were still on track, though another official was quoted on...

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Greenback Trims Initial Losses: Reversal in the Making?

2025-02-24

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2025-02-24

Overview: With Japanese markets closed for a national holiday, the dollar was offered in early turnover today, and its recent losses were initially extended against several currency pairs. However, it recovered and early losses were pared or reversed. Among the G10 currencies, the dollar is higher against the Swiss franc and Japanese yen. The German election results were very much in line with the polls and a CDU/CSU-SPD coalition seems likely, and...

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EMU PMI Disappoints, US Snubs G20, and BOJ Threatens to Buy JGBs

2025-02-21

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2025-02-21

Overview:  The US dollar enjoys a firmer tone today after falling to new two-month lows against several of the G10 currencies. The market lacks near-term conviction as the US tariff threat looms after next week. US Secretary of State Rubio and Treasury Secretary Bessent have not attended the G20 meetings in South Africa due to tension in the bilateral relationship but adds to sense of US unilateralism, which is often mischaracterized as...

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Yen Jumps amid Signs Tokyo Does Not Object to Normalizing Monetary Policy

2025-02-20

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2025-02-20

Overview:  The dollar's gains scored in North America yesterday have been reversed today.  It is softer against all the G10 currencies, led by the Japanese yen.  The greenback was pushed below JPY150 for the first in a little over two months, ostensibly on the back of greater confidence that the BOJ will continue to hike rates, but if anything the swap market is slightly softer than yesterday. Still, the dollar does not look to have bottomed...

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Euro’s Pullback Extends, While the Kiwi Shrugs Off Third Half-Point Cut by the RBNZ

2025-02-19

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2025-02-19

Overview: The US warned that the next phase of the tariff war could be announced in early April and three industries, auto, pharma, and chips. President Trump's comments suggested sometime between the announcement and the implementation. He did not specify if USMCA trade would be exempt for the auto tariffs. Some auto parts reportedly cross the border four-five times. The dollar is mixed against the G10 currencies. The Reserve Bank of New Zealand...

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Greenback Comes Back Firmer

2025-02-18

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2025-02-18

Overview:  The US dollar enjoys a firmer tone against most of the G10 currencies in relatively quiet turnover. Ironically, the Australian dollar is the best performer and it is virtually flat, despite the beginning of the central bank's easing cycle earlier today. Governor Bullock pulled over a hawkish cut in the sense and futures market pushed out the next cut until August. The UK report stronger wage growth and the first increase in employment in...

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Short Note on Presidents’ Day

2025-02-17

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2025-02-17

There are two notable developments today. First, Japan's Q4 GDP was stronger than expected and Q3 growth was revised higher. The net impact is a stronger yen, rise in Japanese rates, and slightly greater confidence that the BOJ will hike rates again, perhaps as early as June. Second, between US and Russian talks to end the war in Ukraine and US Vice President Vance's speech at the Munich conference before the weekend, the Western Alliance has been...

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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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