Tag Archive: Currency Movement

Markets Remain Unsettled Despite the US Postponement of the Reciprocal Tariffs

2025-04-10

by

2025-04-10

Overview: A couple of hours before the US announced a postponement in the reciprocal tariffs on everyone but China, President Trump sent social media message encouraging people to buy stocks. And the postponement sent US equities soaring, but it does not set right with many observers. In fact, the US hiked the tariff on China further, and the net result is that the average effective tariff in the US is now 24% rather than 27% as it would have been...

Read More »

Fragile Calm in the Capital Markets

2025-04-08

by

2025-04-08

(traveling; no commentary tomorrow)Overview: The dramatic price action in throughout the capital markets after last week's US tariff announcements, China's retaliation, and yesterday's US threat of another 50% tariff on China has calmed today, in a nervous way. Indeed, the calm could be shattered by one comment or social media post by the US President. Japan pushed back against some of "facts" the US cited, like the tariff Japan puts on...

Read More »

Shades of Smoot-Hawley: Depression Feared

2025-04-07

by

2025-04-07

Overview:  At the end of last week, there was much talk about Black Monday and today it is here. Various circuit breakers kicked in as stocks plummeted. The Nikkei 225 fell 7.8%, and while China's CSI 300 fell 7.05%, the index of mainland shares that trading in Hong Kong dropped 13.75%. The Hang Seng itself was down 13.2%. Europe's Stoxx 600 fell 5.1% before the weekend and is off another 5.8% today. US index futures settled on their lows before...

Read More »

Friday: Tariffs, US Jobs, Powell, and Melting Equities

2025-04-04

by

2025-04-04

Overview:  There appear to be two-forces at work that has helped the US dollar recover. First, as the market continues to debate whether the reciprocal tariffs are a negotiating ploy and in this tug-of-war of sorts, President Trump's declaration that he is open to "phenomenal offers" plays into that view. Still, the fact that Israel got rid of all of its tariffs on the US and still was hit with a 17% levy is notable. Second, there may be...

Read More »

The Day After

2025-04-03

by

2025-04-03

Overview: Little would one know from looking at the US economic outperformance and the record-high household net worth, but the US President said that global trade has “looted, pillaged, raped, and plundered” the US economy. Rather than some sophisticated analysis to measure trade and non-trade barriers as the President Trump suggested, the so-called "kind reciprocity," appears to be a simple function of US imports as a percentage of the...

Read More »

Liberation Day from the Multilateral World Our Parents, Grandparents, and Great Grandparents Created

2025-04-02

by

2025-04-02

Overview:   The trepidation over today's US tariff announcement has been underscored by reports that even as late as yesterday, a final decision had not been made. Given the complexity of different tariff schedule formulations, and the desire to implement the new regime immediately seem to favor a simply across the board levy or maybe two categories, a high one and low one. In terms of allocation of power, Treasury Secretary Bessent and his...

Read More »

Dollar Consolidates, Bonds Rally, Stocks Recover, and Gold Extends Gains Ahead of Tomorrow’s US Tariff Announcement

2025-04-01

by

2025-04-01

Overview:  Ahead of tomorrow's US tariff announcement, which reports suggest the administration is still debating key elements, the US dollar is mostly consolidating inside yesterday's ranges. The news stream has been limited to the largely as expected Japanese Tankan survey, which did not appear to impact BOJ expectations and the unsurprising decision by the Reserve Bank of Australia to stand pat after initiating an easing cycle at its last...

Read More »

Equities and Rates: Look Out Below

2025-03-31

by

2025-03-31

Overview:  The US dollar begins the new week mostly firmer. The dollar-bloc currencies and Scandis are the weakest. Sterling and the euro are little changed, while the continued drop in the US 10-year yield has helped lift the yen by nearly 0.5%. Emerging market currencies are mixed as well. A handful of Asian currencies, including the Chinese yuan, are higher. The Turkish lira is also firmer, after falling nearly 4% over the past two weeks....

Read More »

Markets Hold Collective Breath as US Offensive Launched

2025-03-27

by

2025-03-27

Overview:  Many participants were focused on next week's US "reciprocal tariffs" when yesterday, it announced a 25% tariff on imported cars, effective April 3. Fully assembled vehicles are the first target, but by May 3, major parts, such as engines, transmissions, powertrain components and electrical systems will be included. The tariffs on Mexico and Canada will be adjusted based on the share of domestic content. A White House official...

Read More »

Softer CPI Weighs on Sterling, Ahead of Budget Statement

2025-03-26

by

2025-03-26

Overview:  Uncertainty over next week's US tariff announcement continues weigh on markets and undermines near-term conviction. The dollar is mostly consolidating against the G10 currencies. Sterling is the heaviest, off about 0.3% after a soft CPI report and ahead of the Spring Budget Statement. The dollar bloc and Norwegian krone are the strongest. Among emerging market currencies, the Mexican peso roughly 0.25% loss puts it at the bottom of the...

Read More »

FX Market Calm on the Surface, Angst Below

2025-03-25

by

2025-03-25

Overview:  The US dollar is consolidating its recent gains against the G10 currencies in quiet and relatively uneventful turnover. There continue to be mixed signals about the US tariffs threatened for next week. President Trump himself said that auto tariffs were coming soon as in days, while suggesting that there may be "a lot" of carve-outs from the reciprocal tariffs. EU's trade representative Sefcovic is meeting with US Commerce...

Read More »

The Possibility that the US is Toning Down its April 2 Tariff Threat Helps Lift Equities

2025-03-24

by

2025-03-24

Overview: Investors are finding some comfort in a signal from some senior US official that toned down the double-barrel threat of reciprocal and sectoral tariffs on April 2. The focus is said to be on the former, with some exemptions. Although the administration is two-months old, there have been many conflicting signals and there still is much uncertainty. After last week's gains, the greenback has begun the new week mostly softer against the G10...

Read More »

March Madness? The Dollar is Closing in on its Best Week this Month

2025-03-21

by

2025-03-21

Overview:  The dollar's down trend, which began at least a week before President Trump's second inauguration stalled this week, and preliminary technical signs suggest a bottom may be in the process of forming. The uncertainty over US reciprocal and sector tariff announcement on April 2 is boosting uncertainty among policymakers, investors, and businesses. The greenback is mostly firmer today and near the week's best levels against most of the...

Read More »

Dollar Comes Back Bid

2025-03-20

by

2025-03-20

Overview:  The Federal Reserve's projections show a little more inflation and a little less growth this year and next, but the median projection showed, as it did in December, two rate cuts this year. This, coupled with the reduction of the balance sheet unwind of Treasury holdings (QT) gave a dovish cast to the FOMC outcome, though the dispersion of forecasts showed upside risks to inflation, and even the two rate cuts anticipated was a closer...

Read More »

Fed: When Words are Actions

2025-03-19

by

2025-03-19

Overview: Often it is said that what the Fed does is more important than what it says. But this is not so today. There is little doubt that the Fed continues to remain on hold but it will updates its forecasts, and Chair Powell will likely reiterate his recent assessment that the economy is in a position that allows the central bank to be patient and wait for clearer signals of the impact of the administration's policies. The Summary of Economic...

Read More »

Europe Leads Dollar Drop, Unwinding Last Year’s Record Purchases of US Equities

2025-03-18

by

2025-03-18

Overview: The greenback remains under pressure and fell to new lows for the move against the euro, sterling, and the Norwegian krone. It is softer against nearly all the G10 currencies but the Japanese yen, where more disappointing data were reported and polls showed support for Prime Minister Ishiba plunged following his admission of doling out JPY100k (~$672) to 15 first-term LDP members of parliament. It makes for a poor backdrop for the upper...

Read More »

China Underwhelms, PBOC sets Dollar Fix Lower, Bessent’s Lack of Concern Weighs on US Stocks, and More US Tariffs Coming

2025-03-17

by

2025-03-17

Overview: The US dollar begins the new week quietly. The week features five G10 central bank meetings, and real sector data that may show the US economy is resilient despite the Atlanta's Fed's pessimism (which will be updated today). President Trump renewed his warning that reciprocal and sectoral tariffs will be announced on April 2. The greenback is trading with a mostly softer but consolidative bias today. Emerging market currencies are mixed,...

Read More »

Gold and the Mexican Peso Trade at New Highs, Sterling is Resilient in the Face of the Unexpected Contraction in January

2025-03-14

by

2025-03-14

Overview: The US dollar is mixed but the risk-appetites are finishing the week on an update. In the foreign exchange market, this is reflected in the dollar-bloc currencies leading the G10 higher, with the yen and Swiss franc the laggards. Japan's spring wage negotiation round is producing solid preliminary results, but a new funding scandal may weaken the minority government led by Prime Minister Ishida. Most emerging market currencies are also...

Read More »

A Break in the Drama, Greenback Consolidates

2025-03-13

by

2025-03-13

Overview: There seems to be a nervous calm in the foreign exchange market as the dollar consolidates mostly inside yesterday's ranges, in largely uneventful turnover. In addition to the US steel and aluminum tariffs, and retaliatory moves by the EU, Canada, and China, the other big development this week is the effort to achieve a 30-day ceasefire in Ukraine. US-Russian officials meet today. Ahead of the talks, Russia reported captured a...

Read More »

Trade War Escalates, Bank of Canada to Cut Rates, US Reports February CPI and Sells $39 bln 10-Year Notes

2025-03-12

by

2025-03-12

Overview: The next phase of the evolving trade war that is both a cause and effect of strain in the traditional US alliance, in North America, Europe, and Asia Pacific has begun. The US has imposed 25% tariffs on imported steel and aluminum. Despite lobbying form various countries, no exemptions were announced. The EU quickly announced retaliation, but the measures do not go into effect for a month, which allows time for negotiations. The dollar is...

Read More »