The U.S. Dollar plummeted this morning as the escalation of the tariffs drama with China and other nations has pushed domestic market futures down and economists to warn about potential damage down the line.
Overview
The White House is looking to calm down business leaders as well as politicians who appear to be in panic about pushing for deals by adding to duties in trade. The total 104.0% added levies on Chinese goods have been countered with a 84.0% tariff on all American goods headed to the world’s second largest economy. The faith across the globe is not on the Buck as a safe-haven asset and instead you are seeing a rally that is indicative of fear that an American recession can be easily triggered.
While every currency is gaining against the Dollar, the Mexican Peso is being the exception by losing a little bit of ground. In part this is due to inflationary measures this morning showing that Consumer Price Index moves are tamed and give the central bank, Banxico, room to keep slashing interest rates. This phenomenon may also manifest itself here in the U.S. with chances of rate reduction for the Fed May 7th meeting standing at over 51.0%. It is almost 100.0% expected there will be at least one cut by June. We shall see if anything radical happens that shifts the mentality. CPI figures are out for the U.S. tomorrow.
What to Watch This Week…
- U.S. CPI on Thursday 8:30AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The Euro has climbed once again to its strongest levels since the start of last October as the havoc in markets makes for a weakening U.S. Dollar. Talks of looking to reinvent free trade deals with other countries are keeping European Union leaders busy and fomenting a narrative that the U.S. can be eft behind by some of its allies if the tariff strategy does not foment a more desirable and prosperous situation. There are currently reports that the U.S. Congress will try to coordinate with the White House to discuss the chance of lowering some of the tension and levy requirements that were laid out on “Liberation Day.”
MXN ⇓
The Mexican Peso is the only currency not improving against the Buck as inflation numbers played into the hands of Banxico. CPI stayed tamed in March and with the need to cushion the economy from the current uncertainty, central bankers can feel alright being stimulus-driven and cutting borrowing costs. Banxico will not meet until May 15th, but the narrative on needing to prevent financial turmoil will keep Peso very sensitive to deviations in loose monetary policy.
