The United States Dollar is trading mixed from Friday’s close in choppy price action this morning, driven mostly by further tariff chatter and second-tier data releases around the world today
Overview
A Bloomberg report published over the weekend suggested that reciprocal tariffs out of the US, due to be implemented on April 2, could be “narrower than initially planned, with some countries exempt.” As President Donald Trump has repeatedly touted this April 2nd deadline as ‘Liberation Day,’ this could represent a substantial walk back of proposed reciprocal tariffs that are set to include value-added taxes around the world. Traders, however, are making what appears to be a concerted effort to avoid making position moves on headlines alone, especially as month-and quarter-end loom ahead of this April 2 deadline. The announcement of these actions so far in advance has taken a good bit of the sting out of them, as many speculate that nations have had ample time to devise countermeasures or negotiate better outcomes.
Quarter-end flows are likely to dominate FX moves through this week, and markets got a taste of it in the back half of last week. The decisive trend through Q1 has been Dollar-negative as uncertainty surrounding the US and global economic pictures continues to ratchet up, but through last Thursday and Friday markets appeared to begin to rebalance this exposure a touch, giving USD a bit of a boost. The Bloomberg Dollar Spot Index has still fallen a whopping 4.3% from its peak at the beginning of February, so some USD-positive flows to rebalance books through the end of the quarter makes sense. The Commodity Futures Trading Commission did show that as of March 18th, speculators on FX officially turned net short on the Dollar for the first time since October.
PMIs released around the world this morning have shown that many major economies remain quite sluggish as well, with US’ set due out at 9:45 Eastern this morning. Though the data calendar as a whole is fairly quiet for the first half of this week, there are a few major releases Wednesday thru Friday, beginning with UK CPI on Wednesday. The US’ final GDP reading for Q4 will be released Thursday morning, followed by a Banxico rate decision, and the week will wrap up with UK GDP and US PCE and personal incoming & spending Friday morning.
What to Watch This Week…
- UK CPI, Wednesday
- US Q4 Final GDP, Thursday 8:30
- Banxico Rate Decision, Thursday
- UK GDP Q4, Friday
- US PCE Price Index, Friday 8:30AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
AUD ⇑
The Australian Dollar is the strongest performer in the G10 this morning after dismal trading last week driven by news that Australian employment actually contracted last month, clawing back roughly a quarter of a percent of ground against USD. Trump administration officials acknowledged over the weekend that the list of targeted nations by April 2nd’s tariffs may not be universal, and existing tariffs on steel and aluminum – two of Australia’s major exports – may not necessarily be cumulative. Of course the true scope of these actions remains to be seen, but AUD is getting a boost on speculation its situation vis-à-vis the US may not be as bad as previously thought.
JPY ⇓
Japanese Yen is sliding against the Buck this morning to the tune of a third of a percent, making it the weakest-performing currency in the G10 basket. Japanese composite PMI released over the weekend came out quite a bit lower than expected – expectations were for a positive reading of 52.0, which would have shown slight economic growth, and the figure read in at 48.5 which is contractionary. JPY is also sliding from more risk-forward trading around the world on tariff headlines that could keep the global trade war from spiraling further.
