The United States Dollar is trading in tight ranges against its G10 peers this morning, even as the Trump Administration once again escalated its rhetoric surrounding the new August 1st trade deadline
Overview
Over the weekend Trump sent letters to the EU and Mexico threatening 30% tariffs should a new deal not be reached by the deadline, along with a flurry of letters last Thursday and Friday. Traders are also awaiting US CPI data out tomorrow morning to see what if any inflationary impact markets have seen through the last month of H1.
Though major FX markets are having a muted reaction to this latest round of tariff threats, bond and equity markets are much less happy and emerging-markets are sliding as risk sentiment sours. Asian and European equities both slid on the Monday morning open, and Japanese bonds in particular tumbled as trade uncertainty coupled with domestic worries about higher government spending. Trump, in addition, has signaled that he will not be backing down on these renewed tariff threats prior to the August 1st deadline, and if trade deals between the US and each respective nation are not made, his proposed “reciprocal” rates will in fact go into effect. The European Union fired back this morning with a statement from Maros Sefcovic that the proposed 30% levy is “effectively prohibitive” to transatlantic trade. The voices in the economic bloc calling for a retaliation from the EU are growing louder and officials have stepped up their efforts to form alliances with other nations targeted by this latest round of tariffs. Mexico’s situation amidst this latest escalation remains quite unclear – there is little clarity on the question of goods covered by the USMCA, and whether those will continue to be excluded from the newly proposed 30% rate.
The data calendar is quite quiet today around the world, but markets will receive US CPI for June tomorrow morning. Traders currently expect that prices did rise last month, and expectations are for a 0.3% monthly increase. The annual rate of inflation is expected to rise to 2.6% from 2.4%, and the annual rate of inflation for goods excluding food and energy is epexcted to come in at 2.9%, also above last month’s reading.
What to Watch This Week…
- US CPI JUN, Tuesday 8:30AM
- UK CPI, Wednesday
- US Retail Sales JUN, Thursday
- Monex USA Online is always open
The complete Economic Calendar can be found here.
AUD ⇓
The Australian and New Zealand Dollars are the worst performers in the G10 this morning, sliding roughly a third of a percent each versus the Buck. AUD’s status as a general risk barometer for the rest of the world is alive and well this morning and this move for the Antipodeans can be attributed for the most part to trade and tariff jitters following the US’ letters to the EU and Mexico over the weekend. AUD also remains highly sensitive to US-China relations, and a slight beat in Chinese export growth is placing AUD a touch stronger than its New Zealand peer.
JPY ⇑
Japanese Yen is outperforming its G10 peers today to trade flat versus the Buck from Friday’s close, followed closely by the other traditional safe haven currency CHF. Negative risk sentiment around the world is keeping JPY buoyant following renewed tariff threats on many US trading partners through the end of last week. Though Japan itself has yet to strike a trade deal with the US, the Yen’s haven status is alive and well. Japanese Government Bonds also tumbled through Monday’s trading session and yields spiked ahead of its upper-house election next weekend as worries mount over government spending not just in Japan but around the world.
