The United States Dollar, even on a busy news day with data that has traditionally shown to be positive for the Buck, is trading weaker this morning after managing to post a third straight session of gains on Wednesday.
Overview
Yesterday evening, a three-judge panel from the U.S. Court of International Trade handed down a decision that effectively nullified more than two-thirds of the tariffs the Trump administration has implemented in just five short months, saying that Trump, as President, overstepped his constitutional authority in enacting levies on more than 60 countries around the world. These tariffs, many of them already paused in a bid to negotiate better trade and import/export terms for the US, have thus far been the Trump Administration’s signature policy, and government officials have vowed to fight this decision. Given the current state of negotiations, one analyst even went so far as to term the restrictive trade policies as the “TACO trade,” standing for ‘Trump Always Chickens Out.’
Though the Greenback initially caught a bounce on the news of this court ruling, any strength USD saw last night has since been washed away in keeping with the current trend of “all news is bad news.” Adding to the pile, even a slight upward revision of Q1 GDP this morning was unable to keep the Buck afloat. The first reading of Q1 GDP from the end of April showed that the US economy contracted by 0.3% in the first three months of this year, and today’s revision to a contraction of 0.2% is not helping give markets further confidence in the domestic economy. While the GDP core price index was revised down slightly to 3.4%, the full reading still showed that inflation grew by 3.7% last quarter on this revision. Stagflation worries are continuing to plague both fiscal and monetary policymakers, and though consumer confidence released on Tuesday showed renewed faith in the US economy, the domestic picture remains murky at best.
Tomorrow morning sees the release of the Federal Reserve’s preferred inflation gauge of PCE, along with personal income and spending data for April. Though month-end flows usually see a bid for the Buck, it seems at the moment that international confidence in the US is waning and taking the Dollar down with it.
What to Watch This Week…
- US Personal Income & Spending, Friday 8:30 AM
- US PCE Price Index, Friday 8:30 AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The single currency is proving to be the biggest benefactor of this morning’s Dollar slide, gaining half a percent back and trading stronger than at yesterday morning’s open. Trade representatives from both the US and EU have stated that they are continuing their negotiations, but the Trump administration’s continuing about-faces have only proven to boost the EUR to a new trading range nearly 8% higher than at the beginning of this year. European treasury yields are also outperforming their US peers, as US government debt continues to be a relatively unattractive asset
JPY ⇑
Japanese Yen and other haven assets and currencies are climbing this morning, with JPY gaining back a quarter of a percent versus the Buck. JPY in particular has proven to be particularly sensitive to news out of the US, and at one point overnight was trading as much as a percent stronger against USD. While some strategists have suggested that the ‘carry trade’ of shorting Japanese Yen in favor of currencies with higher relative interest rates may be coming back into favor, this has yet to impact JPY’s pricing in any major material way, and the currency continues to be news-driven.
