USD lower, markets wait to see if Trump will rollback recent tariffs

Good morning

USD weakness has been an going theme for a while now and the move shows no signs of abating, with GBPUSD now at 1.2820 and EURUSD at a whopping 1.0670.  The push higher in EUR has taken GBPEUR down from its recent highs around 1.2130 to 1.2010.  US equities closed lower again, DJIA and S&P500 were down around 1.5 and 1.2% by the close and although futures pricing is currently suggesting some of those losses may be recovered, there is certainly something of a rout taking place.  And it isn’t just the US equities that are lower.  European stocks have followed suit, German DAX was down some 3.5% yesterday, while the FTSE 100 shed around 1.25%. 

Weaker incoming economic data is of course to blame, the threat of stagflation, ie low growth and high inflation, is being talked about, as it is expected tariffs will only drive inflation higher.  There is already talk that Trump could scale back tariffs on Canada and Mexico as early as today although I’m not so sure, he has imposed and withdrawn them once already and even he must know this is not something to be announced on a whim.  Still, the talk of a possible rollback has, along with the weaker USD, seen USDCAD trade down from yesterdays highs of 1.4535 to 1.4400 where it currently trades.

There has been some tough backlash from Canada over the tariffs, with Ontario’s Premier Ford threatening to cut off electricity supplies to some US states if tariffs persist, and suggesting US companies should be banned from any involvement in Canadian government procurement.  Trudeau too has been vocal in his opposition of tariffs, saying they will be met with harsh retaliation, although Trump has countered this by making it clear he can raise US trade tariffs if Canada do retaliate.  Trump and Trudeau are due to speak later today.

Trump has said Zelensky has sent him a letter saying their recent argument was regrettable, Ukraine really does appreciate US support and that he’s willing to talk peace and mineral deals again.  Trump of course has intimated he is now holding out for a better deal.

RBNZs Gov Orr has resigned unexpectedly, with no reason given as yet.  Orr will officially leave on 31st March, DepGov Hawkesby will replace Orr until a replacement is officially announced.  GBPNZD is 2.2635, just 50 pips off the highs late yesterday that we in turn the highest levels we’ve seen since Nov 2015.  GBPAUD briefly broke above 2.0500 late yesterday, marking a high since March 2020, now 2.0465.

Congratulations to Aston Villa and Arsenal who both won in their Champions League matches yesterday, Arsneal scoring an incredible seven goals on the way to victory.  Liverpool are in action this evening, taking on PSG.  In cricket, India secured their place in the Champions Trophy final with a good win over Australia, the legendary Kohli leading the way with 84 runs.  South Africa will be taking on New Zealand shortly to decide who will face India in the final. 

US data today includes ADP employment numbers and the all-important ISM services PMI, anything weaker than expected should add to the pressure on the US dollar, although perhaps more attention will be on any tariff talk from Trump today. 

-  09.00 EU composite PMI

-  10.00 EU PPI

-  13.14 US ADP employment change

-  14.45 US S&P composite PMI

-  15.00 US ISM services PMI

-  19.00 Fed Beige book

-  00.30 AUS trade balance

Trump cuts aid to Ukraine following last week's disastrous meeting with Zelensky

Good morning

An interesting day yesterday which saw USD lower against the likes of GBP and EUR which reached 1.2715 and 1.0500 respectively.  Of the two it was GBP that just made the larger gains, with GBPEUR up to 1.2120, although overnight that has drifted back a few points to 1.2100.  Lower than expected US manufacturing ISM yesterday did little to help USD,

Trump announced that the 25% Canadian and Mexican tariffs would be imposed as of today, USDCAD did trade up to 1.4540 on the announcement yesterday evening, now back at 1.4500, while USDMXN hit almost 20.90 this morning, up from 20.52 yesterday.  Both pairs are still well below the highs seen in early Feb when tariffs were first announced, when USDCAD reached almost 1.41800 and USDMXN reached close to 21.30, although this time it is against a background of a generally weaker USD.  It was US stocks that came off worse, with Nasdaq down over 2.5%, and DJIA and S&P500 down 1.5% and 1.75% respectively.  Trump also announced further tariffs on China.  Canada and China have retaliated as you’d expect with tariffs of their own.

The Ukraine invasion remains at the top of the headlines, with Trump announcing an end to US aid to the country, including equipment that is currently making its way to Ukraine, now in Poland.  Trump says Zelensky doesn’t want peace and likely cannot survive without US help.  Europe has confirmed its ongoing support to Ukraine and has made it clear that a mineral deal alone for the US would not be enough to guarantee security.  US have made it clear that they see the best way to peace is for US to have an economic interest in Ukraine’s future. 

I do wonder what Trump would say if Zelensky just said ‘OK, enough is enough, we want to preserve life so we’ll give up the fight concede all of Ukraine to Russia’.  Russia then controls the minerals Trump seems to be keen on.  To be clear, I don’t think this is likely, but it would put US and Europe on a weaker footing.  I do expect Russia to now step up attacks on Ukraine in order to secure more territory. Meanwhile, UK and France are looking to propose a joint deal with Ukraine for a ceasefire which would open the door for peace negotiations.

USDJPY is lower, partly due to Trump referencing Yen when talking about countries with weak currencies.   USDJPY slipped to 148.60 overnight, matching the late-Feb lows and thereby creating a very clear level to watch.  It has since recovered a little to 149.30, but still well off yesterday’s highs which came in around 151.30.  It is reported that Japan assured US they were not looking for Yen depreciation when they met recently.  The stronger yen also comes as LDP’s Tamaki gave a pretty clear indication that wage growth of 4.5% would give reason t normalise rates, this is lower than the 5.3% trigger level last year.  Whether Ishiba’s cabinet or BoJ agree, 4.5% has come something of a line in the sand for an additional BoJ rate rise. 

Oil is trading at lower levels after OPEC+ talked about production increases.  WTI hit $67.50 this morning, its lowest level for 2025, while Brent made it down to $70.55, its lowest since Oct 2024.  We are a touch off those lows now, technical traders are watching this area for support, Brent has tested $70 a few times since late 2024 and WTI has only $1.00 or so below current levels since late 2024.  There has been a bit of talk about US looking to remove Russia sanctions and open up Russian energy again but I do think this is still some way off, unless either we see a Ukraine peace deal or if Trump decides to act unilaterally. 

In sport, good luck to Aston Villa and Arsenal as they represent English interests in the last 16 of the Champions League.  Liverpool will play tomorrow evening.  In cricket, India are taking on Australia in the semi-final of the Champions Trophy, the winner will face either South Africa or New Zealand, to be decided tomorrow.  Could be some decent matches there,  

Not the biggest day data-wise, but we have enough going on with tariffs and invasions to keep us on our toes.

Have a great day….

-  10.00 EU unemployment

-  18.00 Feds Barkin speaks

-  19.20 Feds Williams speaks

-  00.30 AUS GDP

-  00.30 BoJs Ueda speaks

-  01.45 China caixin services PMI

World waits to see true impact of Trump/Zelensky fall out

Good morning

What a weekend, sun was shining, bringing wonderful warmth if you’re out of the shade, of course the clear skies meant quite terrific frosts each morning but it’s such a joy to see some proper daylight compared to the dull and dreary conditions we seem to have since the turn of the year.

Dull and dreary were not words to describe Trump’s meeting with Zelensky on Friday.  Neither individual are particularly good statesmen, their arguments should take place behind closed doors. I do see both sides to this, Zelensky should know how to play Trump better, but I understand why he is hugely displeased with Trump’s almost U-turn on support for Ukraine, even to the extent he looks more friendly with Putin and blames Ukraine for being invaded.  Now, perhaps there is some truth that the invasion could have been avoided had Ukraine just given up large swathes of land, or even the entire country, to Russia at the outset.  But that does not mean Ukraine are to blame for being invaded.

Also a lot is made of how much Zelensky is earning out of the aid provided, something I read suggested he earned some $11m/month and owned huge properties in the US.  Who is to say whether that is true or not, I certainly cannot claim to have the facts.  But regardless, I am pleased to some extent that Zelensky has not signed a deal with US to give away the mineral reserves in Ukraine.  Trump is now in the unfortunate position where he has almost guaranteed peace in Ukraine without achieving anything close to peace.  He will not look strong in Putin’s eyes, having failed to cajole Ukraine into surrendering, and also having had a leader of a country have a shouting match in the White House.  Bad form all round.

Where this takes us remains to be seen.  Has Putin, through the Ukraine war, managed to drive a wedge between Europe and the US, something that really weakens both sides and therefore can only benefit Russia.  Can Ukraine survive with just European support, could there ever be a peace deal without a guarantee that Russia won’t invade again, and how would such a security blanket even come into effect?  European troops on the ground?  I cannot see an easy path to peace.

Anyway I am certainly not educated enough in either Eastern Europe or general politics to write any more on the subject here.  Instead I’ll turn attention to the currency markets which have actually been pretty stable.  GBPUSD is currently holding just under 1.26, EURUSD is just below 1.04, which takes GBPEUR a touch above 1.21.   USDJPY is back above 150 having spent some time in the mid-148’s last week.  GBPJPY is 189.00, GBP looking well bid in other crosses with GBP at 2.0250, 2.2470 and 1.8175 against AUD, NZD and CAD respectively.  USDCAD is 1.4440, USDMXN 20.52, the lack of tariff talk for now means neither pair has yet seen the spikes we saw at the start of February.

A busy week this week in terms of economic data from the US and EU, not so much for the UK.  We have EU inflation this morning, retail sales Thursday and also the latest ECB rate meeting where a 25bps cut to 2.65% is expected, while on Friday we have EU GDP numbers.  From the US, ISM PMIs today and Wednesday, with employment numbers including ADP, Challenger and then the main event, the nonfarm payrolls on Friday. 

In other news of note, a word of warning.  I received in the post over the weekend a letter from Hertfordshire Police, a speedwatch letter which claims they had caught me on camera travelling over the speed limit.  The letter went on to say that had a police officer been present I could have been prosecuted.  Which means that the equipment used must have been operated by non-Police, ie other citizens.  Now, I have seen people speeding and thought how I’d love them to get caught, but please don’t let our country turn into one where our own neighbours are spying on us.  However, i do know of course that it’s not clever to break the speed limit.

That’s about all from me this morning.  Have a great day….

-  10.00 EU HICP

-  14.30 CAD S&P manufacturing PMI

-  15.00 US ISM manufacturing PMI

-  18.00 Feds Barkin speaks

-  21.45 NZ building permits

-  23.30 Japan unemployment

-  00.30 RBA minutes

-  00.30 AUS retail sales