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
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