Dollar Down as Risk Takes Trump’s Latest Tariff Threat in Calm
US President Trump’s latest tariff threat has yet to do much to affect broader risk sentiment. The commander-in-chief told reporters just after Wall Street’s record close that he is likely to impose tariffs of around 25% on imports of cars, semiconductors and pharmaceuticals, with an announcement expected as early as April 2. US and European equity futures were little changed on the day although weakness in Asian stocks was slightly more pronounced. Perhaps more indicative of the market’s easing has been the dollar’s decline since the headlines emerged. The Bloomberg Dollar Spot Index fell 0.1%.
The kiwi is at the top of the G-10 foreign exchange leaderboard, up 0.4% against the greenback after the RBNZ signaled it would slow the pace of interest rate cuts after a third straight 50 bps cut. The yen gained 0.3%, taking USD/JPY down to ~151.60 after BOJ Board Member Takata said it was important for authorities to continue considering gradual rate hikes to contain risks of rising inflation. The pound rose 0.1% ahead of UK inflation data due early in the day - BOE Governor Bailey played down the threat of a UK inflation resurgence yesterday.
Bund futures fell ~20 ticks although Tuesday's intraday low remained intact, suggesting European bonds have begun to shake off concerns about the potential for increased debt sales to fund higher defense spending. That poses downside risks for European stocks given that the recent rally has been supported by another part of that trade -- long European defense names
Source: Bloomberg
