Dollar Falls As Trump’s Trade War Begins: Behind The G-10
The dollar slumped as the Trump administration’s massive tariffs on Canada, Mexico and China took effect, hurting global risk sentiment and further dampening investor expectations for U.S. growth in the coming months. The Swiss franc and Japanese yen, safe-haven currencies, led the G-10 advancers against the dollar. The Bloomberg Dollar Spot Index fell as much as 0.7% after a 0.4% decline on Monday
"We attribute the dollar's muted, and in some cases retreating, response to tariffs to two main factors: distrust and tariff relief," Goldman Sachs strategists including Michael Cahill wrote on Tuesday
"Whereas the initial tariff announcement was viewed as a small hit to growth but a near-term inflation support, it is instead being treated as an additional source of near-term policy uncertainty when U.S. data is already showing signs of tiring somewhat from these pressures," Cahill and team added
Government debt rallies across G-10: 10-year Treasury yields fall 2.5bp to 4.13% and traders now expect three Fed cuts by 2025
Retaliatory measures from Canada, Mexico and China are taking effect; Canada is imposing phased levies on $107 billion worth of U.S. goods while China is imposing tariffs as high as 15%; Mexico's Claudia Sheinbaum said they would announce retaliatory measures on Sunday. (Newsmaker23)
Source: Bloomberg
