Dollar Steady Ahead Of Major Tariff Announcement; Euro Slides
The U.S. dollar traded in a tight range on Wednesday, as uncertainty over the Trump administration’s planned tariffs later in the session kept most market participants on the sidelines.
U.S. President Donald Trump is widely expected to announce more trade tariffs later in the session — dubbed “Liberation Day” — and White House spokeswoman Karoline Leavitt said Tuesday that the duties would take effect immediately after the announcement.
Trump has argued that the tariffs are needed to correct the imbalance between the U.S. and its foreign trading partners, as well as a tool to bring manufacturing jobs back to the country. Much uncertainty remains about the size and scope of the trade barriers, but the Washington Post reported that the administration is considering a plan that would raise tariffs on about 20% of goods from nearly every country.
“Our view remains that downside risks dominate all currencies against the dollar at the moment,” analysts at ING said in a note. “The U.S. may try to announce tougher measures today before eventually easing them, which may still force a rotation into USD and JPY with high beta currencies taking a bigger hit.”
"But today's better dollar performance does not suggest a more sustained strength. Time will be needed to judge how long the tariffs will remain in place," ING added.
In Europe, EUR/USD traded 0.2% lower at 1.0789, slightly down ahead of the main tariff announcement.
Europe will respond to possible US tariffs proportionally but will not escalate tensions under any circumstances, French industry minister Marc Ferracci said on Wednesday.
"Europe is always on the side of negotiations and calming things down, because trade wars, you know, only produce losers," Ferracci told RMC radio.
"If 20% carpet tariffs materialize, the argument for a EUR/USD decline will be stronger, but maybe we need to see tighter targeting of EU products or countries to undermine the euro's relative safe haven status against other high beta currencies," ING said.
The euro also fell after data released on Tuesday showed that euro zone inflation eased slightly last month, which could persuade the European Central Bank to cut interest rates again later this month.
The ECB has cut interest rates six times since June, and meets again on April 17.
GBP/USD traded 0.1% lower at 1.2908, amid caution ahead of news from Washington.
Prime Minister Keir Starmer and Trump held talks over the weekend about a possible trade deal, but Downing Street said it still expects Britain to be hit with more tariffs.
"The more the market sees scope for an initial tariff announcement to be softened through negotiations, the more sterling could outperform the euro," ING said.
Australian dollar surges
In Asia, USD/JPY traded 0.2% lower at 149.66, after briefly rising above 150, although safe-haven demand for the Japanese yen increased.
USD/CNY edged up to 7.2710, as traders awaited more cues on Beijing's retaliation against US tariffs and stimulus measures to offset the economic impact.
AUD/USD rose 1% to 0.6304, with the Australian dollar the most prominent currency in Asia after building approvals data came in much better than expected for February, while RBA Assistant Governor Christopher Kent said the central bank would slightly raise the overnight repo rate. Source: Investing.com
