Headlines:
- The dollar hemorrhage continues in European trading
- How have interest rates expectations changed after the tariffs announcement?
- EU trade commissioner says will talk to US counterparts tomorrow
- German Chancellor Scholz: Europe will respond appropriately and proportionately
- “We are ready in this trade war”, says France
- Japan says have not heard rationale behind reciprocal tariffs from the US
- EU to vote on countermeasures to US steel, aluminum tariffs on 9 April
- Deutsche Bank warns of a dollar confidence crisis
- Barclays warns of strong possibility of a US recession this year
- If US tariffs remain, it could push US economy to the precipice of a recession – BofA
- OPEC+ agrees to stick to further production hike in May but with bigger boost
- ECB accounts: Uncertainty calls for caution in policy-setting and especially communication
- US March Challenger layoffs 275.24k vs 172.02k prior
- Eurozone February PPI +0.2% vs +0.1% m/m expected
- Eurozone March final services PMI 51.0 vs 50.4 prelim
- UK March final services PMI 52.5 vs 53.2 prelim
- Japan’s largest union group Rengo sees average wage hike of 5.42% in third-round data
- Putin says ready to keep fighting if he doesn’t like Ukraine deal
- ECB’s Stournaras: US tariffs not an obstacle to April rate cut
- ECB’s Nagel: The ECB will have to reassess the situation
- ECB’s de Guindos: This uncertainty means we need to be extremely prudent
Markets:
- CHF leads, USD lags on the day
- European equities lower; S&P 500 futures down 3.3%
- US 10-year yields down 12 bps to 4.075%
- Gold down 1.3% to $3,091.63
- WTI crude oil down 6.3% to $67.19
- Bitcoin down 3.0% to $83,062
Carnage. Total carnage. That’s what the dollar is experiencing in European trading today as the first wave of the market reaction towards Trump’s tariffs is hitting.
The greenback was hammered across the board after a slow and stuttering start, with EUR/USD surging up from 1.0920 to a high of 1.1145 during the session. Meanwhile, USD/JPY also plunged from 147.50 and is pushing to fresh lows near 146.00 currently. And we have USD/CHF sinking by over 2% as well from 0.8760 to 0.8590 during the session.
With the yen and franc, safety flows are the ones dominating. As for the euro, it’s quite an outsized move but it speaks to the level of disdain against the dollar at the moment I guess. At some point in the next few sessions though, you would think that traders will come around on this with regards to the euro. I mean the ECB won’t like a higher currency amid a hit to the global economy and a trade war with tariffs flying about. So, that’s something to consider.
But for now, it’s all about the emotions and no one is feeling like the dollar is the place to be amid rising fears of a US recession.
Even USD/CAD is down 1% on the day in a fall to under 1.4100 and AUD/USD turning over losses in Asia from a low of 0.6230 to be up near 1% now at 0.6355 on the day.
All of this comes amid a backdrop of strong risk aversion in broader markets. Equities are being hammered with major indices in Europe down by over 2% mostly. Meanwhile, S&P 500 futures are down by a little over 3% as tech shares are being slammed.
In the bond market, 10-year yields in the US are down over 10 bps to 4.087% but that is at least off lows earlier closer to 4.04%.
The only big surprise perhaps is gold not finding much love, with the precious metal down by over 1% to $3,091 currently. But it feels like it will be a matter of time before the gold bugs turn things around so long as trade tensions continue to stay high moving forward.
It’s all about digesting Trump’s tariffs now and we’ll see what else he has to say later in the day to add to the early narrative here.
This article was written by Justin Low at www.forexlive.com.