The USD weakens, oil prices ease, equity markets decline, and US yields rise as the global trade war intensifies. The USD index, which measures the USD against six peers, slipped from three-week highs as Trump’s auto tariffs heightened fears of a trade war. Global equities fell on expectations of an increasing global trade war. In Europe, the auto sector led the declines, as investors associated tariffs with a greater risk of recession. In 2024, the US imported almost $500 billion in automotive products. Of this, $220 billion in passenger cars came from major suppliers like Mexico, Canada, Japan, South Korea, and Germany. Investors are anticipating the announcement of reciprocal tariffs next week, although Trump suggested that the measures might not align with his previous pledges. Elsewhere, oil prices eased, while natural gas prices tumbled by over 3% as storage builds and demand lowers. Bitcoin firmed by 1% to $87.5k, while silver & gold firmed with safe-haven flows. The focus will be on the US GDP report and ECB President Lagarde’s speech to help provide intraday direction to currency markets.
In the news. Trump threatens ‘far larger’ tariffs ifEU and Canada unite to do ‘economic harm’ to the US. Germany slams Trump’s 25% auto tariffs as bad news for US, EU and global trade. Trump says he may reduce China tariffs to help close a TikTok deal. Japan and Brazil vow to bolster strategic ties as security and trade worries rise. Tesla shares drop on plunging European sales, concerns about Trump’s tariffs. Canada will react to Trump’s ‘attack’ soon, could impose tariffs, says Carney. UK Rachel Reeves warned of tax rises ahead despite GBP 14 billion plan to fix public finances. European oil traders weigh Russia return in market reshaped by war.
In currency markets. The USD eased following the announcement of 25% auto tariffs increased domestic recession fears. Norway's central bank postpones rate cuts as inflation rises. Indonesia seeks to calm investors as the IDR slides to a new all time low. CNY is flat, while Asian currencies on average eased by 0.1% against the USD. Trading currencies are mixed, with JPY weakened by 0.25%, CHF is flat, SEK up 0.1%, NOK, ZAR & CZK are firmed 0.2%, and AUD & NZD strengthened by 0.4% against the USD.
In commodity markets. Oil and Copper prices eased by 0.35%. Natural Gas prices tumbled by 3.2%. Gold prices rallied by 0.8%. Silver prices strengthened by 0.5%. Wheat prices up 0.2%, and Soybean prices firmed by 0.3%.
CAD eased from five-week highs following the US’s announcement of 25% tariffs on the auto sector, but the weakening USD on domestic recession fears helped the loonie hold below 1.4300. Investors will focus on PM Carney’s response to the US tariff news after he adjusted his election campaign schedule to return to Ottawa for discussions with members of his cabinet. Intraday, the focus will be on the US GDP report, unless the report prints outside expectations, we expect investors to be sidelined ahead of Friday’s key US inflation report.
EURCAD edged higher in early trading as investors anticipate the larger EU economy will be able to fair better than Canada amid US tariffs.
EUR recovers from three-week lows amid a softening USD.Investors are growing increasingly worried amid global trade uncertainties and caution ahead of Friday’s key US PCE inflation report. Trump threatened to impose larger-scale tariffs, “far larger than currently planned,” on Canada and the EU if they do economic damage to the US. Intraday, markets will be focused on the US Initial Jobless claims, US GDP, and ECB President Lagarde’s speech to help drive direction to the single currency.
GBPEUR are sidelined with investors focused on Friday's UK GDP report and the French & German inflation reports.
GBP remains above 1.2900 amid USD weakness due to fresh tariff news. The pound has gained from the weaker USD as the latest tariff updates have reignited fears of a US economic slowdown. Domestically, UK Finance Minister Rachel Reeves pointed out that the global economy has become more uncertain and announced cuts to spending plans. We anticipate that investors will remain on the sidelines today ahead of Friday’s crucial UK GDP and Retail Sales reports, which are expected to provide further insight into the UK economy.
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