The Morning Update

The USD weakens, oil prices tumble, equity markets are down, and US yields are mixed as global tariffs kick in. The USD continues to face selling pressure against its G10 peers after the US raised tariffs on China, with markets concerned about rising US inflation and fears of recession. Global equity market selloff increased after the US hiked trade tariffs to a 100-year high. President Trump announced a 104% tariff on China that took effect at midnight, and Beijing responded by vowing to ‘fight to the end.’ The US 30-yearTreasury yield briefly surged above 5% for the first time since November 2023. UK borrowing costs reached their highest levels since 1998, oil prices tumbled to a fresh four-year low, and Japanese 40-year bond yields hit a record high.“We’re well into an escalation phase in the trade war, and investors have nothing to hold onto at the moment,” said Baradez, chief market analyst at IG Markets Ltd. “What’s clear now is that the US bond market is no longer a safe haven for investors; on the contrary, it is piling pressure on the stock market.” The focus today, along with any new tariff updates, will be on the US Fed minutes, and the EBC Cipollone speech, which will help provide direction to currency markets.

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In the news. Stocks tumble again as Trump hits China with 104% tariffs, Treasuries slammed. China says it will continue to take 'resolute and forceful' countermeasures as US tariffs kick in. Musk slams Trump's trade tsar in sign of rift over US tariffs. Brussels eyes fresh retaliation as it struggles to counter Trump tariffs. Germany's far right tops poll as Merz races to strike coalition deal. Canada's auto heartland is bleeding jobs and poised to decide the election. The Bank of England warns that the risk of ‘further corrections’ in markets is high. US to 'take back' Panama Canal from Chinese influence, visiting Pentagon chief says.

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In currency markets. The USD index continues under pressure over the US tariff rollout, with the Index down 5.8% year to date. The CNY falls to its lowest level since 2007 as US tariffs on China kick in. CNY weakens by 0.2%, while Asian currencies strengthen by 0.4% on average against the USD. Trading currencies rebound, with outlier NOK down 0.2%, while SEK & MXN up 0.1%, ZAR firms 0.3%, JPY & DKK gained by 0.5%, CHF jumped 0.7%, NZD strengthened by 0.85%, and AUD rallied by 1.2% against the USD.

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In commodity markets. Oil prices tumbled by 4.3%. Natural Gas prices gained by 1.5%. Gold & Silver prices rallied by 2.3%. Copper prices strengthened by 1.9%. Wheat prices up by 0.5%, and Soybean prices firmed by 0.65%.

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CAD strengthens despite tumbling oil prices, with the loonie benefiting from the weakening USD as global investors fear that US tariffs will raise US inflation and recession concerns. Domestically, the BoC's Q1 business outlook survey highlighted declining business sentiment affecting hiring and investment decisions. We expect the loonie to stay vulnerable to heightened volatility due to Canada's retaliation against US tariffs, uncertainty ahead of the Canadian election, and rising expectations of the BoC adopting a more proactive stance to lower domestic interest rates. Intraday, markets will monitor the US’s response to Canada’s retaliatory tariffs.

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EURCAD edges higher, testing fresh April highs with investors continuing to favour the single currency.

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EUR slips from intraday highs as investors focus on the Fed minutes. The euro’s strength reflects investor concern for the US, which is experiencing increasing expectations of a recession, increasing inflation, and stagnating growth driven by the US global tariff strategy. Domestically, Reuters, citing sources, said that the ECB expects eurozone growth to take a bigger hit fromUS tariffs than it had initially estimated. “All agreed that the 0.5% estimate is too low now, and one of the policymakers said the impact could be in excess of 1%. Investors will be focused on the EU's response to the US tariffs.

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GBPEUR continues under pressure holding near 8-month lows as the UK continues to struggle to secure a new trade deal with the US.

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GBP breaches 1.2800 amid a softer USD. The Bank of England warns the UK is exposed to the risk of a global hit from US tariffs. “The probability of adverse events and the potential severity of their impact has risen,” the BoE’s Financial Policy Committee (FPC) stated today. “Risks associated with debt sustainability concerns, including a sharp increase in government bond yields, could crystallize relatively quickly, particularly if accompanied by rapid capital outflows, “ FPC added. Investors will be focused on the FOMC Minutes to help provide direction to the pound today.

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