Daily Market Update

U.S. Dollar Resurrection as Trade Turmoil Starts Going Away

March 27, 2018

The U.S. Dollar is trading in much stronger ranges this morning following news of deals being worked out between the U.S. and China to alleviate the shock markets felt over high tariffs on metals and other products.

USD

Barriers to trade or potential for a “trade war” were never going to contribute anything good economically or positively impact the greenback, however, recovery from the fears and concerns have. Thus far, the buck has recovered by over half a percent overall since 3PM yesterday per the Bloomberg Dollar Spot Index.

Treasury Secretary Steve Mnuchin is said to have been very successful in getting China to the negotiating table and bringing up major proposals on commerce such as lowering the costs of importing auto parts for the U.S. Although not everything is fine and well after these tariff ultimatums, it seems like the U.S. is using it as leverage and the threat for many countries was never real.

The administration has made almost all allies exempt to new costs and is promoting free trade. Stock indexes have welcomed these developments and a positive correlation between the buck and equities is occurring, as we mentioned in previous daily updates. However, MXN is now at its strongest level against the dollar for the year.

 

EUR

The Euro is down by over half a percent after major swings across markets derived from news about the U.S. calming its tariff actions. Talks between China and the U.S. are ongoing to try to minimize any further blowout from the promise of implementing higher tariffs. Last week’s sentiments of risk-aversion propelled the Euro, but it seems like it was overvalued and now we are returning to levels seen at the start of the month. Without much in terms of data, expect Euro to be at the mercy of headlines over trade and political discord.

 

GBP

The Pound was smacked overnight as the Bank of England spoke in a meeting about the “material risks” that Brexit poses to financial services. The financial Policy Committee met and discussed how firms may struggle to offer their services down the line since they may not have the necessary permissions. Additionally, the Pound was also a benefactor of doubts over U.S. trade as well as foreign policy, but for right now these fears have subsided.

 

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