So far today, we’re seeing currencies and stocks fade a bit of the moves from overnight trading on the session. With S&P 500 futures down 2%, the dollar is also struggling for the most part again. It’s been a bit of a theme since the whole tariffs saga with traders questioning the dollar’s status as a reserve currency and safe haven it would seem. USD/CHF is currently down 1.6% and has almost erased all of the jump from Trump’s tariffs pause announcement:
USD/CHF hourly chart
Elsewhere, EUR/USD is up 0.9% to 1.1045 and that one has erased the drop from Trump’s call to pause reciprocal tariffs. And we also have USD/JPY down 1.1% today to 146.08 currently. Besides that, GBP/USD is up 0.4% to 1.2870 and NZD/USD up 0.5% to 0.5675. AUD/USD is down flat at 0.6150 but that arguably owes to the escalation in the US-China trade conflict.
With the bond market also finding some calm and no longer imploding, it’s interesting to take note of the latest dynamic here with regards to the dollar.
As much as Trump’s tariffs pause is now in effect, there’s still a big regime change in global trade.
There’s 125% tariffs on China in the latest salvo with 10% blanket tariffs for everyone else. Then, you still have 25% tariffs on steel and aluminum alongside the 25% auto tariffs. Adding to that is also tariffs on Canada and Mexico. At this point, it is hard to keep track of things but it isn’t good by any means.
As of now, one can argue that when measuring the pain for global trade, it’s not so much about the breadth but more so about the depth. That as the focus turns largely towards China.
It’s come to the point where we’re even seeing Australia abandon its position to make nice and want to decouple from China. That said, it was a growing rhetoric before that until both sides tried to mend the relationship in the past year. And then now, we’re back to abandoning all the progress again.
And in this new climate, markets are also acting wonky with investors definitely sensing some unease in wanting to hold dollars for safety. That’s allowing for the yen and franc to be the ultimate haven currencies and keeping the likes of gold very much in favour.
So yes, we do have a 90-day tariffs pause. But it doesn’t mean markets are back to normal, at least not yet.
There’s still much to figure out with regards to the economic circumstances as well as observing the US-China rhetoric in the meantime. In short, there is still a lot uncertainty left for traders to work with as the tariffs saga continues over the coming months.
