- Currency futures had a volatile week after Trump imposed reciprocal tariffs.
- Economic worries sent investors scrambling for safety in currencies like the yen.
- Data on Friday revealed an unexpected surge in US job growth in March.
Currency futures were mixed on Monday, with most currencies holding steady and risk-sensitive currencies vulnerable after fresh lows hit last week. The moves came after the US imposed reciprocal tariffs on most of its trading partners, escalating the global trade war.
Currency futures had a volatile week after Trump imposed new tariffs on many more countries. The move renewed worries about a global trade war. Moreover, it further clouded the outlook for the global economy, sending risk appetite down.
The US president imposed a 10% reciprocal tariff, with some countries like China suffering much higher levies. As a result, some countries have responded with counter-tariffs. Meanwhile, some are ready to negotiate better trading deals. Nevertheless, there is a growing fear that the global economy will slow down rapidly.
The economic worries sent investors scrambling for safety in currencies like the yen and the Swiss franc. Meanwhile, risk-sensitive currencies like the Australian dollar collapsed. The Aussie was one of the worst affected since China is Australia’s major trading partner. The trade war between China and the US is heating up.
Chinese top officials have promised counter-tariffs starting on Thursday. This trade war will negatively impact both economies, with China being more vulnerable. This will also cloud the outlook for Australia’s economy, pushing the RBA to lower borrowing costs.
Dollar (Source: Bloomberg)
Meanwhile, currencies like the euro and sterling benefitted from a weak dollar. US recession worries sent Fed rate cut expectations higher, Treasury yields lower, and the dollar down.
However, a rebound in the dollar on Friday sent currency futures down. The greenback recovered after Powell’s speech lowered expectations for Fed rate cuts. The Fed Chair poured cold water on rate cut bets when he said the central bank would remain cautious to assess the impact of Trump’s tariffs. Therefore, there is no need to rush to lower borrowing costs.
Additionally, data on Friday revealed an unexpected surge in US jobs growth in March. The economy added 228,000 new jobs. However, the unemployment rate also increased to 4.2%, sending mixed signals.
In Canada, the economy unexpectedly lost 32,600 jobs, indicating a weak labor market. Moreover, the unemployment rate increased from 6.6% to 6.7%, putting more pressure on the Bank of Canada to lower borrowing costs. As a result, the loonie ended Friday down.
