The USD moved lower on the back of concerns about tariff wars, especially with China. Trump last week accused China of breaking the trade deal.
China firmly rejected the claim and countered that it was the United States that breached the deal. The Chinese Ministry of Commerce stated that the U.S. had implemented several “discriminatory restrictive” measures against China, including:
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Issuing guidance on AI chip export controls
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Halting sales of chip design software to China
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Revoking visas for Chinese students
China asserted that these actions seriously undermine the consensus reached at the Geneva economic and trade talks and damage China’s legitimate rights and interests.
Late Friday, President Trump announced that the United States will double tariffs on imported steel and aluminum from 25% to 50%, effective June 4, 2025. This increase applies broadly to imports from all countries, including China. The move aims to bolster the domestic metal industry and reduce reliance on foreign suppliers.
Later today, the White House said we want countries “best offer” by Wednesday in tariff talks.
And you wonder why the USD was hit?
The USD is trading down the most vs the NZD (-1.33%) and the AUD (-1.00%). The greenback did the best vs CAD at -0.21% after a new move to the lowest level since October 2022 failed. The dollar was down -0.62%vs the GBP adn teh -0.83% vs the EUR.
The US yields moved higher on the day with the 2 yhear up 2.0 bps at 3.938%. The 10 year yield moved up 2.6 bps at 4.443%.
The US stocks did erase early declines which was confusing unless you believe that all will pass over time. The Nasdaq led the way with a gain of 0.67%. The S&P was up 0.41% while the Dow rose 0.08%.
The ISM manufacturing index today stayed below 50 at 48.5 vs 49.5 last month. Construction spending also was weaker at -0.4% vs +0.3% estimate. The prior month was revised lower to -0.8% vs -0.5%. That data supports a lower dollar.
And to add more confusion in the “witches brew” that defines the markets (or doesn’t), the Atlanta Fed GDPNow forecast for Q2 growth continued the surged to 4.6% from 3.8% in its current guesstimate. Recall first quarter GDP was at -0.2%.
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