Tag: TradeWar

  • Australian Dollar maintains position, upside seems limited as China braces for US tariffs

    Australian Dollar maintains position, upside seems limited as China braces for US tariffs


    • The Australian Dollar could struggle as China is due to be hit with a 10% tariff later in the day.
    • Traders monitor the development surrounding the tariff deal with China.
    • Trump would suspend his tariffs after both countries agreed to send 10,000 soldiers to the US border to prevent drug trafficking.

    The Australian Dollar (AUD) rebounds on Tuesday, ending its six-day losing streak as the AUD/USD pair rises amid a weakening US Dollar (USD). The USD depreciated after US President Donald Trump announced late Monday that he would pause tariffs on Mexico and Canada. However, market volatility remains a concern as investors closely watch developments in the ongoing tariff negotiations with China, Australia’s key trading partner. China is due to be hit with across-the-board tariffs of 10% that begin at 05.00 GMT on Tuesday.

    President Trump stated that he would suspend steep tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 soldiers to the US border to combat drug trafficking. The tariffs on Mexico and Canada have been postponed for at least 30 days. This decision comes just two days after Trump imposed 25% tariffs on Mexican and Canadian goods and 10% tariffs on imports from China.

    The AUD may lose its ground due to the increased likelihood that the Reserve Bank of Australia (RBA) could consider a rate cut in February. The RBA has maintained the Official Cash Rate (OCR) at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any policy easing.

    Australian Dollar appreciates due to improved risk sentiment

    • The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, stabilizes around 108.70 at the time of writing after giving up most of its gains in the previous session.
    • The White House announced late Monday that US President Donald Trump signed an executive order to initiate the creation of a government-owned investment fund, according to Reuters. This fund could allow the US to profit from TikTok if an American buyer is secured. TikTok has until early April to find an approved partner or purchaser. Trump is pushing for the US to acquire a 50% stake in the company.
    • Data released by the Institute for Supply Management (ISM) on Monday showed that the Manufacturing PMI rose to 50.9 in January from 49.3 in December. This reading came in better than the estimation of 49.8.
    • The US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose 0.3% MoM in December, up from 0.1% in November. On an annual basis, PCE inflation accelerated to 2.6% from the previous 2.4%, while core PCE, which excludes food and energy, remained steady at 2.8% YoY for the third straight month.
    • Fed Chair Jerome Powell emphasized during the post-meeting press conference that the central bank would need to see “real progress on inflation or some weakness in the labor market” before considering any further adjustments to monetary policy.
    • US Treasury Secretary Scott Bessent warned Key Square Capital Management partners a year ago that “tariffs are inflationary and would strengthen the US Dollar—hardly a good starting point for a US industrial renaissance.” However, according to the Financial Times (FT), Bessent last week advocated for new universal tariffs on US imports, proposing an initial 2.5% rate that would gradually increase.
    • President Trump announced his threat on X (formerly Twitter) to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.
    • Australia’s Retail Sales declined by 0.1% month-on-month in December 2024, marking the first drop in nine months. Although the decline was less severe than the anticipated 0.7% contraction. The annual sales increased by 4.6% compared to December 2023. On a seasonally adjusted basis, sales rose 1.0% QoQ in the December quarter of 2024.
    • China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) declined to 50.1 in January, down from 50.5 in December. The reading fell short of market expectations, which had anticipated a steady 50.5.
    • ANZ, CBA, Westpac, and now National Australia Bank (NAB) all anticipate a 25 basis point (bps) rate cut from the Reserve Bank of Australia (RBA) in February. Previously, the NAB had forecasted a rate cut in May but has now moved its projection forward to the February RBA meeting.
    • The Reserve Bank of Australia released its January 2025 Bulletin, featuring a detailed analysis of how monetary policy changes influence interest rates in the economy and how fluctuations in interest rates impact economic activity and inflation.

    Australian Dollar tests nine-day EMA barrier near descending channel’s upper boundary

    AUD/USD hovers around 0.6210 on Tuesday, trading within the descending channel pattern on the daily chart, signaling a bearish bias. However, the 14-day Relative Strength Index (RSI) has rebounded toward the 50 level, signaling weakening downside momentum. A breakout above the channel and a sustained move above the 50 mark on the RSI could indicate a shift toward a bullish bias.

    On the downside, the AUD/USD pair could test the descending channel’s lower boundary at the 0.6150 level. A break below the channel would guide the pair to navigate the region around 0.6087, the lowest since April 2020, recorded on February 3.

    The AUD/USD pair tests its initial barrier at the nine-day Exponential Moving Average (EMA) of 0.6225, aligned with the upper boundary of the descending channel.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.26% -0.19% 0.31% -0.76% -0.44% -0.41% -0.09%
    EUR 0.26%   0.07% 0.58% -0.50% -0.18% -0.14% 0.17%
    GBP 0.19% -0.07%   0.48% -0.57% -0.26% -0.22% 0.10%
    JPY -0.31% -0.58% -0.48%   -1.04% -0.73% -0.71% -0.38%
    CAD 0.76% 0.50% 0.57% 1.04%   0.31% 0.35% 0.68%
    AUD 0.44% 0.18% 0.26% 0.73% -0.31%   0.04% 0.38%
    NZD 0.41% 0.14% 0.22% 0.71% -0.35% -0.04%   0.31%
    CHF 0.09% -0.17% -0.10% 0.38% -0.68% -0.38% -0.31%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • I like the idea of tariffs on most countries

    I like the idea of tariffs on most countries


    United States (US) President Donald Trump hit the newswires with a wide swath of off-hand statements on Monday, ranging from the war in Ukraine, where President Trump expects ‘rare earth metals’ in exchange for obtaining a ceasefire with Russia. Donald Trump also noted that he remains “not happy” with the Panama situation, and reiterated that his work on tariffs is not over yet.

    Key hightlights

    We’ll be doing something perhaps with TikTok if we can make the right deal, TikTok could go into the sovereign wealth fund.

    Nobody is out of tariffs.

    I had good talk with Trudeau.

    We haven’t agreed on tariffs yet with Mexico.

    We’re not treated well by Canada.

    We don’t need Canadian cars, lumber, agriculture.

    I wouldn’t mind making our cars in the United States.

    We will have a big negotiation with Mexico.

    We will speak to China over next 24 hours, probably.

    China won’t be involved with the Panama Canal for long.

    China will be dealt with on the Panama Canal.

    China tariffs were an opening salvo.

    USAID is a good concept, but has radical left lunatics.

    I like the idea of reciprocal tariffs on more countries.

    We are telling Ukraine they have valuable rare earths and we want a guarantee.

    I’m seeking guarantees on rare earths in any deal with Ukraine.

    I want Ukraine to give us rare earths.

    We will have a call with Panama on Friday.

    I’m not happy with the Panama situation but they have agreed to some things.

    I have no guarantees that the Gaza ceasefire will hold.



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  • Australian Dollar defends its ground despite tariffs-related cautious market mood

    Australian Dollar defends its ground despite tariffs-related cautious market mood


    • AUD/USD hovers above 0.6200, defending mild bids amid US tariff concerns and weak Chinese data.
    • US PCE data showed no surprises, Fed remains cautious.
    • RBA dovish bets continue to pressure the pair.

    The Australian Dollar clings to mild gains on Friday, trading around 0.6215 after briefly touching a two-week low. The pair remains under pressure as US President Donald Trump reaffirmed plans to impose tariffs on Chinese imports, dampening risk sentiment.

    Meanwhile, speculation over a potential rate cut by the Reserve Bank of Australia (RBA) in February and ongoing economic struggles in China continue to weigh on the Aussie.

    Daily digest market movers: Aussie struggles on US tariffs concerns

    • US confirms 25% tariffs on Canada and Mexico, 10% on China, effective February 1.
    • US Dollar retreats as weak economic data erases weekly gains, pushing the DXY lower from its peak near 108.00.
    • China’s PMI data disappoints with manufacturing contracting and services barely expanding, pressuring the Aussie.
    • Iron ore prices hit yearly highs, offering mild support to AUD despite concerns over China’s weak demand.
    • Markets consider that the RBA cutting rates in February is a done deal, which is also weakening the Aussie.
    • On the US data front, the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation measure, rose by 0.3% MoM in December, following a 0.1% increase in November.
    • On an annual basis, the PCE inflation rate increased to 2.6% from the previous month’s 2.4%. The core PCE, which excludes food and energy prices, remained steady at 2.8% YoY for the third consecutive month.
    • Markets are expecting no rate cut by the Fed in March.

    Technical outlook: AUD/USD struggles for direction

    AUD/USD remains confined within a narrow range, facing resistance near 0.6230 while holding support at 0.6200. The Relative Strength Index (RSI) stands at 42 in negative territory, reflecting a lack of clear directional momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints decreasing green bars, suggesting fading bullish strength.

    Despite recent recovery attempts, the Aussie’s upside potential appears limited. A break below 0.6200 could trigger further losses, while a move above 0.6230 may offer short-term relief.

     

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • Earlier reports are wrong, tariffs are coming February 1

    Earlier reports are wrong, tariffs are coming February 1


    United States (US) Press Secretary Karoline Leavitt dashed investor hopes for a delay in tariffs on Friday, announcing from the White House’s press podium that President Donald Trump’s wide tariffs of 25% on Canada and Mexico, as well as 10% on China, would be taking effect on February 1. The announcement shattered earlier reports that the Trump administration would be pushing tariff implementation out to March.

    Key highlights

    Press Sec. Leavitt reiterates February 1st deadline for Canada and Mexico tariff.

    Canada and Mexico tariff at 25% and China at 10%.

    Tariffs will be up for public consumption on Saturday.

    There is no update on exemptions.

    Trump reviewing details of tariff plans, which may allow some exemptions but they will be few and far between.

    White House: We’re not seeing start of trade war with Canada.

    Canada and Mexico tariffs are over flow of fentanyl.

    Trump has not made up mind on tariff timeline for the EU.



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  • EUR/USD slides as soft inflation in Germany’s six states validates ECB dovish bets

    EUR/USD slides as soft inflation in Germany’s six states validates ECB dovish bets


    • EUR/USD declines to near 1.0370 as inflation in six states of Germany decelerates in January.
    • Donald Trump threatens to impose 100% tariffs on BRICS and 25% on Mexico and Canada.
    • The Fed kept interest rates at their current levels on Wednesday.

    EUR/USD faces selling pressure and declines to near 1.0370 in Friday’s European session. The major currency pair declines as the Euro (EUR) weakens across the board amid a slowdown in inflationary pressures in six German states. Softer-than-expected Consumer Price Index (CPI) data for January boosts confidence that Eurozone price pressures are on track to return sustainably to the European Central Bank’s (ECB) desired rate of 2%, which will support the central bank in easing the monetary policy.

    On Thursday, ECB President Christine Lagarde showed confidence in announcing a victory over inflation this year in the monetary policy statement after the central bank reduced its Deposit Facility Rate by 25 basis points (bps) to 2.75%. In Friday’s European session, ECB policymaker and Estonian Central Bank chief Madis Muller also said that it is realistic for inflation to be near 2% “by the middle of this year”.

    Christine Lagarde’s comments at the press conference indicated that the ECB has kept the door open for further policy easing. Lagarde said that we are still in “restrictive territory” and it is premature to “anticipate at what point where will stop”. She avoided providing a pre-defined interest rate cut path and reiterated that we decide meeting by meeting based on data.

    Going forward, investors will focus on the flash Eurozone Harmonized Index of Consumer Prices (HICP) data for January, which will be released on Monday.

    But before that, the preliminary German HICP data for January will be published at 13:00 GMT. However, the impact is expected to be limited, as the inflation data in six German states have already indicated the current status of price pressures.

    Euro PRICE Today

    The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   0.28% 0.14% 0.25% 0.04% 0.04% -0.08% 0.15%
    EUR -0.28%   -0.14% -0.05% -0.23% -0.23% -0.38% -0.12%
    GBP -0.14% 0.14%   0.10% -0.09% -0.11% -0.24% 0.01%
    JPY -0.25% 0.05% -0.10%   -0.21% -0.21% -0.37% -0.10%
    CAD -0.04% 0.23% 0.09% 0.21%   -0.02% -0.15% 0.10%
    AUD -0.04% 0.23% 0.11% 0.21% 0.02%   -0.14% 0.12%
    NZD 0.08% 0.38% 0.24% 0.37% 0.15% 0.14%   0.26%
    CHF -0.15% 0.12% -0.01% 0.10% -0.10% -0.12% -0.26%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

    Daily digest market movers: EUR/USD weakens as Trump’s tariff threats improve USD’s appeal

    • EUR/USD remains under pressure as the broader outlook of the US Dollar (USD) remains firm, with the US Dollar Index (DXY) wobbling around 108.20. The safe-haven appeal of the Greenback strengthens as United States (US) President Donald Trump reiterated his intentions of imposing hefty tariffs on his North American peers and BRICS on Thursday.
    • Donald Trump said on his social media platform, TruthSocial, that he requires a commitment from the BRICS that it will “neither create a new currency nor back any other currency” to replace the US Dollar. Trump threatened that any country tries should “face 100% tariffs”, and expect to say “goodbye to selling into the wonderful US economy.”
    • Market experts believe that Donald Trump is using tariff measures as a tool to fulfill his economic agenda, and the imposition of hefty tariffs will be inflationary for the US economy. Such a scenario would support the Federal Reserve (Fed) in holding its stance of keeping interest rates unchanged in the range of 4.25%-4.50% for longer.
    • On Wednesday, the Fed maintained the status quo and guided to remain in the waiting mode until the central bank sees any “real progress in inflation or some weakness in the labor market”.
    • Meanwhile, the next move in the US Dollar will be guided by the US Personal Consumption Expenditure Price Index (PCE) data for December, which will be published at 13:30 GMT. Economists expect monthly core PCE inflation to have grown at a faster pace of 0.2%, compared to a 0.1% increase in November. Year-on-year, core PCE is estimated to have grown steadily by 2.8%.

    Technical Analysis: EUR/USD returns below 20-day EMA

    EUR/USD declines to near 1.0370 in Friday’s European session, below the 20-day Exponential Moving Average (EMA) around 1.0390. The major currency pair resumed its correction after failing to sustain above the 50-day EMA, which trades around 1.0449 at the press time.

    The 14-day Relative Strength Index (RSI) faces barricades near 60.00. Such a scenario indicates that the recovery move was short-lived.

    Looking down, the January 20 low of 1.0266 and January 13 low of 1.0177 will act as major support for the pair. Conversely, the December 6 high of 1.0630 will be the key barrier for the Euro bulls.

     



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  • US President Donald Trump:

    US President Donald Trump:


    United States (US) President Donald Trump ran through a long list of grievances while delivering his remarks during the World Economic Forum hosted in Davos, Switzerland on Thursday. President Trump reiterated his concerns that the US’ trade deficit with Canada, which amounts to 4% of the US’ total trade imbalance, is unsustainable. President Trump also floated tax cuts for US businesses, asking the Organization of the Petroleum Exporting Countries (OPEC) to lower Crude Oil prices, and re-floated his ongoing threats of ambiguous, sweeping tariffs on US imports from other countries. President Donald Trump also took the opportunity to remind everyone at Davos that he will single-handedly deliver extreme tax cuts while simultaneously shrinking the US spending deficit, and also vowed to attempt to subvert the operational independence of the US Federal Reserve (Fed).

    Key highlights

    US has largest amount of oil and gas of any country and we are going to use it.

    US House and Senate will pass tax-cut measures.

    Congress will pass the largest tax cut in American history.

    I will ask OPEC to lower oil prices.

    I will ask Saudi’s MBS for $1 trillion in investments.

    I will demand lower interest rates.

    I’m asking NATO nations to increase defense spending to 5% of GDP.

    EU tariffs make it very difficult to bring products into Europe.

    I will do something about the trade deficit with the EU.

    We need double the energy we have in the US for AI to be as big as we want it.

    I will bring the corporate tax rate to 15% if the product is made in the US.

    We can’t continue current trade deficit levels with Canada.

    I want to obliterate US debt, which will happen rapidly.

    I will meet Putin soon to end the war in Ukraine.

    I see US-China relationship being very good.



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  • EUR/JPY climbs to one-week top, closer to mid-162.00s amid weaker JPY

    EUR/JPY climbs to one-week top, closer to mid-162.00s amid weaker JPY


    • EUR/JPY scales higher for the fourth straight day amid the emergence of some JPY selling.
    • The divergent BoJ-ECB policy expectations should keep a lid on the upside for the cross.
    • Traders now look to ECB President Christine Lagarde’s speech for short-term opportunities.

    The EUR/JPY cross attracts follow-through buyers for the fourth straight day on Wednesday and looks to build on its recovery from the 159.70-159.65 area, or over a one-month low touched last week. The intraday positive move lifts spot prices to a one-week top, around the 162.35-162.40 area during the Asian session and is sponsored by the emergence of some selling around the Japanese Yen (JPY).

    The global risk sentiment remains well supported by the Israel-Hamas ceasefire agreement and hopes that US President Donald Trump might relax curbs on Russia in exchange for a deal to end the Ukraine war. Adding to this, Trump’s proposed trade tariffs lacked details, which further boosted investors’ appetite for riskier assets. This, in turn, is seen undermining demand for the safe-haven JPY and acting as a tailwind for the EUR/JPY cross.

    That said, the growing acceptance that the Bank of Japan (BoJ) will raise interest rates on Friday should limit any meaningful JPY depreciation. Furthermore, a modest US Dollar (USD) strength, along with Trump’s threat to impose tariffs on the European Union and bets that the European Central Bank (EC) will lower borrowing costs further, seem to weigh on the shared currency and should cap any further gains for the EUR/JPY cross. 

    The aforementioned fundamental backdrop and the recent repeated failures near the 200-day Simple Moving Average (SMA) warrant some caution for bullish traders. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move. Traders now look to ECB President Christine Lagarde’s speech for some impetus, though the focus will remain glued to the crucial BoJ policy meeting.

    Japanese Yen PRICE Today

    The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   0.08% 0.02% 0.25% 0.02% 0.13% 0.23% 0.12%
    EUR -0.08%   -0.07% 0.16% -0.07% 0.05% 0.15% 0.04%
    GBP -0.02% 0.07%   0.23% -0.00% 0.12% 0.21% 0.09%
    JPY -0.25% -0.16% -0.23%   -0.22% -0.12% -0.03% -0.15%
    CAD -0.02% 0.07% 0.00% 0.22%   0.12% 0.21% 0.08%
    AUD -0.13% -0.05% -0.12% 0.12% -0.12%   0.10% -0.03%
    NZD -0.23% -0.15% -0.21% 0.03% -0.21% -0.10%   -0.13%
    CHF -0.12% -0.04% -0.09% 0.15% -0.08% 0.03% 0.13%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

     



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