A poor week for the USD
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Daily Currency Update
US President Trump approach to trade relations with Canada and Mexico has clouded the outlook for the North American economy. In February, Trump slapped 25% tariffs on non-energy Canadian goods and all Mexican products, but later delayed them for 30 days. The recent pause on the tariffs are said to be nothing to do with the effect it has had on the markets with Trump blaming globalists for the sell-off, in USD and other investable products like equities. However, recent actions are being deemed chaotic and amateur which is seeing market participants look at investments elsewhere. Also denting sentiment has been a raft of recent data points that have hinted at a slowdown in U.S. growth, while traders have been eyeing some underwhelming corporate earnings reports.The US dollar has been heavily sold this week, taking the GBP/USD from 1.2580 at the start of the week to above 1.2900 this Friday and EUR/USD from 1.0400 up and above 1.0850. Until things calm down and there is more certainty in the markets, the USD will likely remain out of favour.
Key Movers
The European central bank (ECB) cut interest rates yesterday, with no surprises in the 25 basis points deduction. The deposit rate was seen as too restrictive for the Eurozone economy and with looming US tariffs, geopolitical uncertainty and falling headline inflation, the cut was inevitable. It was comments in the following press conference labelling the current rate as ‘meaningfully less restrictive’ that grabbed the headlines, indicating that further rate cuts by the ECB may be limited. Although the door isn’t being closed, the indication is we will not see the cuts we have seen the past 6 months.GBP/EUR has just broken below 1.1900 this morning, after seeing resistance at this level on Thursday. EUR/USD continue to advance as it pushed towards 1.0900.
Expected Ranges
- GBP/USD: 1.2770 - 1.2990 ▲
- GBP/EUR: 1.1850 - 1.1960 ▼
- GBP/AUD: 2.0360 - 2.0590 ▲
- EUR/USD: 1.0750 - 1.0930 ▲