Market News
U.S. dollar slides on concern Trump’s tariffs will batter U.S. economy - BLOOMBERG
A gauge of the U.S. dollar slid to a five-month low as traders braced for the impact of higher U.S. tariffs on the economy.
The Bloomberg Dollar Spot Index fell as much as 1% to the lowest since November, with the greenback sliding sharply versus the yen and Swiss franc. The euro appreciated more than 1% to the strongest in six months, approaching the closely watched $1.10 level. Stocks in Europe slumped 1.8%.
U.S. President Donald Trump announced Wednesday he will apply at least a 10% tariff on all exporters to the US, with even higher duties on some 60 nations to counter large trade imbalances with the U.S. Canada said it will fight tariffs with counter-measures while China has also vowed to retaliate.
The harsher-than-expected tariffs threaten to raise prices on trillions of dollars in goods imported into the U.S. each year. U.S. stock futures tumbled about 3%, surpassing losses in Chinese shares even as the Asian nation faces a tariff of well above 50% on many goods.
“The aggravation of U.S. growth concerns on the tariff news and related further falls in US stocks has meant that the dollar isn’t enjoying its traditional safe haven/reserve currency status support,” said Ray Attrill, head of foreign-exchange strategy at National Australia Bank Ltd.
The greenback’s slump sent currencies across the board rallying. The pound rose as much as 0.8% to $1.3115, the strongest since October. The yen and the Swiss franc gained more than 1%.
Risks to the U.S. economy were also reflected in rising bets for Federal Reserve interest-rate cuts, which could add to depreciation pressure on the dollar. Overnight-indexed swaps signaled an 84% chance of Fed rate cuts by June, up from 76% on Wednesday. Treasury yields fell close to 4%.
“The market is betting against the Fed here, saying that weaker U.S. growth — especially if accompanied by an uptick in unemployment — will triumph over the tariff-related inflation uplift to see them easing faster than their rhetoric and current dot plot would have you believe,” said Attrill.
If the market is right and the decline in US yields is sustained, “there is plenty more U.S. dollar downside to come in coming months,” he added.
For strategists at Deutsche Bank including George Saravelos, there has been a disconnect between today’s outcome and recent communication suggesting an in-depth assessment of bilateral trade relationships.
“We are squarely focused on the market’s perception of the relative growth and fiscal policy outlook between the US and rest of the world and broader perception of relative policy credibility,” they wrote. “Our assessment of the newsflow so far is dollar bearish.”
--With assistance from Aline Oyamada.
