Dollar bulls celebrate easing global trade tensions

Matthew Ryan, CFA Ebury

An improvement in global trade tensions would ordinarily be bearish for the safe-haven greenback, yet this is being cheered by dollar bulls in the current environment. Treasury Secretary Scott Bessent appears to have returned some sanity to proceedings.

Speaking on Tuesday, Bessent struck a more conciliatory tone on the US-China trade war, saying that the current situation was “unsustainable”, while noting that he expects a de-escalation.

Trump himself has echoed these remarks, indicating that while tariffs aimed at China would not amount to zero, they would land “substantially” below current levels - a WSJ report out on Wednesday indicated that the tariffs could eventually drop to somewhere between 50-65%.

Attention now increasingly turns to how the tariff disruption is impacting the US economy.

Yesterday’s PMI data was not particularly encouraging, but not a total disaster either, with the composite index slipping to a still expansionary 51.2 in April (from 53.5 in March).

Next Wednesday’s first quarter GDP report will be one of the closest watched in recent times. A mild annualised contraction appears likely given the front-loading of imports pre-tariffs, but we suspect that a sharp downturn will be avoided.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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