USD firmer on renewed tariff threats – Scotiabank

The US Dollar (USD) continues to grind higher in relatively quiet trade. President Trump’s suggestion that he will probably introduce auto tariffs 'in the neighbourhood' of 25% (and similar for pharma and chip imports) on April 2 has weighed on global stock sentiment while also depressing fixed income, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

USD firmer as Trump revisits auto tariff threat

"US yields have firmed marginally but Treasurys are outperforming European debt where the major markets reflect a 3-5bps rise in 10Y yields. FX is relatively tranquil, however. The USD is firmer but not universally so and ranges are relatively tight. The NZD is outperforming after the RBNZ cut rates 50bps again—in line with expectations—but signaled the pace of rate cuts may slow. The AUD is finding a small bid on the Kiwi’s coattails; Australia reports employment data tonight." 

"The JPY is moderately firmer after BoJ hawk Takata said the central bank should consider gradual policy tightening to contain inflation risks. June BoJ swaps are pricing in 15-16bps of tightening risk. The EUR is the main underachiever on the session, easing back to the low 1.04 area, with the GBP not too far behind after mixed UK inflation data. It’s another day of limited data releases—just Housing Starts and Building Permits from the US this morning. The Fed releases the minutes of the January policy meeting at 14ET." 

"Its tone will likely underscore the pause in policy adjustment until members have more confidence in the inflation outlook. Jefferson, an FOMC voter, speaks at 17ET. The Mexican central bank releases its inflation report at 13.30ET. Moderate gains for the USD so far today suggest the rebound can extend a little more—but perhaps not too much—as markets await clarity on tariffs. The DXY continues to—roughly—track its evolution in the early days of the first Trump administration. If that is any guide, the DXY may edge back to the low/mid 108s over the next few weeks."