USD settles back but tariff uncertainty to persist – Scotiabank

That was exhausting. Yesterday brought a mix of news on tariffs that likely reflects the sort of swings in sentiment we will have to expect as President Trump wields the tariff hammer on the US’ main trading partners, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD eases modestly overall in calmer trade

“Mexico’s President said it had an agreement for a 1-month reprieve from border-related tariffs, lifting markets, then it didn’t—apparently, according to Trump who said that nothing had been agreed. But it actually did. Canadian officials weren’t hopeful they would get a temporary pass. But then they did. President Trump said last night the 30-day stay would allow time for a final ‘economic’ deal to emerge. China announced retaliatory tariffs on a limited number of US goods as US tariffs came into effect.”

“Volatile trading across all asset classes yesterday has calmed as investors take stock. Developments yesterday supported hopes that tariffs are not going to be a permanent fixture of the economic landscape. But clarity on whether tariffs are a temporary measure to obtain (limited, in yesterday’s cases) concessions or will be used to raise revenue and fund tax cuts elsewhere, as Trump has suggested—and are therefore liable to remain in place—is still lacking.”

“The US Dollar (USD) traded well off the intraday high and closed net lower on the day yesterday overall. A little more softness has crept in this morning, suggesting perhaps that markets feel Trump’s tariff bark is worse than the bite – but that remains to be seen. There are more data reports from the US this morning, including JOLTS data and Factory Orders. Markets are keener on following headlines on tariff developments than tracking data, however.”