Global Themes

The U.S. dollar maintained a heavier tone a day after President Trump took issue with its strength. In a broad swoon, the dollar fell to one-, two- and six-week lows against the euro, sterling and loonie, respectively, and to five-month lows against the yen. In remarks published yesterday in The Wall Street Journal, President Trump said the buck was ‘getting too strong’ and thus bad for American business. The president didn’t stop there as he voiced support for low U.S. interest rates and said he wouldn’t label China a currency manipulator. The dollar had already been in a stupor this week thanks to geopolitical risks with the president’s remarks adding fuel to its selloff. Going forward, the dollar could find itself pitted in a tug of war between market forces and fundamentals, and presidential attempts to keep its strength in check. U.S. fundamentals will be in focus today and over the balance of the holiday-abbreviated week.


The Down Under dollar turned sunny side up thanks to blowout local jobs data. The Aussie dollar swung from three-month lows to more than one-week peaks after Australia netted 60,900 jobs in March, an amount some three times better than expected. The bullish jobs data came with upgraded revisions to the last report which helped raise an already high bar to a local interest rate cut this year.


Sterling jumped to two-week highs after President Trump talked down the dollar which he said was ‘getting too strong,’ The pound had already enjoyed a tail wind after U.K. numbers this week on inflation and unemployment suggested a fair amount of momentum behind the Brexit-challenged economy. The pound could be in for choppy seas with liquidity expected to evaporate with U.K. markets off for Good Friday and Easter Monday. The pound’s next fundamental cue will come from U.K. retail sales on April 21 which are forecast to fall under the weight of rising inflation.


The loonie held aloft at six-week highs, boosted by less dovish signals this week from the Bank of Canada and the blows landed on the greenback by America’s president. As expected, the BOC left its main interest rate parked at 0.5 percent. But officials nodded to the economy’s better run of late while it also upgraded its forecast for growth this year. Still, the BOC wasn’t seen as game changing in meaningfully positive way for the loonie as bankers still want to see the export sector lead the way which has wavered of late. 


The euro raced to one-week highs after President Trump jawboned the ‘too strong’ dollar lower. But the euro’s rise gave way to some selling with political uncertainty ahead of the fast approaching French election capping its upside. French polls suggest a tightening race ahead of the first-round vote on April 23. The election in the euro zone’s No. 2 economy has the potential to cause a market reaction like Britain’s Brexit vote and last year’s U.S. president election. 


The dollar steadied somewhat but remained on a decidedly defensive position, weighed down by ongoing global tensions and uncertainty, and the punch on the chin by the president yesterday. The dovish talk by Mr. Trump caused the bottom to give way on Treasury yields with the 10-year plunging to at least 2.2 percent, the lowest since November, and a country mile from the 2.6 percent weeks earlier. Lower yields diminish the dollar’s appeal. Scope for broader dollar strength has seemingly diminished with the president keeping an eye on its value. U.S. data fared mixed which largely offset and had little impact on the dollar. Weekly jobless claims inched down but wholesale inflation printed on the tame side of expectations.

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