Australian dollar (AUD) weakens as Trump tariffs go ahead
The Australian dollar (AUD) faced selling pressure yesterday as US President Donald Trump went ahead with hefty tariffs on Canada, Mexico and China, thereby souring the market mood.
However, AUD’s losses were cushioned somewhat by the Reserve Bank of Australia’s (RBA) latest meeting minutes, which showed that policymakers seem cautious over future interest rate cuts.
Today, the spotlight falls on Australia’s latest GDP figures. An expected acceleration in growth in the fourth quarter of 2024 could see the ‘Aussie’ recover.
New Zealand dollar (NZD) falls amid trade war fears
The New Zealand dollar (NZD) also fell yesterday as the implementation of Trump’s new tariffs raised fears of a global trade war.
New Zealand economic data is absent from the calendar today. Therefore, NZD could be driven by risk appetite and the currency’s positive correlation with AUD.
Pound (GBP) uncertain in absence of data
The pound (GBP) traded without a clear direction yesterday as a lack of UK data left Sterling rudderless.
Additionally, a gloomy market mood put pressure on the increasingly risk-sensitive pound, while hopes the UK would be less affected by US tariffs offset GBP’s losses.
The UK’s final services PMI could impact the pound today, if it differs from preliminary estimates. Overnight, any hawkish comments from Bank of England (BoE) Governor Andrew Bailey could support Sterling.
Euro (EUR) buoyed by USD weakness
The euro (EUR) strengthened yesterday, with the single currency attracting support thanks to its negative correlation with the US dollar (USD).
The safer euro also benefitted from the downbeat market mood, with EUR firming against riskier rivals.
This evening, the Eurozone’s final services PMI will also be published. Confirmation that services activity slowed last month could weigh on EUR.
US dollar (USD) dented by fears of US recession
The US dollar faced selling pressure yesterday, despite the risk-off mood, amid concerns that US tariffs and retaliatory measures from other countries could tip the American economy into recession.
These concerns about the US economy also saw markets ramp up bets on more Federal Reserve interest rate cuts, with the odds of a May rate cut rising from around 36% to 48%.
The focus for USD investors in the session ahead will likely be the ISM services PMI, due out overnight. If activity in the American services sector remained robust last month, the ‘greenback’ could regain ground.
Canadian dollar (CAD) strikes multi-year lows as tariffs hit Canada
The Canadian dollar (CAD) suffered heavy losses yesterday, hitting multi-year lows against some peers, as 25% tariffs on Canadian exports to the US came into effect.
Looking ahead, another downbeat services PMI from Canada could pressure the ‘loonie’ tonight.
Data releases
10:30 AUD GDP Growth Rate (Q4)
19:00 EUR Services PMI (Feb)
19:30 GBP Services PMI (Feb)
23:15 USD ADP Employment Change (Feb)
00:30 CAD Services PMI (Feb)
00:30 GBP BoE Gov Bailey Speech
01:00 USD ISM Services PMI (Feb)