North American Summary and Highlights 3 April
Overview - The USD was softer across the board but corrected off its lows in late trade.
North American session
USD weakness persisted in the morning before seeing an afternoon correction. Equities plunged early and remained sharply weaker. USD/JPY bottomed at 145.20 and moved back above 146. EUR/USD slipped to 1.1020 from above 1.11 and GBP/USD slipped below 1.31 from 1.32. USD/CAD bottomed at 1.4028 and held below 1.41. AUD.USD peaked at .6389 before correcting to .6220.
Initial claims were lower than expected at 219k but had little impact. February’s trade deficit of $122.7bn was near consensus. Later a weaker than expected ISM services index of 50.8 helped sustain the downward momentum the USD had at the time. Fed’s Jefferson and Cook saw no hurry to change policy.
European morning session
The USD extended declines through the European morning, with the riskier currencies slightly outperforming the JPY, although the CHF was the strongest performer. EUR/USD gained 90 pips to 1.1040, AUD/USD gained 50 pips to 0.6340, while USD/JPY fell 60 pips to 146.40. USD/CHF fell more than 1% to 0.8620. The SEK also made strong gains, with EUR/SEK down 3 figures to 10.69.
FX moves were driven by equity market weakness, with European equities down around 2.5%, while US S&P 500 equity futures were down 3.2%. Bond yields were also all substantially lower, with European 5 year yields down around 10bps and US around 15bps. The moves were all driven by the tariff increases announced by the US overnight. Thus far there has been no confirmed retailiation response. Datawise there was Swiss CPI, which was weaker than expected in March at 0.3% y/y, unchanged from February. Eurozone services PMI was revised slightly higher to 51.0, while UK services PMI as revised lower to 52.5.