Asia Summary and Highlights 19 Jan
Trump announced that Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland would face a 10% tariff from February 1, rising to 25% from June 1, unless the U.S. is permitted to buy Greenland.
Asia Session
Trump announced that Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland would face a 10% tariff from February 1, rising to 25% from June 1, unless the U.S. is permitted to buy Greenland over the weekend. It came as a huge surprise as a series of allies are being tariffed and it seems Trump is quite determined to acquire Greenland. The geopolitical tension has risen between EU and the U.S. for EU is preparing retaliative tariffs if diplomatic solutions fail. USD/JPY opened 25 pips lower and has yet to close the gap, currently trading 0.17% lower at 157.79.
Risk took a beating with Trump's tariff strategy to take Greenland. Previous metal jumped higher on such geopolitical tension. U.S. major equity indexes all gap lower with little reprieve so far, given the U.S. holiday. Regional equities are also dragged lower with Chinese equities surviving on stronger than expected GDP. AUD/USD also opened lower but soon retrained traction along with gold and see the pair currently trading 0.25% higher at 0.6700. NZD/USD outperforms and is trading 0.42% higher while USD/CAD slips 0.18%. Else, EUR/USD is up 0.35% and GBP/USD is up 0.15%. Most pair have recaptured the opening gap except USD/JPY.
North American session
The USD received a lift along with front end UST yields when Trump stated that Kevin Hassett, who had been the favorite to be nominated as the next Fed Chair, might remain in his current position as director of the NEC. This led markets to see a reduced threat to Fed independence. Later Fed Governor Bowman, also on the shortlist for Chair, expressed dovish views. US data had little impact December industrial production was stronger than expected with a rise of 0.4% but January’s NAHB homebuilders’ index unexpectedly slipped to 37 from 39.
EUR/USD fell from a high of 1.1627 to a low of 1.1585 before correcting to near 1.16. USD/JPY however was little changed near 158. Before Trump’s remarks, AUD/USD had already edged below 0.67 and USD/CAD had edged below 1.39. The moves were modestly extended after Trump spoke.