Asia Summary and Highlights 4 March
Risk stays sour as U.S. tariff looks set to be imposed
Asia Session
The risk appetite remains sour as it looks like the U.S. tariffs on Canada and Mexico looks set to be imposed, while Canada is going to retaliate with 25% on 30 billion CAD U.S. import and Mexico is not responding yet . Trump also mentioned increasing the tariff on China to 20% which creates more uncertainty in the market as China said it would be taking retaliation steps. Major equity indexes are all in the red and see AUD/USD down 0.47% to 0.6195, NZD/USD is also down 0.24% while USD/CAD rose 0.17%.
The key of JPY movement on Tuesday lies not in the labor data but the threat from Trump on Japan devaluing its currency. Trump's remark on China and Japan's weak currency to be a type of tariffs have seized market participants attention as such would likely trigger more action from him despite both Japanese FM Kato and PM Ishiba denies actively devaluing JPY. While we all know his ultimate goal is on narrowing trade deficit, the uncertainty of policy has kept risk asset on check and JPY strengthens. The JPY continue to strengthen on Tuesday's Asia session and see USD/JPY down 0.24% at 149.12 with a session low at 148.60. Else, EUR/USD is down 0.07% and GBP/USD is down 0.05%.
North American session
EUR/USD and GBP/USD extended gains on expectations of higher defence spending, EUR/USD briefly touching above 1.05 and GBP/USD moving above 1.27. USD/JPY saw early gains above 151 but fell back to 150.20 by midday. The reversal was assisted by ISM manufacturing data which while near consensus on the headline at 50.3 showed weakness in the detail, particularly new orders at 48.6. This was despite a rise in prices paid to 62.4, the highest since June 2022.
Late comments from Trump that 25% tariffs on Canada and Mexico would be implemented as scheduled on Tuesday sent USD/CAD, which had earlier seen a brief move below 1.44, well above 1.45. This sent equities, already hit by the ISM data, sharply lower, and USD/JPY plunged to a low of 149.10. AUD/USD, which had previously seen highs above .6250, fell to near .62. EUR/USD and GBP/USD saw only a modest reaction to the announcement, edging off their highs but remaining well up on the day.