Collinson FX Commentary: Mar 26 - USD slides post tariffs

by Collinson FX 26 Mar 2018 05:05 PDT 27 March 2018

Day 2, Bay of Islands Sailing Week, January 25, 2018 © Richard Gladwell

Collinson FX: Mar 26: Trump opens trade war

Equity markets continued to unwind under the threat of global trade wars. The Trump administration has announced the imposition of tariffs of up to $60 Billion on Chinese trade. This is the opening salvo on negotiations designed to curtail Chinese theft of 'intellectual property' and address the massive trade imbalance. China has responded with retaliatory tariffs but they can only lose this war.

They have an enormous trade surplus with the USA and 'free trade' has allowed this to flourish. Chinese markets have been protected by their own tariffs/trade restrictions, impeding trade partners, while taking advantage on free markets in the US. Command economies have worked well, as Asian Tigers have demonstrated, but challenges are here. Free Trade is transitioning to 'fair trade' and reciprocity!

The Dollar has suffered, with the EUR jumping to 1.2350, while the Yen has hit 104.50! This is a temporary reaction to 'trade wars' and the Feds activities should ensure the continued performance of a strong Dollar. The Central Banks that have been mired in the previous monetary cycle, should perform accordingly. The ECB, RBA, RBNZ and BoJ continue with QE, supporting vulnerable economies, thereby undermining their currencies. The NZD will open the week above 0.7200, while the AUD remains vulnerable, drifting below 0.7700.

Easter arrives this coming week so a shortened trading week should provide plenty of action.

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