Collinson FX: April 11: Markets suffer a fortnight of whiplash with more overnight
by Collinson FX 11 Apr 10:14 AEST
11 November 2024
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Markets will be suffering severe whiplash, after the last couple of weeks trade, and overnight was no exception.
Asian and European markets posted big gains, bolstered by the Trump announcement of a ‘pause’ on tariffs, on all but China. Tariffs remain at 10%, but the full tariff burden, has been suspended for 90 days. This was enough to trigger rallies in equities across Asia and Europe. The USD finally succumbed to the market volatility, as fears began to emerge of the overall impact of the global trade wars, on US economic growth. The EUR surged above 1.1200, while the GBP is heading back to the important 1.3000. US inflation data was largely ignored amongst the fallout, but the CPI crashed to 2.4%, much lower than expected.
The tumbling reserve further boosted resurgent commodity currencies, with the AUD breaking above 0.6200, while the NZD pushed up towards 0.5850. The roller coaster continues, and uncertainty will only fuel the tenure of this disruptive period. Trump seems focused on China, so developments there, remain key to the return of some semblance of normality.
Collinson FX: April 10: Tarriffs suspended with 70 countries - except China
President Trump announced a temporary pause on ‘reciprocal tariffs’, while negotiations are under way, with 70-odd Countries.
US equity markets roared back overnight, with massive gains across all of the bourse.
The relief from markets was manifest, with an explosion upwards in the Dow, Nasdaq and S&P. Markets are experiencing a massive roller-coaster ride and uncertainty breeds volatility. It appears that Trump has taken a chill-pill, on the rest of the world and decided to turn all guns on the resistant and rebellious, China. Trump has increased tariffs on China, then when retaliation arrived, doubled and tripled down. Who will blink first?
The equity market tumult has also spread to the bond markets, with yields on the rise, sparking real concerns in the Trump administration. A big sell-off in bonds would be extremely uncomfortable and China have a lot to sell. The USD was softer overnight, with the EUR looking to regain 1.1000, while the GBP trades above 1.2700.
The Trump administration announcement of a pause in tariffs, allowed the commodity currencies to regain some mojo. The AUD surged above 0.6100, while the NZD regained 0.5600. The RBNZ cut rates by 25 basis points, in line with expectations, and promised further cuts if the ‘tariff’ volatility continued. The focus for Trump is now China and this will determine the outcome of this trade war.
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