USD posts limited gains amid tariff uncertainty - Scotiabank

The US Dollar (USD) is broadly firmer this morning but gains versus the majors are limited for the most part, leaving the currencies holding established trading ranges. European stocks have slipped a little while US equity futures are firmer so far. Bond markets are softer, with Treasurys underperforming, driving yields 4-5bps higher along the curve, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD trades mixed to marginally higher amid tariff uncertainty

"The JPY and CHF are underperforming among the majors while the MXN and CAD are relative out-performers among the G10 currencies, suggesting another punt in President Trump's tariff deadlines(s) yesterday to early April is one factor shaping positioning among FX traders. Japan's Vice Finance Minister endorsed market expectations for tighter BoJ policy but noted that vigilance was required against speculative market moves."

"Month-end demand may also be lifting the USD somewhat. Still, the USD may find it hard to progress more significantly. Recent gains are overshooting yield spreads--which have tended to narrow on aggregate versus the dollar's major currency peers. Spread-based fair value for the DXY is close to 1 standard deviation below the spot value currently."

"Technical trends have softened somewhat also, with the DXY trading below its 100-day MA this week and barely managing to regain that level (106.66) today. Markets may be more sensitive to weak US economic reports following the slide in Consumer Confidence reported earlier this week and there is a fair amount of US data out this morning."