USD trades broadly lower - Scotiabank

After Tariffs Tuesday, we've arrived at Walkback Wednesday, it would seem. Commerce Sec. Lutnick provided some relief for markets last night when he suggested that President Trump might offer concessions to Canada and Mexico, perhaps 'meeting them halfway' on 25% border tariffs today. That follows this week's stock market slump and the president's comment in his remarks to Congress last night that tariffs would cause a little 'disturbance' for Americans, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

The US hints at concessions on border tariffs

"This is no 'all clear' on tariffs, at least not yet. And it remains to be seen whether Lutnick has the president's ear or not. Even if 25% tariffs are rolled back somewhat today, additional steel/aluminum and reciprocal tariff action is likely in the next few weeks. Messaging from markets and US industry about the consequences of punishing border tariffs just might be resonating with the White House, however." 

"Stocks have rallied and strongly so in Europe with gains turbocharged by the shift in fiscal policy in Germany while the USD continues to track its 2017/Trump 1.0 experience with another sharp fall today. Along with a jump in European stocks, Eurozone bonds have tumbled, driving yields significantly higher on Germany's increased spending plans." 

"There is plenty of headline risk to focus on at the moment, but we are also getting to the meatier part of the week for US data releases--ADP, ISM and factory orders today, ahead of NFP on Friday. US growth concerns are rising and it seems only a matter of time before forecasts start to reduce expectations materially. Softening growth trends plus resilient inflation risks may be reflected in the Beige Book release this afternoon."