USD: US markets wilt under tariff pressure - Scotiabank

Yesterday's hopes for some moderation in US tariff policy met the reality of 104% tariffs on China and President Trump's other levies being imposed as of midnight last night, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD weaker along with Treasuries and US equities

"This morning, markets reflect heightened anxiety across the board and--unusually--a weaker USD, weaker US Treasuries along with weaker US equity futures amid another round of hefty losses in European stocks. Crude oil prices continue to slide (WTI down 4.5%) but gold prices appear to be recovering after dipping below $3000/oz this week. Tariffs and there anticipated consequences are driving investors out of US assets, either as a consequence of liquidating winning positions to offset losses elsewhere or as a result of concerns that the primacy of US asset markets is eroding amid poor policy decisions."

"Market moves may raise concerns that markets are facing some serious dislocations as investors redeploy capital away from US assets. The lack of haven demand for US Treasuries amid sliding US stocks suggests pressure on the USD is likely to extend in the short run at least. DXY losses have steadied around the 102 area intraday but the trend remains geared towards more losses and a push towards 99/100 in the near term. Major resistance sits at 103.50/75 now."

"The Fed releases the minutes of the March FOMC meeting later. It's old news essentially but expect a lot of references to 'uncertainty' to reflect the tone of the of Chair Powell's post-meeting press conference and caution on the outlook, echoing last Friday's remarks. A May rate cut is a 50/50 bet, according to swaps--but perhaps only because investors hope the 'Fed put' strike is nearing. It isn't."