INDIA: India Offers to Slash Tariff Gap With US to Seal Trade Deal: RTRS
May-09 09:24
India has offered to slash its tariff gap with the U.S. to less than 4% from nearly 13% now in exchange for an exemption from President Donald Trump's "current and potential" tariff hikes, sources told Reuters. This would mean that the average tariff differential between India and the U.S., calculated across all products without weighting for trade volume, would be reduced by 9 percentage points. More from Reuters below:
- "After the UK, India and Japan are the next two nations in line to finalise a deal, a third Indian government official said. "We will see which one crosses the line first.""
- "To achieve this, New Delhi has offered to reduce duties to zero on 60% of the tariff lines in the first phase of the deal which is under negotiation, said the first two sources, both Indian government officials familiar with the matter."
- "India has offered preferential access to nearly 90% of goods imported from the United States, including the reduced tariffs, one of the two officials said."
- "A delegation of Indian officials is likely to visit the U.S. later this month to take the negotiations forward, a fourth official said."
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FOREX: Broad Dollar Weakness Pervades, USDCHF Prints Below 0.8400
Apr-09 09:16
- Although off its worst levels, the session has been characterised by a resumption of US dollar weakness, which sees the ICE dollar index down 0.5% ahead of the NY open. USD outflows have combined with a further souring of risk sentiment, as market participants continue to gauge the impact of such restrictive US trade policy.
- This dynamic briefly saw the DXY back below 102.00 and contributed to EURUSD reaching as high as 1.1089. With volatility remaining extremely high, and markets continuing to ponder the best expression for the rapid swings in risk sentiment, EURUSD did move aggressively back to 1.1000, before stabilising somewhat. Additionally, ECB rate cut pricing has picked up, providing an additional Euro headwind to contend with.
- Safe havens remain the key beneficiaries, with both JPY and CHF rising around 0.6% on the session. USDJPY fell to within two pips of the most recent cycle lows at 144.56, keeping bearish momentum firmly in place. A break of this level would signal scope for an extension towards 144.13, a Fibonacci retracement point, and 143.43, the Oct 2 ’24 low.
- For USDCHF, the pair briefly broke below 0.8400 for the first time since September. Trend indicators continue to point south, and the market’s focus will be on 0.8333, of which a break would place USDCHF at its lowest level since the removal of the peg in 2015.
- AUDUSD screens as the best performing major pair, rising 0.85%. It is important to put this into context, given the aggressive move down to 0.5915 in early APAC trade. Spot remains ~1.25% off the Tuesday highs.
- Earlier today, all eyes were on USDCNH as it broke above 7.40, reaching as high as 7.4273 before gravitating back to 7.3820 at typing . The moves come as USD/CNY saw the highest fix since 2023 this week. Chinese Premier Li Qiang said his country has ample policy tools to “fully offset” any negative external shocks.
GILT AUCTION RESULTS: Disappointing auction but little follow through
Apr-09 09:10
- Disappointing 5-year gilt auction with the lowest accepted price coming in below the pre-auction mid-price (and indeed coming in at the lowest level since the first 15 minutes of gilt trading today).
- The tail of 1.0bp was wide but the bid-to-cover of 2.95x was still respectable.
- Despite the disappointing result overall, the 4.375% Mar-30 gilt price has still moved higher, and currently exceeds the average auction price. Gilt futures also moved higher, following other core bonds, with gilt futures hitting their intraday high (outside of the opening minute of trading today). This suggests there has been little follow through from the auction.
ECB: Rehn Offers More Explicit Support For April Cut
Apr-09 09:05
More explicit signalling from Rehn than in previous comments that he will support an April cut here (via RTRS):
- "ECB'S REHN: DOWNSIDE RISKS HAVE MATERIALISED SINCE MARCH RATE MEETING"
- "ECB'S REHN: CASE FOR CONTINUING RATE CUTS AT APRIL MEETING IS SUPPORTED BY DOWNSIDE RISKS MATERIALISING"
It's not all that surprising though. Following Rehn's appearance at an MNI Connect event on March 18, our sense was that the bar to him not voting for a cut in April was quite high, with growth concerns emanating from US tariff uncertainty featuring more prominently than possible inflationary impacts.
