FOREX: USD Index Fully Reverses Monday Surge Before Stabilising
May-14 16:44
- Tuesday’s theme of a weakening US dollar extended today, helped lower by major equity benchmarks consolidating their recent strength and headlines surrounding trade talks providing an additional greenback headwind. The US and South Korea agreed to share a mutual understanding of the principles they hold for operating foreign exchange markets and to continue discussions on FX policy. The headlines spurred some USDKRW weakness, which then filtered through to a broader dollar move against G10 peers.
- Price action prompted the USD index to bridge the gap to last Friday’s close, notably eroding the entirety of the US/China tariff reprieve inspired rally to start the week.
- Hardest hit on Wednesday was USDJPY, which has traded in an impressive 206 pip range. The Japanese yen had been trading in a relatively weak manner amid the risk sentiment surge, however, discussions on FX policy being discussed between other administrations prompted some speculative yen appreciation. USDJPY traded as low as 145.61, and was down as much as 1.27% before stabilising. The move did fall just shy of last Friday’s close at 145.37. Amid a broader stabilisation for the greenback, USDJPY has pared roughly half the moves and stands around 146.50 as we approach the APAC crossover.
- Elsewhere, the likes of AUD and NZD are underperforming (down around 0.45%), although they still remain among the best performers in G10 this week. For AUDUSD, Monday’s move lower was considered corrective and another test above 0.6500 today reinforces the underlying bullish tone. Further strength would open 0.6528, the Nov 29 high, although there appears scope for a more protracted recovery towards the US election related highs at 0.6688.
- Thursday’s APAC session will be highlighted by the Australian unemployment report, before the focus turns to UK GDP. In the US, PPI and Retail Sales data are scheduled, which will be followed by Fed Chair Powell speaking.
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TARIFFS: Trump Says Pharma Tariffs "Not Too Distant Future" Suggests Likely 25%
Apr-14 16:27
US President Donald Trump has delivered a wide-ranging press conference alongside Salvadoran President Nayib Bukele at the White House.
- On tariffs, Trump indicates that tariffs on pharmaceuticals will be coming shortly as the US needs to reshore pharma production. He namechecks Ireland as a pharma producer and says: “All I have to do is impose a tariff… The higher the tariff, the faster they come,” referring to companies relocating their manufacturing to the US.
- He says, “its going to be like we have on cars… We have, as you know, a 25% tariff on cars [steel and aluminum],” adding “that category fits right now [for pharma].” Asked about his timeline for implementation, he says: “not too distant future”. Trump declines to offer any information on potential semiconductor tariffs.
- When asked to clarify comments yesterday when he suggested a Russian attack on the Ukrainian city of Sumy was a “mistake”, Trump reiterates that the mistake was on the behalf of Ukrainian President Volodymyr Zelenskyy and former President Joe Biden for allowing the war to start.
- He again blames Zelenskyy for starting the war, “you don’t start a war against someone 20 times your size and then hope some people give you some missiles.” Trump adds that there are, “some proposals on stopping the Ukraine war very soon.”
- Trump says Iran cannot be allowed to acquire a nuclear weapon and notes the talks in Oman on Saturday. He acknowledges that Tehran could be stringing the US along by delaying talks.
PIPELINE: $8B Morgan Stanley Multi-Tranche Launched, 6NC4 SOFR Dropped
Apr-14 16:21
- Date $MM Issuer (Priced *, Launch #)
- 04/14 $8B #Morgan Stanley $2B 4NC3 +113, $500M 4NC3 SOFR+138, $2.5B 6NC5 +118, $3B 11NC10 +128
- 04/14 $1B #HP Inc $500M 5Y +145, $500M 10Y +175
- 04/14 $600M #Trans-Allegheny Interstate Line +5Y +100
- 04/14 $Benchmark BNY Mellon 2NC1 +100a, 2NC1 SOFR, 4NC3 +120a, 4NC3 SOFR
- 04/14 $Benchmark JP Morgan 6NC5 +135a, 6NC5 SOFR, 11NC10 +145a
CANADA: Debate Week Underway Ahead Of 28 Apr Election
Apr-14 16:00
PM Mark Carney's centre-left Liberal party remains in a strong position to win an outright majority in the House of Commons according to the latest opinion polling and political betting markets. Only a single poll over the past week, from Mainstreet Research on 13 April, has shown the centre-right Conservatives leading. Even then, if the 44-42% split in the Conservatives' favour was repeated in a federal election, it would likely not prove sufficient for Pierre Poilievre's party to win an overall majority given the Canadian first-past-the-post electoral system.
- The next few days could prove an important milestone in the election campaign, with the French and English-language leaders' debates taking place.
- This first debate will be conducted in French and starts at 2000ET. PM and centre-left Liberal party leader Mark Carney, centre-right Conservative party leader Pierre Poilievre, as well as Yves-Francois Blanchet from the regionalist Bloc Quebecois, Jagmeet Singh from the left-wing New Democratic Party, and Jonathan Pedneault from the environmentalist Greens will participate.
- The second leaders’ debate takes place in Montreal, this time conducted in English. The debate will have the same five individuals as participated in the French-language debate. The event starts at 1900ET.
Chart 1. Federal Election Opinion Polling, % and 8-Poll Moving Average
Source: Liaison Strategies, Mainstreet Research, Nanos Research, Abacus Data, Innovative Research, Angus Reid, Pollara, MQO Research, Leger, Research Co., Ekos, Ipsos, Pallas Data, MNI
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