FOREX: USD Index Sharply Lower as US Trade Policy Shakes Global Markets
Apr-03 17:12
- Analysts continue to cite the most recent US tariff announcements as a pivotal turning point for global trade policy. While risk sentiment has been negatively impacted, US pessimism reverberated into global currency markets, with dollar indices sharply lower on the session.
- The ICE dollar index is off its worst levels, but is broadly consolidating a 1.75% decline on Thursday, currently trading around the 102.00 mark. This is just 2% above the 2024 lows, marking the significance of the pullback across 2025 so far, and the close proximity to significant medium-term objectives.
- Standing out have been the moves for the dollar against the low yielding safe havens. USDJPY remains down 2.1% despite a 100 pip bounce off the 145.20 lows. AS for USDCHF, spot remains 2.5% lower on the day, having breached the US election inspired lows at 0.8615, and extending as low as 0.8547.
- EURUSD also had a very aggressive move higher in late European trade, with liquidity evaporating on a swift move above 1.11. Spot reached as high as 1.1147 before stabilising, but remains on course for a move to a cluster of highs around the 1.12 mark. At one point, EURUSD was registering its biggest intra-day advance since 2015.
- Weaker sentiment in equity markets have offset the appreciations for the likes of AUD, NZD and GBP, only advancing between 0.75-1.00% today.
- Emphasising the broad dollar weakness, even the Mexican peso has rallied one percent, bolstered by the relatively lenient outcome for the nation of the US liberation day announcements. The Bloomberg dollar index, which includes a broader basket of currencies, notably fell below the US election lows, and is now 5.5% below the February highs.
- The US employment report will be the highlight on Friday’s economic data calendar. Additionally, subsequent comments from Fed Chair Powell will be eagerly awaited given the recent turbulence in markets.
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