FOREX: USD Index To Fresh 2025 Lows After Trump Tariff Comments

The USD BBDXY index has hit fresh lows for 2025, last close to 1298, down around 0.30% for the session so far. The first move came as headlines crossed from US President Trump around not wanting to use tariffs on China, while yen has rallied post the BOJ's 25bps rate hike, which had some hawkish undertones. 

• The remarks made by Trump around tariffs (as part of the second leg of his Fox News Interview) don't suggest tariff hikes are off the table for China, but will be welcomed by the market in the sense there is potential for negotiations between the two side and an imminent tariff hike may not be on the cards.
• Higher beta plays like AUD and NZD moved quickly firmer, outperforming other parts of the G10 space, although this is now less apparent, particularly with yen playing catch up.
• AUD/USD was last 0.6310/15, against session highs of 0.6324. The 50-day EMA resistance, close to 0.6330, is nearby. NZD/USD is up to 0.5700/05. Session highs rest at 0.5711.
• USD/JPY was initially volatile through the BoJ announcement. We saw highs of 156.41 before a sharp pull back to 155.01, close to recent lows and important support points.
• The BoJ hiked 25bps as expected, but the combination of expressing confidence in realizing the outlook, which would prompt further rate rises, along with higher inflation forecasts, has left hawkish impressions on the market.
• Downside focus will rest on the high 154/low 155.00 region. the 50-day EMA is just above 155.00, while 154.64, is a trendline drawn from the Sep 16 ‘24 high. A break sub these levels is likely to signify a deeper correction in the pair.
• In the cross asset space, US yields are lower (post Trump comments), which has helped push US-JP yield differentials down, another yen positive. US equity futures are down slightly. Regional equities are mixed, with China/HK markets outperforming (again related to the Trump comments).
• Looking ahead, the main focus will be on preliminary PMI reads for the UK, EU and US. We also have some ECB speak, headlined by Lagarde.