CNH: USD/CNH Dips Into Month End, Manufacturing PMIs Expected To Be Weaker Today

J.P. Morgan: "Auto tariffs elicited the expected sell-off in sector equities in partner countries, but the USD remained somewhat range-bound. We reckon that with the Fed on hold, the real-yield corroding effect of tariff-fueled inflation is blunting some of the USD’s natural anti-cyclical beta to RoW growth damage.
USMCA carve-outs suggest that the US administration is unwilling to impose pain on the domestic economy beyond a point, but the precedent of stacking sectoral tariffs portends harsher-than-expected tariff measures for RoW trade partners on April 2nd.
In isolation, auto tariffs should have limited FX impact assuming the USMCA carve-outs sustain, which should keep the direct hit to CAD and EUR FX manageable. JPY should strengthen at the margin as equity risk-off financial flows should overwhelm relatively small trade balance effects given that Japanese auto production is heavily offshored.

EUR/USD should be resilient against tariffs up to 10% or reciprocal/ sectoral tariffs as these are already accounted for in the growth outlook and would be offset by gains from fiscal spend…
…but would be vulnerable if tariffs are >10%. We estimate 20% tariffs would be worth 5% on EUR/USD (fair value ~1.0350), but markets will struggle to price this in fully given the lack of visibility on longevity; more realistic is a target of 1.06-1.0650 in this outcome as it reflects 50-60% odds of 20% tariffs will last.
Benign tariff delivery on April 2nd should sponsor USD weakness despite a squeeze higher in US stocks and a backup in bond yields, as the RoW should benefit more from a relief rally, and the aftermath could bear resemblance to the valley of the USD smile.
Appreciation pressures could resurface for some currencies if FX policy is deemed to be a steep non-tariff barrier for reciprocal tariff determination, but the lesson of Trump 1.0 is that such talk tends to quickly cool amid organic DXY weakness.
GBP avoided a UK budget scare ahead of a highly anticipated OBR forecast update. BoE implications of the delivered fiscal tightening are dovish at the margin but not enough to matter for FX; stay long EUR/GBP." 

Risk-sensitive Aussie and Kiwi underperformed the G10 on Friday as equities sold off driven by growing concerns around US inflation following higher-than-expected PCE price data. AUDUSD rose to a high of 0.6312 and then trended lower before stabilising between 0.6285/90. It fell 0.3% to finish at 0.6287, and has started today lower at 0.6281 following a WSJ report that US tariffs will be broader and higher. The USD index was down 0.1%. 

• The short-term bull theme in AUDUSD remains and Friday’s drop appears corrective. Initial support is at 0.6258 but clearance of 0.6187 is needed to reinstate a bear threat. Initial resistance is at 0.6391 and the bull trigger at 0.6409.
• The yen outperformed driven by weaker US equities leaving AUDJPY down 1.1% to 94.21, after a low of 94.10. It is currently around 94.05.
• The euro was also an outperformer resulting in AUDEUR falling 0.5% to 0.5806. It is currently around 0.5808. AUDGBP is down 0.2% to 0.4858. 
• AUDNZD broke above 1.1000 and made a high of 1.1013 before hovering around 1.1000 again. It is now around 1.0996.
• Equities sold off with the S&P down 2% and Euro stoxx -0.9% but FTSE only 0.1% lower. Oil prices fell with Brent -0.9% to $73.38/bbl. Copper is down 0.2% and iron ore around $103/t.
• Today the Melbourne Institute inflation gauge for March and February private credit are released. The focus of the week will be on Tuesday’s RBA decision.

GOLDMAN SACHS: "USD: The drawbacks of the clawbacks. Our view from price action and client conversations is that markets think tariffs will be less durable than some of the other policy shifts that are more negative for the Dollar, and there is nothing in the contours of the tariff announcements we expect next week that will change that. Our economists expect a high initial headline, but a relatively long implementation period with an expectation that the final tariff levied will be lower than the initial proposal—negotiation is a feature, not a bug. While we think that markets are vulnerable to a negative surprise, the bar to deliver that next week is high (and probably more dependent on the implementation period than the initial “sticker shock”). And this is especially true in light of lingering concerns around the US growth outlook (in this regard, payrolls on Friday could be more important for the near-term direction of the Dollar than the tariff announcements, even though the latter are potentially structurally more important). Still, we think a more hawkish trade agenda should be Dollar positive over time other things equal. Worries to the contrary have some validity, and the data are admittedly mixed, but we think the balance of price action and surveys thus far still support this conclusion. First, high-frequency price action has consistently showed the typical initial Dollar reaction to tariff headlines in both directions. Second, much of the Dollar’s fall so far this year can be attributed to the Euro after the German fiscal surprise—the broad Dollar is 2% higher than pre-election even as DXY is flat. Third, other policy issues—DOGE-related policy shifts and a potential embrace of greater fiscal restraint, for instance—have also contributed to uncertainty and to more concern about US growth, and it is completely normal for tighter fiscal policy and idiosyncratic slowdown concerns to weigh on the Dollar. In our view, recent weakness in consumer sentiment looks more consistent with these concerns than tariffs, especially after a more careful examination of the rise in household inflation expectations. And since December, our non-manufacturing survey tracker has fallen by 3pts while manufacturing surveys have improved on net, which is not the pattern one would expect if tariffs were the driving factor. Finally, while European data have been more resilient than expected, this is not universal. For example, Canadian business sentiment plunged to the lowest level in 25 years according to the CFIB survey, and our Canada CAI has fallen from north of 2% in Q4 to -1%. However, these points also reinforce what so far has been the main lesson for FX in 2025—these tariff increases are not occurring in a vacuum, and so far the balance of other measures has been negative for the Dollar."