USD Drops Below the Radar After China’s Retaliation

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3780-1.3990

Euro                 1.5630-1.5850

Sterling            1.8030-1.8260

WTI Oil (opening level) $60.31

The CAD/USD is opening at 1.3880 ( 0.7204 )

The USD/CAD plummeted during European trading hours on Friday, on news indicating China announced additional tariffs on the USA. On Thursday, the White House confirmed tariffs on China of 145%, higher than the 125% previously estimated.

As a result, the Chinese Finance Ministry said it would raise additional levies on US imports from 84% to 125%, per Reuters, from April 12. The never-ending trade war between Beijing and Washington triggered the USD sell-off across the FX board, resulting in USD/CAD trading at around 1.3880 at the time of writing, a level that was last seen in November 2024.

Concerns revolve around a potential US recession, alongside fresh inflationary pressures, as a result of the tit for tat taxes between the world's two largest economies.

Headlines

·    The White House stated that US tariffs on China now total 145% after the latest hike. CNN reported the 125% "reciprocal" tariff announced by Trump adds to the existing 20% tariff. The Trump Administration may delist Chinese public company shares from US exchanges, with incoming SEC chair Paul Atkins likely to address this upon taking office, according to FBN's Gasparino.

·    President Trump’s chaotic tariff rollouts continue to undermine confidence in the US economy, and less than 24 hours after pausing reciprocal tariffs excluding China to prevent a meltdown in financial markets, selling resumed, hitting US stocks, bonds, and the US dollar as investors pull money out of US assets, with the CHF, EUR, JPY, and not least gold being the main beneficiaries for now. Gold posted a new record high in USD terms at 3,220 overnight.

·    US March CPI came in cooler than expected across the board, with headline numbers at -0.1% MoM and 2.4% YoY vs. +0.1% / +2.5% expected, respectively, and vs. 2.8% YoY in Feb.US Mar. CPI ex Food and Energy out at +0.1% MoM and 2.8% YoY vs. +0.3% / +3.0% expected, respectively and vs. +3.1% YoY in Feb.

Key Points

·    Equities: US-China tariffs escalate; tech stocks sharply lower; Europe rebounds on tariff pause optimism

·    Volatility: VIX surges; significant intraday volatility spikes; PPI and bank earnings critical

·    Digital Assets: Bitcoin volatility below S&P 500; Ethereum, Solana rise; crypto stocks struggle

·    Currencies: USD pummelled lower yesterday and overnight and seems now to serve as a broad risk-sentiment measure

·    Fixed Income: US treasury yields push toward top of range at long end of yield curve, suggesting strain on liquidity.

·    Commodities: Gold hits fresh record as US assets fall