Liberation or Obliteration

Good morning

US equities responded badly to Trump’s war on global trade.  The Dow Jones was down 4%, S&P down 5% and Nasdaq was down 6%.  This was despite Trump himself saying markets would ‘boom’ as a result of the tariffs.  Weaker than expected US data yesterday did nothing to help the rout, ISM services PMI was 50.8 vs an expected 53, while Challenger job cuts soared to 275k from an expected 172k, most of which was attributable to DOGE.  What this means for today nonfarm payrolls remains to be seen, markets are looking for something in the +135k region with an unchanged unemployment rate of 4.1%.

The chances of a US recession this year have grown and inflation must surely push higher.  There is a growing feeling that countries impacted by the higher tariffs will not only retaliate but be pushed to seek trade relationships elsewhere, leaving the US very much on its own.  EU have already looked at a South America trade deal to offset the US tariffs.  Those losses in the equity markets yesterday added to losses already seen since Trump’s Presidency, they are down around 10% since he took the helm.  Liberation Day has been renamed as Obliteration Day by some.  Wish I’d thought of that. 

The US dollar has weakened pretty much across the board although is off its lows.  EURUSD hit a high of 1.1145 yesterday, now 1.1050, GBPUSD touched 1.3200 but has fallen back sharply to 1.3050, which has dragged GBPEUR to within a whisker of 1.1800, pretty much the Jan 25 lows.  We have to go back to Aug 24 to see levels below 1.1800.  I’m looking for answers as to why GBP has been hit so hard, I wonder whether it is Trumps comments about pharmaceuticals being next in line for tariffs, given UK’s exports t the US in this sector.  

AUD continues to struggle as the market prices in more RBA rate cuts, now 0.6225 against USD and around 2.1000 vs GBP.  NZDUSD is 0.5700, GBPNZD around 2.2900, both pairs at multi-year highs.  CAD remains strong having avoided the recent tariffs, USDCAD now 1.4145, GBPCAD 1.8425.  ZAR continues to trade on the weak side, USDZAR is up at 19 while GBPZAR is 24.75 having knocked on the door of 25.00 briefly yesterday afternoon.  Jan 2016 was the last time we were up at these levels,

In sport, Spurs lost 1-0 to Chelsea last night, a result that came as no surprise other than the fact I’d thought it may have been a bigger goal margin.  Spurs next couple of premier league matches are against Southampton and Wolves, which may off the chance of some much needed points before they face Forest and Liverpool in late April.  In between we do have the small matter of the Europa league, next week brings the quarter finals.  Could Spurs win a trophy after the shocking league performances?

The pick of the premier league action this weekend could well be Forest v Villa, although the Manchester derby could throw up some excitement as well.  Arsenal and Liverpool will both be hoping to take all three points in their matches against Everton and Fulham respectively.  The weekend also bring the Japanese F1 grand prix, tomorrow also brings the Grand National, always difficult to pick a winner and none of the names are really jumping out at me other than the favourite, I Am Maximus at 8-1.

While todays nonfarm payrolls is certainly the main event, much focus will be on Feds Powell who speaks later in the day.  We’ll be interested to hear his take on the tariffs, global trade and a possible US recession.  Also watch for any signs of Trump backtracking on tariffs, he’s already talking about making deals with countries who offer better terms.   

Have a great day and a great weekend if we do not speak before

-  09.00 ECBs de Guindos speaks

-  13.30 US nonfarm payrolls

-  13.30 CAD employment

-  16.25 Feds Powell speaks

-  17.00 Feds Barr speaks

-  17.45 Feds Waller speaks

Trump upsets global trade, eyes now on negotiation or retaliation

Good morning

It was a another calm day in the markets yesterday, we got a bit of USD weakness into the London close with GBPUSD up to 1.2970, an area that had pretty much capped the upside for the past couple of weeks, while EURUSD reached as high as 1.0870, again broadly around the last two week highs.  USDJPY bucked the weaker US move, pushing up 100 points from 149.15 to 150.15. 

And then Trump spoke.  I watched it and I have to say it was pretty painful.  The problem is, I can’t work out if Trump is right or wrong when he says trade with other countries is so unfair.  It is surely only reasonable to level the playing field.  But why do I have a sinking feeling about this?  It’s a massive gamble from Trump, one that if it pays off it would be great for the US, but it will be American consumers hit hardest by the higher prices in the short term and the positive effects, if they arise, won’t be seen for much longer. 

Mind you, some US firms are already looking to lure US customers.  Ford has apparently said they’ll offer their employee discount to all customers which should surely be enough to encourage buyers to purchase ‘American’.  That’s if they purchase at all of course.  Could be worth watching the success of this latest campaign by Ford as a litmus test for the ‘buy American’ idea.

USD is lower since Trump spoke despite the growing risk of US inflation and the potential for rates there to remain on hold for some time.  The fear of a slower US economy with higher inflation and higher interest rates is a very real concern.  GBPUSD is now 1.3100 which means 2025 has already seen a 10 big figure range and EURUSD is 1.0950.  These are the highest levels in both pairs since Oct 2024 and neither show any sign of stopping as yet. 

USDJPY is lower at 147.00, with the March lows around 146.60 not too far away as Yen is bought as a safe haven.  CHF is also higher against USD, now 0.8680 from 0.8850 yesterday.  Gold, another safe haven, saw a new record high of $3,167.

GBP has actually performed well since the tariff announcements, no surprise given UK was hit with a figure of 10%, considerably lower than many other countries.  GBP is up at 2.0815, 2.2750 against AUD and NZD.  AUD was hit particularly hard by Trump when he singled out their restrictions on US beef imports.  I see that their trade surplus released overnight was well down on expectations at AUD3bn against AUD5.6bn expected.

CAD has pushed higher against USD and is pretty stable now at 1.4180, while GBPCAD is only a touch higher than pre-Trump levels at 1.8605, demonstrating how well CAD has held after the tariff implementation.  No surprise given that both Mexico and Canada have avoided Trumps reciprocal tariff regime.

ZAR has been a big mover over the past couple of days, perhaps it is Trump tariffs or perhaps the mention of possible sanctions on countries who purchase Russian energy is to blame.  USDZAR is up at 19.00 while GBPZAR is up at 24.85, the highest we’ve seen since Jan 2016.    

One piece of news I feel very bad for not mentioning yesterday was the sad passing of Val Kilmer.  I know he’d been in many films but of course for me the main one was Topgun where he played Iceman, and I’m pleased he managed to make an appearance in the sequel, Topgun Maverick despite being pretty poorly at the time.  Still , other than Top Secret in the 80’s and Batman Forever in the 90’s I’m not sure I’ve seen many of his other films.  Perhaps that gives me something to work through, rather than a new box set.

In football, Liverpool beat Everton to extend their lead at the top of the table.  Ipswich caused an upset by beating Bournemouth and Villa had a comfortable win over Brighton to boost their chances of European football next year.   Next up, Spurs v Chelsea this evening, fair to say that neither team is really firing on all cylinders but at least Chelsea look like they are down a couple from what should be a V8, while Spurs are still spluttering along with a couple of cylinders at best.  Part of me thinks we’re capable but realistically I can’t say I am at all confident.  Chelsea could do with the points after both Man City and Newcastle won last night to knock Chelsea down into sixth place. 

US ISM PMIs are likely to be the highlight today, jobs data in the form of challenger cuts and initial claims are unlikely to offer any really insightful clues as to tomorrows nonfarms. 

Of course, the key now will be the global response to Trump’s tariffs, whether that is negotiation or retaliation.  EU have prepared countermeasures if negotiations fail, China have said they will retaliate if tariffs are not lifted.  Either way, it is unlikely we’ll see no action from those hit by increased tariffs.  Global trade will be hit, that’s for sure and global equities are lower as a result.  Its going to be a long and rocky ride and we could well be seeing changes that bring around a new era of trade relationships.

Have a great day…

-  09.00 EU composite PMI

-  10.00 EU PPI

-  11.00 ECBs Schnabel speaks

-  12.30 ECB minutes

-  12.30 US challenger job cuts

-  13.30 US initial jobless claims

-  14.45 US S&P composite PMI

-  15.00 US ISM services PMI

What impact will Trumps 'Liberation Day' have?

Good morning

Here we are, Trumps ’Liberation Day’.  His actual announcement isn’t until this evening, 9pm UK time to be more precise, so there is a chance we’ll see a continuation of the tight ranges we’ve witnessed recently in the majors throughout the day, until we get to the main event.

At one stage yesterday it did look as though those ranges might break, GBPUSD traded down to the 1.2880 area, I was watching the 1.2865/70 area which has really been the low since early March, but weaker than expected JOLTS jobs number and ISM manufacturing PMIs sent USD lower once again, and it wasn’t too long before we back at 1.2920, an area that has been something of a pivot point for the past couple of weeks.  EURUSD also dipped, reaching 1.0780 briefly before regaining 1.0800.  GBPEUR had been as low as 1.1935 but ended the London session at 1.1965.

Interesting moves overnight as both AUD and NZD pushed sharply higher.  GBPAUD is now at 2.0490, GBPNZD at 2.2510, down from peaks around 2.07 and 2.28 respectively.  I’ve not seen a sensible reason for the shift other than some hope that they will be spared in Trumps tariff overhaul.  Stronger than expected Aussie building permits overnight surely can’t be responsible. 

Russia have said they won’t back a peace plan while Zelensky is in power.  I presume instead they want to put in their own pro-Moscow guy who would welcome Russia with open arms.  Regardless, US are warning of sanctions on third party countries who purchase Russian oil and gas if it seems that Russia are stalling the peace process. Meanwhile US are reported to be sending more ships and planes to the Middle East as they continue to hit Houthi forces in Yemen.

In football, Arsenal beat Fulham to bring them within nine points of Liverpool at the top of the table.  Forest beat Man Utd to help their top-four chances, now eight points clear of fourth placed Chelsea, while Wolves beat West Ham.   Those latter two results certainly helped Spurs as neither Man Utd or West Ham gained any league positions.  Plenty of action this evening including the Merseyside derby.  Brighton v Villa could be an interesting match, with both teams still very much in the running for a European place.

US ADP employment numbers out this afternoon, and we’ll hear from a couple of ECB speakers through the day.  Trump speaks at 9pm, so much uncertainty here, I will be looking at some short dated options to provide cover for some worst case outcomes.  They’ll be pretty tailored to individual client position so best let me know if you’re interested.

Have a great day…

-  11.30 ECBs Schnabel speaks

-  13.15 US ADP employment

-  15.00 US factory orders

-  15.05 ECBs Lane speaks

-  21.00 Trump’s ‘Liberation Day’ tariff announcement

-  21.30 Feds Kugler speaks

-  01.30 AUS financial stability review

-  02.30 AUS trade balance

-  02.45 China caixin services PMI