25% is the new 10%


The USD spiked half a cent lower against the Europeans yesterday lunchtime. There were no economic data or official comments to justify the move so it was put down to "technical factors", the economic commentator's favourite get-out-of-jail-free card. Otherwise it was a mostly steady day for the dollar. The US ecostats were not much help: Producer prices were roughly in line with forecast; March's trade deficit was wider on the month but smaller than expected; initial and continuing jobless claims were close to analysts' predictions.

The big event came overnight when the president pressed ahead with an increase, from 10% to 25%, of tariffs on goods from China. Beijing said straightaway that it would respond with countermeasures but did not specify what they might be. The escalation will not be helpful to the US economy but should in theory be positive for the USD. When the higher taxes are passed on to consumers it will mean higher prices, which will put upward pressure on inflation and interest rates.


It was a slightly better than average day for the euro, which strengthened by 0.1% against the other majors. There was not much to commend the EUR though, at least among this morning's Euroland ecostats. The best set of numbers came from Germany, where the trade surplus grew to €20 billion in March as imports increased by 0.4% and exports jumped 1.5%.  

On the other side of that equation were the industrial output figures from France and Italy. Both were down by 0.9% in March.  The biggest help to the EUR was that unexplained spike at lunchtime which was never fully corrected.  It is 0.4% higher on the day against the USD.


A fairly solid day for the CAD took it 0.2% higher against the USD.  It would have done better had it not been for the increased US tariffs on China, which were confirmed at midnight. The Loonie took a few steps backwards after the announcement, perhaps because there had been a degree of doubt, even to the last, that the US president would carry out his threat.

Thursday's Canadian data covered house prices and the balance of trade.  The new housing price index was flat in March and just 0.1% higher on the year. March's trade deficit came in at $3.2 billion, lower than February's shortfall but more than forecast.


Towards the end of a difficult week for the GBP investors carried out some damage-limitation work which took it 0.1% higher against the USD. Looking on the bright side, investors came to the conclusion that the lack of progress with Brexit also meant an absence of newly-damaging developments.

This morning's UK ecostats, good as they were, had no immediately positive effect on sterling. Gross domestic product expanded by a provisional 0.5% QoQ in the first quarter (annualized 2.0%). Industrial and manufacturing production increased by 0.7% and 0.9% respectively in March and the trade deficit narrowed to £5.408 billion.


The safe-haven currencies' trade war premium was felt more by the CHF than the JPY yesterday, principally as a result of the USD's downward spike against the Europeans. Where the Swiss franc gained 0.4% the yen lost 0.1% to the USD.

Overnight data from Japan showed a divergence between household income and expenditure. Overall household spending went up by 2.1% in the year to March while earnings declined by 1.9%. The JPY weakened on the news.

Sign up for a free account

Sign up for a free account

Access our convenient and secure online platform to process your international payments. Manage beneficiaries and view payment status and history at the click of a button.

Find out more
FX business solutions

FX business solutions

We provide tailored services to help companies make international payments and manage their foreign exchange risk

Find out more