USD Falls Amidst Trade Concerns
Concerns over the trade conflict with China have put downward pressure on the USD. Last week, Trump accused China of violating their trade agreement.
China, however, strongly denied this accusation, stating that it is actually the US that has not adhered to the terms. The Commerce Department of China claimed that the US has enforced several “discriminatory” measures against them.
- Issuing guidance on AI chip export control
- Halting sales of chip design software to China
- Revoking visas for Chinese students
China contends that these actions significantly damage the agreements made during Geneva’s economic discussions, infringing upon China’s legitimate rights and interests.
On Friday, President Trump declared that the US would boost tariffs on imported steel and aluminum from 25% to 50%, effective June 4, 2025. This increase broadly affects imports from all nations, China included, and is intended to bolster the domestic metals industry while reducing reliance on foreign supplies.
Today, the White House announced it is seeking “the best offer” at the customs meeting scheduled for Wednesday.
So, what’s happening with the USD? It’s experiencing noticeable declines, particularly against the NZD (-1.33%) and AUD (-1.00%). The dollar performed slightly better against the CAD, with a decrease of only -0.21%, despite a recent dip to its lowest point since October 2022. It dropped -0.62% against the EUR and -0.83% against the GBP.
The US saw an increase of 2.0 basis points to 3.938%, with the 10-year yield rising by 2.6 basis points to 4.443%.
US stocks have rebounded from earlier declines, unless they think this will all just pass. The Nasdaq led with a modest gain of 0.67%, followed by the S&P at 0.41%. The Dow edged up by 0.08%.
The ISM manufacturing index continues to linger below 50, registering at 48.5 compared to 49.5 last month. Construction spending was weak, with estimates showing a decrease of -0.4% against an expected 0.3%. The previous month’s figures were adjusted to -0.8% from -0.5%, indicating pressure on the dollar.
Adding to the uncertainty surrounding the market, the Atlanta Fed’s GDPNow has revised growth estimates from 3.8% to 4.6%. Notably, the GDP for the first quarter was reported at -0.2%.
