Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Markets hit as Trump confirms tariffs
Global markets shuddered overnight as US president Donald Trump confirmed that new tariffs on Canada and Mexico would go ahead as planned at midnight Tuesday 4 March EST (4.00pm Tuesday AEDT).
An increased 20% tariff on Chinese goods – raised from the 10% announced in January – will also be implemented.
US shares were hit hard with the Dow Jones down 1.5%, S&P 500 down 1.8% and the Nasdaq falling 2.6%. The S&P 500 is now down 4.9% from recent highs while the Nasdaq is down 8.7% from recent highs.
However, the reactions in FX markets were more muted, with investors worried about the impact on US growth at a time when US data has recently started to weaken.
Overnight, the US’s March ISM manufacturing number was reported at 50.3, down from 50.9 last month, and below forecasts at 50.6. US retail sales and consumer confidence numbers have also recently missed forecasts.
As a result, the USD has actually weakened on the day, most notably falling sharply versus the euro. The EUR/USD gained 1.1%.
In APAC, the AUD/USD gained 0.3% and NZD/USD gained 0.4%. USD/SGD was up 0.4%.
On the other hand, the tariff-target markets like Chinese yuan and Canadian dollar weakened. USD/CNH gained 0.1%, USD/CAD climbed 0.2% and USD/MXN gained 0.5%.
USD weakens as markets fret about growth
The US dollar will remain in focus as markets digest the tariff news and look to key US data.
Most notably, later this week, the US non-farm payrolls will be released. We anticipate a little increase in job growth to 185k in February.
Unusually cold weather and wildfires contributed to January’s weakness, which should result in a good payback in this report.
Lead indicators indicate a possible underlying slowdown, and we anticipate that trend employment increases will decrease in the upcoming months.
President Trump’s federal hiring ban probably had an effect on government employment, which probably decreased to 15,000 during the month.
At 4.0%, the unemployment rate most likely stayed constant. Layoffs and hiring have both stayed low.
Euro, GBP gain as Europe seen insulated…for now
The euro and British pound were the outperformers overnight on the view that Europe and the UK appear to have avoided US tariffs, at least for now.
Today, the UK BRC shop pricing index will be released. For the last six months (August 2024–January 2025), BRC shop price inflation has been negative; however, in the January print, the rate of deflation slowed to -0.7% year over year.
In February, non-seasonally adjusted prices usually increase by 0.4% month over month; if they resumed that pace this year, the yearly rate would stay at -0.7% year over year.
The GBP has been resilient during recent tariff news with GBP/USD hitting two-month highs overnight. The GBP has been stronger in other markets across APAC.
The AUD/GBP fell to five-year lows overnight while NZD/GBP hit ten-year lows.
Aussie, kiwi hold on overnight, but remain near lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 3 – 7 March
All times AEDT
Have a question? [email protected]
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.