Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
China retaliation drives global markets lower
Key global markets extended heavy losses on Friday with the US’s S&P 500 down 5.5% on Friday bringing its two-day loss to 10.6%
The major leg lower on Friday night was driven by retaliation from China as the world’s second-largest economy announced 34% tariffs on the world’s largest economy late on Friday.
Away from sharemarkets, other markets were also shaken. The US ten-year bond yield fell from 4.13% to 3.99% while crude oil is down 16% since the US’s tariff announcement on Wednesday (US time).
Importantly, US administration leaders, notably US treasury secretary Scott Bessent, said on the weekend that they were willing to look through the impact on markets, meaning that any market volatility might not force a shift in policy from the Trump administration.
In FX markets, the Australian dollar was the hardest hit, down 4.6% on Friday after trading higher on Thursday, and briefly trading below 0.6000 for the first time since April 2020.
The NZD/USD fell 3.4% but remains just above key support at 0.5515.
Reciprocal tariffs hit Asia’s risk assets
US retaliatory tariffs had a significant negative impact on Asia’s risk assets. Given that Asian exporters are disproportionately affected by this tariff shock, the region’s macroeconomic effects will surely be profound.
The Chinese yuan is the big issue, and FX would be the worst hit by this terms of trade shock in the medium term.
Given the extra economic challenges facing China, further policy assistance is probably needed. This support might take the shape of RRR and policy rate cuts of 30–40 basis points. Even more powerful disinflationary dynamics will propel rates markets in Asia, continuing the downward trend in regional bond yields.
In Asia, the USD/SGD jumped back to one-month highs.
The USD/CNH ended Friday approaching the 7.3000 level and near the highest closing level in a month.
SGD/CNH dropped from the six-month highs seen on Thursday morning. The AUD/CNH fell to the lowest level in five years.
Busy week for data across major economies
The economic calendar for the first full week of April features crucial inflation readings from multiple regions.
US CPI data arrives on Thursday with core inflation expected at 2.6% YoY, while China releases both PPI and CPI figures the same day.
Additionally, Germany will publish its March CPI readings on Friday. These inflation metrics will be closely monitored for signals about the monetary policy trajectory of major central banks.
Industrial production data will be released across several economies, beginning with Germany on Monday, followed by UK on Friday. These figures will provide valuable insights into the global manufacturing sector’s health as economies continue to navigate challenging conditions.
On Wednesday, the RBNZ will announce its official cash rate decision, with expectations centered around 3.5%. Thursday brings the release of FOMC meeting minutes from the March 19 meeting, offering market participants further clarity on the Fed’s thinking.
This follows recent mixed US economic signals and will be scrutinized for indications about the potential timing and pace of rate adjustments.
The UK releases its monthly GDP figures on Friday, providing an updated view on economic growth. Japan’s BoP Current Account Balance on Tuesday will draw attention from traders focused on external balances and currency valuation metrics. The US Federal Budget Balance report on Friday will also be closely watched amid ongoing fiscal discussions.
Aussie hit hardest with almost 5.0% fall on Friday
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 7 — 11 April
All times AEDT
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*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.
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