USD: Deficit concerns and tariff drama hangover can bite – ING

Source Fxstreet

We shouldn’t be surprised to see the dollar softer at the start of the week, even with US President Donald Trump reversing course on 50% EU tariffs. It’s not a case of the greenback suddenly rediscovering its safe-haven status – by most measures, it hasn’t – but more a reflection that markets had largely filed tariffs under 'April risks'. The focus for May and beyond was supposed to be on trade deals. Admittedly, some agreements were always going to take time, and the EU never looked like an easy one. Still, the renewed standoff between Trump and the EU is a reminder that tariff threats and delays can re-emerge quickly. If there’s a lesson from April, it’s that the dollar bears the brunt of tariff drama, ING's FX analyst Francesco Pesole notes.

DXY more likely to retest the 98.0 April lows

"Our short-term fair value model, which looks at the past year’s FX correlations with rates and equities, still points to the dollar being highly undervalued: around 4% versus the euro, sterling and Canadian dollar, 3% versus the Japanese yen and Aussie dollar. But for now, we have to set that aside; the greenback still isn’t trading in line with the classic market drivers. In many respects, it’s behaving more like an emerging market currency, where investors are fixated on public finance sustainability, watching capital flows closely, and forced to factor in unpredictable policy moves. The decoupling is clear – the 60-day correlation between 10-year Treasury yields and DXY started the year at 0.68, and now sits at zero."

"For now, the best hope for the dollar is that incoming data calms recession worries. That’s needed, as deficit concerns are starting to shake the dollar’s already fragile footing. It’s not so much that Trump’s spending bill blows out the deficit overnight, but more that this was a rare opportunity for Congress to address the deficit issue, and it’s been missed. The risk is that US creditworthiness worries remain a drag into the summer, as Treasury auctions could still point to lukewarm demand."

"FX liquidity was thin on Monday due to a US and UK public holiday. Today, we’ll get a better sense of direction. Our view is that the balance of risks remains skewed to the downside for the dollar due to deficit concerns and trade uncertainty, unless US data comes in convincingly stronger than expected. A retest of the 98.0 April lows in DXY looks more likely than a rebound to 100.0 at this point."

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Samsung to Manufacture Tesla’s AI6 Chips in $16.5B Deal, Musk ConfirmsTesla CEO Elon Musk announced on Monday that the company has signed a $16.5 billion chip supply deal with Samsung Electronics, a move that could revitalize Samsung’s struggling contract chip manufacturing business. The agreement designates Samsung to produce Tesla’s upcoming AI6 chips, which are expected to power future versions of the automaker’s autonomous driving technology.
Author  Mitrade
7 Month 28 Day Mon
Tesla CEO Elon Musk announced on Monday that the company has signed a $16.5 billion chip supply deal with Samsung Electronics, a move that could revitalize Samsung’s struggling contract chip manufacturing business. The agreement designates Samsung to produce Tesla’s upcoming AI6 chips, which are expected to power future versions of the automaker’s autonomous driving technology.
placeholder
Asian FX Weighed by Dollar Ahead of Fed, BOJ TalksAsian currencies steadied on Tuesday following sharp declines in the prior session, as the U.S. dollar gained support after the announcement of a trade agreement between the United States and the European Union.
Author  Mitrade
7 Month 29 Day Tue
Asian currencies steadied on Tuesday following sharp declines in the prior session, as the U.S. dollar gained support after the announcement of a trade agreement between the United States and the European Union.
placeholder
Asia FX Steady as Dollar Softens Before Fed Rate DecisionMost Asian currencies experienced minimal fluctuations on Wednesday, as the dollar saw a slight retreat from its recent advances.
Author  Mitrade
7 Month 30 Day Wed
Most Asian currencies experienced minimal fluctuations on Wednesday, as the dollar saw a slight retreat from its recent advances.
placeholder
Trump Announces 15% Tariff on South Korean ImportsPresident Donald Trump announced on Wednesday that the United States will impose a 15% tariff on South Korean imports, lowered from the previously threatened 25%
Author  Mitrade
23 hours ago
President Donald Trump announced on Wednesday that the United States will impose a 15% tariff on South Korean imports, lowered from the previously threatened 25%
placeholder
Apple Q4 revenue tops estimates; $1.1B tariff impact forecastApple projected its revenue for the current quarter ending in September well above Wall Street forecasts on Thursday.
Author  Mitrade
2 hours ago
Apple projected its revenue for the current quarter ending in September well above Wall Street forecasts on Thursday.
Related Instrument
goTop
quote