USD little changed as markets mull tariffs – Scotiabank

The USD is trading steady to a little softer overall in quiet trade. Global stocks are firmer while bonds are little changed in rather quiet trading, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD steady to slightly lower versus majors as Trump notes 'tough' Xi

"FX markets appear to be scratching around for a stronger sense of direction; the USD squeezed higher yesterday but a solid day on the charts does not alter broadly bearish fundamental and technical dynamics. Scope for sustained USD gains remains limited. President Trump’s increased steel and aluminium tariffs come into force today. Recall that the president’s first term steel tariffs had mixed results—some increase in domestic steel jobs but non-negligible downstream outcomes (higher input prices, weaker job growth in manufacturing, according to studies)."

"Meanwhile, the shifting sands of US tariff policy have to make it harder for countries to negotiate effectively with the US. Reports earlier this week suggested that the White House was soliciting its trade partners for their 'best' tariff and US investment offers by today. But there’s not much sign of movement from China and President Trump said on social media earlier today that President Xi was tough to make a deal with. There’s not been any coverage that I recall of other countries bringing potential deals to the president."

"There’s another 5 weeks of the current tariff reprieve to run but there’s no real sense that certainty for businesses will improve anytime soon. ADP data are expected to rebound to 112k jobs in May after the soft (62k) gain in April. The May ISM Services index is called a little higher at 52 last month (from 51.6); details (prices, employment etc.) matter here as well. The Fed releases its latest Beige Book at 14ET. Comments from a number of Fed officials suggest that tariffs are having an impact on the economy but their longer run effect remains unclear."