Forexlive Americas FX news wrap 26 Mar: Tariffs, inflation concerns rattle markets.USD up.

• Pres. Trump: Going to go with tariffs and cars
• Treasury Sec. Bessent: Trump would not hesitate to raise sanctions on Russia
• Politico: EU tariffs could be as high as 20-25%
• All the tariff talk is a distraction from the world-changing shifts in AI and robotics
• Canadian consumer spending held up ok in February – RBC
• Escalate to de-escalate? Why US tariffs may be lower than feared
• Trump will announce auto tariffs at 4 pm ET with many questions to be answered
• BOC Minutes: Would probably have left rates unchanged if not for tariff risks
• Fed’ Musalem: Risks that inflation will stall above 2% or move higher has increased
• US treasury sells $70 billion of 5-year notes at a high yield of 4.910%
• European indices close mostly lower
• Atlanta Fed GDPNow growth estimate -1.8%, unchanged from previous estimate
• Fed’s Kashkari: This is the most-dramatic shift in sentiment outside of the covid era
• EIA weekly crude oil inventies -3341K vs -956K expected
• Report: White House won’t go ‘all the way’ in terms of accounting for non-tariff barriers
• A note for caution on market-based inflation expectations
• UK’s Reeves: We now expect GDP growth of 1.0% this year
• US February durable goods orders +0.9% vs -1.0% expected
• The USD is higher vs the 3 major currencies – the EUR, JPY and GBP – to start the US day
• ForexLive European FX news wrap: Sterling eases on lower UK inflation
• US MBA mortgage applications w.e. 21 March -2.0% vs -6.2% prior

Tariff and inflation fears sent the broader US stock indices lower and yields higher. The broader S&P and Nasdaq indices snapped 3 day’s of positive closes. Yields are higher. The 10-year yield is up 4.2 basis points today 10 basis points this week.

Copper continued its run to the upside reaching a new all time high of $5.37 before coming off. The price is at $5.24, up $0.03 or 0.59%. From the low on January 2, to the high today, the price has moved up 34.18%.

Pres. Trump is expected to announce tariffs on auto’s shortly. He is also rumored to be leaning to tariffs of 20-25% on European imports.

From the Fed today, Minneapolis Pres. Neel Kashkari was a bit more dovish in his comments today. He described the current shift in market sentiment as the most dramatic since the COVID era, attributing much of it to growing uncertainty around tariffs. He noted that a significant portion of the sentiment change is driven by concerns over tariffs, suggesting that the resulting hit to business and consumer confidence could potentially have a greater economic impact than the tariffs themselves. Kashkari emphasized the importance of resolving trade uncertainty, stating that doing so could help restore lost confidence. He also warned that the longer this confidence shock persists, the more meaningful and lasting its effects may become.

Overall, his comments carried a dovish tone, reflecting caution about the broader implications of tariff-related uncertainty.

On the otherhand, St. Louis Fed President Musalem was more hawkish on worries of 2nd round effects from tariffs on inflation.

Musalem expressed growing concern that inflation may remain above the 2% target or even rise further in the near term. While acknowledging a slowdown in growth and caution among consumers and businesses, he stated that patience with current policy is appropriate as the Fed assesses whether inflation is on track to return to target. However, he warned that the risks of inflation stalling or rising have increased, especially if second-round effects from tariffs begin to take hold. Musalem emphasized that not all tariff-driven price increases should be assumed temporary, and if the labor market remains strong alongside persistent inflation, the Fed may need to keep rates elevated for longer or even adopt more restrictive measures.

Despite his hawkish tone—being the first Fed official in this cycle to explicitly raise the possibility of rate hikes—he also acknowledged the balance of risks, noting that if unemployment rises, cuts could still be warranted even in the face of tariffs. He also highlighted that recent surveys show more businesses plan to raise prices in the coming months, suggesting growing pricing pressures.

Musalem concluded with a warning that rising medium- to long-term inflation expectations could demand a more vigilant policy response, especially given the backdrop of a full-employment economy and lingering consumer sensitivity from previous inflation spikes.

The USD is trading higher on the day vs the major currencies. The biggest gains were vs the JPY and the GBP by 0.42%. The USD gained 0.36% vs the EUR. Versus the CAD, AUD and NZD, the greenback was higher by 0.14% or less on the day.

Technically:

• EURUSD:
  EURUSD initially attempted to hold support within a swing area between 1.07609 and 1.07767. A corrective move higher reached the next swing area near 1.0804 but encountered strong selling pressure. The pair then fell to fresh session lows in the final hour of trading, driven by hawkish Fed rhetoric and reports from Politico suggesting EU tariffs could be set between 20% and 25%—above the expected 20%. EURUSD bottomed at 1.0745, with the next key support seen at the rising 200-day moving average near 1.0730. Also in focus is the 38.2% retracement of the rally from the February 28 low at 1.07266, a level that could attract dip buyers and lead to some profit-taking from shorts. A break below this level, however, could trigger further downside momentum.

  GBPUSD:
  Cable broke below its 100-bar moving average on the 4-hour chart during the European session and remained under that level into the US close (currently at 1.2922). This moving average aligns closely with the 61.8% retracement of the drop from the September 2024 high, adding to its technical significance. On continued weakness, the next downside target is the swing area between 1.2831 and 1.2843.

  USDJPY:
  USDJPY saw choppy price action around the swing zone between 150.11 and 150.28. Buyers stepped in just above the psychological support at 150.00 during the European morning session. Later in the day, a US session pullback found support near the high end of that swing area at 150.28. Heading into the close, the pair is trading at 150.525, holding near intraday highs.

  NZDUSD:During the Asia-Pacific session, NZDUSD found support just ahead of its rising 200-bar moving average on the 4-hour chart (currently at 0.5713). The pair then staged a rally, breaking above a key cluster of moving averages—the 100-bar moving average on the 4-hour chart, the 100-day moving average, and the 100-hour moving average—before testing the 200-hour moving average at 0.5763. However, the rally lost momentum, and the price has since retreated below the trio of 100-bar moving averages, now clustered between 0.5731 and 0.5736. With the pair currently trading at 0.5725, holding below this zone keeps the short-term bias tilted to the downside. A move back above the moving average cluster would shift the near-term outlook back to the upside.

Looking at the closing stock levels today:

• Dow industrial average -132.71 points or -0.31% at 42454.79
• S&P index -64.45 points or -1.12% at 5712.20. The S&P index moved away from it’s 200 day moving average of 5756.21 after trading above and below the moving average level over the last three trading days.
• NASDAQ index -372.84 points or -2.04% at 17899.01.
• Russell 2000 fell -21.54 points or -1.03% at 2073.83

In the US debt market, yields are higher:

• 2-year yield 4.020%, +3.7 basis points
• 5-year yield 4.098%, +4.0 basis points
• 10 year yield 4.3557%, +4 point basis points
• 30 year yield 4.706%, +5.1 basis points

Crude oil is trading higher by $0.88 at $16.88. Gold is trading up $1.77 at $3021.50 and Bitcoin is trading down $149 and $87,279.

This article was written by Greg Michalowski at www.forexlive.com.