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The story of the Trump administration so far is US dollar weakness. Policymaking has been chaotic but when you talk with people in markets they highlight three fears:

1. Below-trend US growth
2. Higher US inflation
3. Declining productivity/dynamism

These are classic characteristics of an underperforming economy but it’s also a 180-degree turn from what markets were expecting at the close of the US election. Trump 1.0 talked a lot about tariffs but ultimately focused on growth and boosting equity prices. Now, it’s looking more like that was a product of his first cabinet rather than his core instincts.

So what are the things driving the fears:

1) Tariffs

This one is obvious but there are more and more conversations about the unintended consequences of these policies. In covid we learned that supply chains are far more-fragile than thought and there is a worry that something could break and lead to an inflation shock beyond what the simple math would indicate.

2) Growth

There is a Trump ‘growth agenda’ around lower taxes and deregulation that helped to get him elected, particularly with mainstream conservatives but it’s been overshadowed so far. In addition, I’m not sure how much low-hanging fruit is really there as the core part of the tax cut is just an extension of what’s already in place. But beyond those things, the tariff and policymaking uncertainty is a big potential headwind for growth, particularly if the Fed will have to keep interest rates higher.

The main fear is that there is an administration in place that thinks it can re-write the rules of economics. We’ve seen protectionism fail many times before and this will be no different.

So far we’ve only seen drastic declines in consumer and business sentiment but the market is holding its breath for that to hit the real economy.

3) Deficits

There is some good news in the ‘Trump agenda’ but there is also the problem of how to pay for it. The US is running deficits at an eye-watering 7% of GDP and it’s coming at a time of 4% unemployment. The bond market is balking right now and I think at least a portion of that was last week’s indications from Congressional leadership that they’re aiming to pass a budget with all the goodies that Trump promised in his campaign. The fiscal hawks just aren’t there and the US could be on a path to deficits at 10% of GDP which will lead to an inevitable reckoning that will cripple growth later or lead to political turmoil.

4) The rules and norms

The US dollar is at the centre of the global system and it’s held together by things like NATO, the WTO, the WHO, the UN and a strong belief in the US rule of law. These things are all being eroded or destroyed at an alarming pace and in a way that won’t be easily reconstructed. It’s tough to even conceptualize what is at stake here but some murmurs from Beijing just today hinted at a US vulnerability: Intellectual property. What are US companies worth in a world that no longer respects it?

5) Immigration

It’s not clear how much of Trump’s crackdown on illegal immigration was theatrics and how much was genuine. Moreover, it’s not clear how much any of it will continue but illegal immigrants in the US are a key constituent keeping inflation down in farming and hospitality. Trump last week floated a plan where some could leave and come back legally but — again — there is no clear plan here and you wonder if Trump doesn’t continue to play to his worst instincts.

6) Fed policy

This is a tail risk but earlier this month, a US judge allowed Trump to move forward with the firings of two top officials at the Federal Trade Commission. If it’s allowed to stand, it would pave the way for him to fire Federal Reserve officials, including Jerome Powell. It’s a fight that’s headed to the Supreme Court but the FX implications are obvious. If the US central bank loses independence, it will be stacked by loyalists who keep rates low, undermining the value of the dollar.

This article was written by Adam Button at www.forexlive.com.

Pres. Trump is speaking and says:

• Will do Tarasov imported pharmaceuticals
• Says they do not make their own drugs
• Looking to help car companies
• They will solve Iran problem, Iran wants to do deal with us but they do not know how
• There may be some things coming up: I spoke to Apple CEO Tim Cook
• Does not blame China or Vietnam taking advantage of US particularly in the one
• EU is taking advantage of US specifically in the auto space

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

The market went into the weekend with considerable optimism about progress between China and the USA but what unfolded was:

• A dropping of tariffs on everyone regarding electronics
• A White House reminder that 20% fentanyl tariffs remained on Chinese electronics
• Lutnick saying that electronics (and other) tariffs were still coming soon
• Trump confirming what Lutnick said

It was all so chaotic and at the end of it, I’m left thinking that the electronics tariffs that result of Section 232 will be more lasting and less of a negotiating tool.

Initially, we saw a spike in the Nasdaq at the open but it’s slowly faded and is now trading flat.

This article was written by Adam Button at www.forexlive.com.

This survey was done before ‘Liberation Day’

• 3-year inflation unchanged at 3%
• 5-year inflation down to 2.9% from 3.0%
• Households more pessimistic about jobs and future earnings
• Found accelerating food and rent expected
• Households more downbeat on finances and credit access
• Share of households seeing worse financial situation highest since Oct 2023
• Expectations for stocks to rise is at lowest since June 2022
• Median household spending growth expectations declined by 0.1 percentage point to 4.9%
• Mean unemployment expectations—or the mean probability that the U.S.
  unemployment rate will be higher one year from now—jumped 4.6
  percentage points to 44.0%, the highest reading since April 2020

There is a clear pattern of worsening sentiment across many indicators but little evidence of it bleeding into hard economic data, though that often takes time.

This article was written by Adam Button at www.forexlive.com.

• Leaders of China and Vietnam should exchange visits frequently like relatives
• Xi urges both countries to jointly tackle online gambling, telecom fraud and other cross-border crimes
• China and Vietnam signed 45 bilateral cooperation documents

One of the big battles of Trump’s administration will be the fight to pull Vietnam deeper into the US or Chinese sphere of influence. That’s why it’s puzzling that Trump hit Vietnam so hard with reciprocal tariffs.

For Vietnam, the challenge is to maintain full market access to both countries.

This article was written by Adam Button at www.forexlive.com.

Trump is out with a message on Truth Social about the Ukraine war. Peace and ceasefire negotiations have brought little progress and there is talk about a Russian spring offensive.

I wouldn’t take this as a sign of optimism but he’s still talking about ending it:

“The War between Russia and Ukraine is Biden’s war, not mine. I just got here, and for four years during my term, had no problem in preventing it from happening. President Putin, and everyone else, respected your President! I HAD NOTHING TO DO WITH THIS WAR, BUT AM WORKING DILIGENTLY TO GET THE DEATH AND DESTRUCTION TO STOP. If the 2020 Presidential Election was not RIGGED, and it was, in so many ways, that horrible War would never have happened. President Zelensky and Crooked Joe Biden did an absolutely horrible job in allowing this travesty to begin. There were so many ways of preventing it from ever starting. But that is the past. Now we have to get it to STOP, AND FAST. SO SAD!”

At the moment, Ukraine officials are having a very tough time striking a minerals/ports deal.

This article was written by Adam Button at www.forexlive.com.

USD/JPY is in the middle of a nice turnaround after it held support at 142.00 in four separate dips in the past two trading days. The pair got as low as 142.24 in Asia and tested that again in early Europe but it’s surged since and is now trading above 144.00. Most of those gains have come in the past hour as money flows back into the US.

Bonds are bid today finally and that may have the market feeling that the worst of the basis trade blowup is over. It’s a reversal of the usual correlation that is: High yields = high USD/JPY but it reflects deep uncertainty about the US policy path.

This article was written by Adam Button at www.forexlive.com.

Could US port traffic really crash this year?

The latest Global Port Tracker report from the National Retail Federation and Hackett Associates is subject to whatever tariff regime rules the day but it’s a useful view on how long it will take for tariff effects to truly hit trade.

The numbers show a short-term bump ahead of a rapid plunge.

Their data shows that February saw 2.06 million TEUs handled (up 5.2% year-over-year), and March is projected at 2.14 million TEUs (up 11.1% year-over-year), the outlook darkens significantly from May onward (TEU stands for “Twenty-foot Equivalent Unit,” which is the standard unit of measurement used in the shipping industry to quantify cargo capacity or volume):

• May: Expected to fall to 1.66 million TEUs (-20.5% y/y ), ending 19 consecutive months of growth
• June: Projected at 1.57 million TEUs (-26.6% y/y), the lowest volume since February 2023
• July: Forecast at 1.69 million TEUs (-27% y/y)
• August: Expected to be 1.7 million TEUs (-26.8% y/y)

These are catastrophic numbers for the shipping industry and they forecast a 15% overall drop in 2025 cargo volumes, though these numbers were before the latest U-turn on electronics tariffs.

For me, the takeaway here is that we will have to wait until May to see trade as a real headwind to

This article was written by Adam Button at www.forexlive.com.

Oil is green today, which has been a rare occurrence in April. WTI crude oil is up 83-cents to $62.33 as broad sentiment improves on hopes for a phone call between Trump and Xi.

OPEC hasn’t wasted any time downgrading its economic view today as it cut its demand growth forecast to +1.3 million barrels per day from +1.45 mbpd. They note US tariffs as one part of the reasons for the demand revision.

The one spot I would watch would be China, which may finally ramp up consumer stimulus. Eamonn earlier wrote about a Reuters pull highlighting expectations for rate cuts this quarter.

Giuseppe wrote about the oil technicals earlier.

This article was written by Adam Button at www.forexlive.com.

• Prior was +1.2%
• Inventories vs +% prior
• Inventory-to-sales ratio vs prior

This article was written by Adam Button at www.forexlive.com.

• 100% not expecting recession
• Rare earth limits being studied very carefully

There are the usual talking points here but it’s tough to take anything seriously from Trump’s deputies as he seemingly changes his mind constantly.

This article was written by Adam Button at www.forexlive.com.

Headlines:

• Dollar selling returns to start European morning trade
• Markets consolidate ahead of Trump’s update on semiconductor tariffs
• The bond market stays on edge in the new week
• What are the interest rates expectations for G8FX?
• China president Xi arrives in Hanoi
• China welcomes partial U.S. tariff rollback but calls it only a ‘small step’
• Trump has directed for tariff talks to begin immediately with South Korea, Japan, India

Markets:

• GBP leads, CHF lags on the day
• European equities higher; S&P 500 futures up 1.6%
• US 10-year yields down 4 bps to 4.456%
• Gold down 0.4% to $3,222.04
• WTI crude up 1.7% to $62.54
• Bitcoin up 1.3% to $84,817

The market is holding on to some hopeful optimism to start the week, with all eyes staying on the US-China trade rhetoric.

Over the weekend, we had Trump come out to confirm that the US will be paring down tariffs on key electronics to 20%. That is while waiting to place all of that in a different tariffs basket, which might take up to a month or longer.

That helped to ease some concerns of further escalation and is helping to keep equities underpinned to start the new week. S&P 500 futures were up around 1% in Asia before pulling a little bit higher in European trading amid some pushing and pulling. European indices are also holding up, posting gains of a little over 2% for the time being.

Despite that, FX traders maintained their conviction in selling the dollar in the new week. EUR/USD nudged up to just above 1.1400 briefly but is still up 0.3% to 1.1390 on the day. Meanwhile, GBP/USD climbed up from 1.3120 to touch 1.3200 during the session as sterling is an outperformer today alongside the antipodes.

USD/JPY fell to a low of 142.25 in Asia before nudging up to 143.00, then falling back again during European morning trade. There is a slight bounce back now to 143.15, though the pair is still down 0.2% on the day.

The Swiss franc is the biggest loser though, with USD/CHF seen up 0.5% to 0.8190 and EUR/CHF up 0.8% to 0.9330. SNB in play perhaps?

Elsewhere, the bond market continues to stay on edge for the most part with 30-year yields in the US holding near 4.87% currently. There’s not much of a let up there and I would take that as a more solid indicator of broader market sentiment for the time being.

It’s all about watching for headline risks again. So, let’s see what Trump has to offer later in the day with Xi out visiting Vietnam and ironing out deals with Southeast Asian countries this week.

This is a market that is still fragile but at the same time, sentiment can quickly change on a flip of a dime.

This article was written by Justin Low at www.forexlive.com.