Forexlive Americas FX news wrap: US dollar rallies as the White House walks back tariffs

• White House reportedly mulling cutting China tariffs to de-escalate trade war
• White House would look at lowering tariffs pending talks with Beijing
• Bessent: No unilateral offer from Trump to cut China tariffs
• US Treasury Sec Bessent says Trump administration wants to help China &U.S. rebalance
• Several OPEC+ members want the group to approve another accelerated oil output increase
• S&P global manufacturing PMI for April 50.7 versus 49.1 estimate.
• US new home sales for March 0.724M vs 0.680M estimate
• Beige Book: Economic activity was little changed, outlook in some districts worsened
• ECB’s Lane: US dollar asset allocation has shifted to neutral from overweight
• Leavitt: There will be no unilateral reduction in tariffs against China
• BOE Bailey at IMF conference: Fragmenting the world economy will be bad for growth
• ECB’s Muller: Too soon to tell whether June will be a cut or a pause
• US treasury auctions off $70 billion of 5-year notes at a high yield of 3.995%
• ECB’s Knot: A US tariff of 25% on imports would lower GDP by about 0.3 pp
• ECB Knot: He is not concerned about prospect of stronger EUR
• World Bank cuts Mexico 2025 GDP forecast to 0% from 1.5%
• US crude oil inventory 0.224M vs -0.770M est
• FOXBusiness Gasparino: Don’t expect China’s Xi to jump on the first offer on trade truce
• Fed’s Goolsbee: Increase in productivity seeming to be a tech driven boom
• Canada March new housing price index 0.0% vs +0.1% prior
• U.S. budget deficit projected to fall to 6.5% of GDP in 2025 due to tariff collection…

Markets:

• Gold down $96 to $3285
• US 10-yaer yields flat at 4.39%
• WTI crude oil down $1.39 to $62.28
• S&P 500 up 1.7%
• USD leads, CHF lags

The US dollar was strong on Wednesday as the market continues to sense that Trump will retreat on tariff policies. The heavy selling of the euro, yen and pound came first in Asia but then there was a strong bounce later in Asia and dollar trades flattened out from there. However a second wave of dollar buying came with the arrival of New York and the extremes of the day were retested and — in the case of USD/JPY — broken.

There were no exemptions to the ‘Buy America’ trade in FX as even the Aussie was sold off despite strong bids in equities. That was a similar (albeit inverse) dynamic to how it unfolded when the dollar was falling.

The price action in bonds might have been the most-interesting of the day as yields initially tumbled with 10s falling to a 10-day low of 4.25% before reversing midway through US trading to 4.39% and finishing flat. Were there sellers waiting in the weeds? What does that say about USD demand? It’s only one day but long-dated are still where they were last week while equities signal a potential policy change.

Another big move was in the oil market as a report said that Kazahkstan was playing tough on paying back overproduction from quotas. That could ultimately lead to a fracturing but for now it looks like Saudi Arabia may try to hold it together by accelerating the return of barrels. At the moment, none of the producers are winning as today’s talk led to a sharp decline in crude in an otherwise optimistic day.

On net, the market is carefully evaluating tariffs and how likely they are to stick. It’s all very speculative and depends on the mood of one man but for now, retracement is the mood as we wait for trade deals and improvement between Washington and Beijing.

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