The US Dollar Index (DXY) found some reprieve today, ticking back to just below 104.10 after falling as much as ~1% intraday. The US Dollar index outlook remains unpredictable.
Tariffs
Investors are bracing for the effects of the tariffs that President Donald Trump announced. These are the big economic measures that will truly matter for the US economy. These cuts would produce currency appreciation, throwing cold water on the global economic recovery. With the Canadian Dollar under pressure, the USD/CAD pair rises towards 1.4360 on increasing risk aversion ahead of Trump’s big announcement. Elsewhere, in European trading, the EUR/USD pair comes under new selling pressure and is heading back towards 1.0800. For reference, gold prices are climbing past $3,150. Yet, this rally is mainly motivated by fears of a US recession, which is putting pressure on the US Dollar and US Treasury yields.
US Dollar Faces Uncertainty Amid Tariff Announcements
The latest swings in the US Dollar Index are a sign that investors are nervous about what is coming next on the economic front. President Trump is getting ready to announce these types of reciprocal tariffs later this very week. Market participants are understandably nervous about the potential ramifications of this move on the US economy. With the future of these tariffs highly uncertain, an even more convoluted picture sets up for the US Dollar. People are concerned about how punitive measures would hurt economic development and growth.
Aside from tariff worries, investors are awaiting a series of key economic data to be released in the coming weeks. March Nonfarm Payrolls March NFP data up next – It’s been a hectic week for economic data already. These new figures will provide much more helpful insights into the health of the US labor market. They can directly affect monetary policy decisions, too.
Canadian Dollar Declines as Market Awaits Employment Data
Amidst this backdrop, the Canadian Dollar has continued to slide, with the USD/CAD pair rising close to 1.4360 today. The Canadian employment data for March, scheduled for release on Friday, is another key factor that investors are keenly anticipating. It will provide a more reliable indication of Canada’s economic strength and potential to drive future CAD appreciation.
The Canadian Dollar’s decline is influenced by caution ahead of President Trump’s tariff announcement. As a significant trading partner of the United States, Canada could face economic repercussions from any changes in trade policies, adding pressure to the Canadian currency.
Gold Prices Surge Amid Economic Concerns
Unlike the big currency moves though, gold prices have continued a very vigorous advance in European trading, pushing back toward $3,150. This increase is buoyed by persistent US macroeconomic issues that are dragging down the US Dollar and Treasury yields. Moreover, gold is an asset people flock to during times of economic turmoil, increasing demand and pushing prices even higher.
Additionally, technical indicators point to further bullish momentum for the USD/CAD pair. Additionally, the 14-period Relative Strength Index (RSI) oscillating between the 40.00-60.00 levels shows a bullish to sideways price action. The USD/CAD continues to trade above the 100-period Exponential Moving Average (EMA) at 1.4233. Such a position would point to a very aggressive bullish trend.
Mexico Emerges as Top Exporter
In the midst of these currency/commodity market shifts, Mexico has become an impressive success story on the export front. Mexico was the US Census Bureau’s number one exporter with $466.6 billion in exports. This trend further underscores Mexico’s emerging importance to global trade and its increasing strength at a time when global supply chains are adjusting to new economic realities.