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Vishnu Varathan, head of macro research for Asia (excluding Japan) at Mizuho Securities, said on April 3 that U.S. reciprocal tariffs may continue to be a source of economic headwinds. These tariffs may also "inadvertently intensify and increase vulnerability to adverse demand shocks." Varathan said: "Asia has been particularly hard hit, especially in Cambodia, Vietnam, Thailand and Indonesia." In addition, South Korea, Japan, India and the European Union have not been spared, while the United Kingdom, Australia and Singapore have been the least affected. Varathan added that, therefore, the pressure on Asian currencies, except for Japan, may continue.On April 3, the Wall Street Journal reported that German automaker Volkswagen will impose an "import fee" on cars affected by US President Trumps 25% tariff. The report cited a memo sent to retailers saying that Volkswagen has temporarily stopped rail transportation from Mexico and will temporarily keep cars arriving by ship from Europe at the port. According to the agencys analysis of tariff codes contained in the Federal Register, Trumps 25% auto tariff will cover more than $460 billion worth of auto and auto parts imports each year. According to the report, Volkswagen told its dealers that it will provide more details on the pricing strategy for cars affected by tariffs by mid-April and plans to start distributing the cars to stores by the end of the month.European Commission President Ursula von der Leyen: The global economy is expected to suffer significant losses. Uncertainty will rise sharply and trigger new protectionism.European Commission President Ursula von der Leyen: Europe will stand on the side of those countries directly affected.European Commission President Ursula von der Leyen: We will stand together and our unity is our strength.

AUD/USD falls to approximately 0.67 as a result of less hawkish RBA minutes

Daniel Rogers

Mar 21, 2023 14:05

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As a result of the publication of minutes from the Reserve Bank of Australia (RBA) that were less hawkish, the AUD/USD pair has declined to near 0.6705. Given that inflation was still too high, the labor market was constrained, and business surveys indicated robust activity, the Board reaffirmed that additional policy tightening would likely be required. The RBA policymakers viewed a 25 basis point (bps) rate increase as the only viable option for March's monetary policy.

 

Investors should be aware that RBA Governor Philip Lowe raised the Official Cash Rate by 25 basis points to 3.60 percent for the fifth consecutive time. In addition, it was the RBA's eleventh consecutive increase in interest rates to combat persistent inflation.

 

Recent optimistic Australian employment data indicate that the fight against persistent inflation is extremely complicated and that RBA policymakers are still required to make challenging decisions in times of inflation uncertainty and global banking collapse concerns.

 

In the Asian session, S&P500 futures have extended Monday's gains as investors disregard concerns over the Federal Reserve's (Fed) impending monetary policy, indicating a further improvement in market participants' risk appetite.

 

The US Dollar Index (DXY) has remained relatively stable around 103.30 as investors anticipate a less hawkish monetary policy and interest rate guidance. Fed Chair Jerome Powell is required to restore investor confidence following the failure of three midsize commercial banks in the United States. This could be accomplished through minor adjustments to interest rate policy.

 

In the interim, the demand for U.S. government bonds has weakened further as inflation expectations have risen as a result of the collaborative effort of various central banks to support commercial banks by providing liquidity assistance in the form of US dollars. This has led to higher yields on US Treasury bonds. The yield on the 10-year Treasury note has risen to 3.5%.


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