NEW YORK: The US dollar traded mixed overall on Monday, falling against the yen and sterling, but posting gains versus the Swiss franc, as investors waited warily for further news of US trade policy and braced for a week packed with economic data.
This week’s economic reports may give a first glimpse of whether US President Donald Trump’s trade war is hitting home.
“This is the calm before the storm. We’re consolidating, trading broadly sideways today mostly within Friday’s ranges,” said Marc Chandler, chief market strategist, at Bannockburn Global Forex in New York.
“The big stuff still lies ahead this week. We have largely seen soft survey data, but this week we will see evidence that weakness has crept into the real sector data such as Q1 GDP (gross domestic product) and that’s before the tariffs.”
For now, the dollar has found its footing, trading little changed against the euro at $1.1365 and rising 0.2% versus the Swiss franc to 0.8280 franc.
It was down 0.5% versus the yen at 142.99 yen, headed for its largest monthly fall in nearly 2-1/2 years as Trump has rattled confidence in the dependability of US assets.
The euro, on the other hand, was on track for its largest monthly gain against the dollar since November 2022. The greenback did trim monthly losses against both the euro and yen toward the end of last week amid an apparent conciliatory shift in the tone of US-China relations.
Both sides seemed to soften their respective stances, with the Trump administration signalling openness to reducing tariffs and China exempting some imports from its 125% levies. Yet where Trump insists there has been progress, and that he has spoken with President Xi Jinping, Beijing has denied trade talks are occurring and on Sunday, Treasury Secretary Scott Bessent did not say that tariff talks were under way.
On Monday, Bessent said top US trading partners had made “very good” proposals to avert US tariffs, and one of the first deals to be signed would likely be with India.
As for China, the top Treasury official said “all aspects of government are in contact with China,” and underscored that it was up to China to reduce tensions since it sold five times more goods to the United States than vice versa.
Investors are also awaiting the April US jobs report, due on Friday, where jobs growth is still expected, although at a sharply slower pace than a month earlier.
Federal Reserve officials including Chair Jerome Powell have indicated they would be willing to cut interest rates if it becomes clear there are risks to growth. But most appear content to first determine what impact Trump’s tariffs have on real-economy metrics such as inflation and employment before making a move.
“So unless the hard data — particularly jobs and consumption — clearly rolls over, the Fed is unlikely to act before July. They need real deterioration to justify a move, not just forecasts or soft indicators,” Saxo Bank chief investment strategist Charu Chanana said.
The US also releases first-quarter GDP data and the Federal Reserve’s favored inflation gauge, core PCE, this week, while GDP and preliminary inflation figures are also due in Europe. Across the Atlantic, the euro fell 0.4% against the pound
to 84.97 pence, as news hit of a massive power outage across much of Spain on Monday.
Canadians, meanwhile, vote in a general election on Monday, with the ruling Liberal Party holding a narrow lead in opinion polls and a larger one in online prediction markets. Options markets suggest traders are not bracing for much volatility in currency trade and the Canadian dollar was flat at C$1.3854 per US dollar. The Bank of Japan, on the other hand, sets monetary policy on Thursday.
No policy change is expected, though markets will be focused on the outlook and how policymakers are planning to navigate an uncertain economic environment- especially as US-Japan trade talks are expected to touch on the currency.
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