By Nick Harrison
Yet again US President Donald Trump dominates our market report and tonight could see his most impactful announcement since the start of his second term.
As we have recently seen, he has imposed trade tariffs on Canada, Mexico and China. Since then he has threatened, retracted and re-threatened his intentions to impose his so called “reciprocal” taxes on other nations who trade with the US.
Just to clarify, trade tariffs are taxes on goods imported in to a country – in this case the US. Trump’s intentions around imposing these trade tariffs are to protect US manufacturing and help the job market by making foreign-made products less attractive to buy.
These tariffs though have a knock on effect to both consumers, and the countries selling the goods. Companies will put their prices up to compensate for the increased taxes and so the customer ends up paying more for these goods. The countries selling to the US also feel the pinch as increased prices make their products harder to sell.
Tonight sees this unveiling of reciprocal taxes in what Trump calls “Liberation Day”. He has obsessed about the US being ripped off by previous trade deals and he now intends to name the countries who will be in the firing line to have tariffs imposed on them. The messages so far have been a little mixed as to which countries he means, with UK Prime Minister, Kier Starmer, hoping that his recent positive calls and meetings with Trump will possibly exclude the UK from such a financial impact. The Chancellor Of The Exchequer Rachel Reeves recently announced her various cuts to UK spending in her Spring Statement and these imposed trade tariffs will directly effect UK economic growth which, as we know, has been performing badly for some time now.
All will be revealed from 9pm onwards tonight, so watch out for some potential volatile trading in the FX market overnight and tomorrow morning.
Outside the tariff announcement, the US continues to dominate the FX market for the rest of the week. The US Unemployment Claims data is released at 1.30pm tomorrow. This figure tells us the number of individuals who filed for unemployment insurance for the first time during the past week. The number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions. Unemployment is also a major consideration for the FOMC, who decide upon the country’s monetary policy. The forecasted figure is 225,000 so investors will no doubt react if the figure falls way out of forecast.
ISM Services PMI is then released in the US at 3pm. This is a survey of about 300 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries and inventories. Above 50.0 indicates industry expansion, below indicates contraction with tomorrow’s forecasted figure being 53.
The US Non-Farm Payrolls figure then finishes off what could be a huge week in the FX market. This figure tells us the change in the number of employed people during the previous month, excluding the farming industry. It excludes farms as farm employment is highly seasonal, so therefore cannot give an accurate month by month indication. This is vital economic data released shortly after the month ends. The combination of importance and earliness makes for hefty market impacts, so do watch out for more potential market volatility after this is released at 1.30pm on Friday.
So a lot of information for you to digest as the FX market braces itself for what Trump has to say and how these market data releases are received by investors. It’s therefore important to connect with your account manager at A Place in the Sun Currency who can guide you through these market impacts and help you make informed decisions about how and when to make your trading decisions.
Market Data For The Rest Of This Week
Wednesday
US ADP Non-Farm Employment Change 1.15pm
US President Trump Speaks 9pm
Thursday
Swiss CPI (Inflation) 7.30am
US Unemployment Claims 1.30pm
US ISM Services PMI 3pm
Friday
Canada Employment data 1.30pm
US Average Hourly Earnings 1.30pm
US Non-Farm Payrolls 1.30pm
Fed Chair Powell Speaks 1.30pm