The US dollar is mostly flat today after trading sideways last week. There have been quite a few news headlines relating to tariffs in recent history. Over the weekend, Peter Navarro (director of the White House National Trade Council) and Wilbur Ross (Commerce Secretary) both spoke on US television. Navarro claimed that US businesses could claim exemptions from the tariffs on a case-by-case basis "so that business can move forward". Ross stated that there would no country-level exemptions. Canada, the largest source of imported steel for the United States, is trying to secure a national exemption. Last week, President Trump announced his intentions to establish 10% tariffs on imported aluminum and 25% tariffs on imported steel. The announcement of the plan led to sell-offs in most global stock markets and a weaker US dollar. The initial response in the dollar has been relatively surprising. All else held equal, new tariffs should result in a stronger dollar as a response to lower imports. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is down today and currently trading above 105.50. EUR/USD is down and trading above 1.2290. The pound is flat, and GBP/USD is currently above 1.3780.
Turning to US economic data this week, markets will be focused on PMIs and non-farm payrolls. Later today, we'll see Markit services and composite PMIs, and ISM non-manufacturing PMIs. We'll also hear from Fed Vice Chair Randal Quarles. Tomorrow, we'll see factory orders. We'll also hear speeches from the Fed's William Dudley and Lael Brainard. On Wednesday, we'll get ADP employment changes, the trade balance, consumer credit, and nonfarm productivity. We'll also hear speeches from Fed members including Kaplan, Bostic and Dudley. On Thursday, we'll see initial jobless claims. On Friday, the most important day, we'll see nonfarm payrolls numbers, hourly earnings and the participation rate. Last week, Core PCE figures came within expectations.