Yen Up, Trump Threatens Tariffs on Mexico, USMCA Approval in Doubt?


Asia Pacific Market Open Talking Points

  • Trump threatens tariffs on Mexico, throwing curveball on USMCA ratification
  • Sentiment collapsing, anti-risk Japanese Yen gaining, Mexican Peso depreciating
  • The Canadian Dollar held up effectively regardless of a major decline in crude oil costs

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The anti-risk Japanese Yen is gaining whereas the Mexican Peso is sinking in early Friday commerce. US President Donald Trump introduced the nation goes to impose a 5% tariff on all items imported from Mexico come June 10. These levies are focused at Mexico and are meant to curb unlawful immigration, a key concern that the US President introduced up throughout his 2016 Presidential marketing campaign and can accomplish that once more. In addition, the US mentioned that this tariff fee might improve to 25% by October 1 if the disaster persists.

Trade wars, particularly between the US and China, have been a standard theme within the markets inflicting volatility. For the North American area, this growth crossed the wires simply hours after welcoming USMCA remarks from the US and Canada (talked about afterward on this article). This might throw a curve ball at ratification prospects because it should go by US Congress.

Sentiment Sinks as Trump Threatens Tariffs on Mexico

Yen Up, Trump Threatens Tariffs on Mexico, USMCA Approval in Doubt?

Chart Created in TradingView

USD/MXN climbed greater than 1.4% within the aftermath of those developments.

USD/MXN 30-Minute Chart

Yen Up, Trump Threatens Tariffs on Mexico, USMCA Approval in Doubt? Chart Created in TradingView

Canadian Dollar Holds Up Despite Collapse in Crude Oil

Despite the roughly 4.5% drop in crude oil costs over the previous 24 hours, the Canadian Dollar held up comparatively effectively. It was the best-performing main. The Loonie tends to have a detailed relationship with the commodity resulting from Canada’s commodity-focused export sector. CAD spent the first-half of Thursday rallying earlier than paring most of its features in the course of the US buying and selling session.

Prior to Wall Street open, the Canadian Dollar rose with an uptick in sentiment after first quarter US GDP knowledge was revised decrease by less-than-expected. However, market confidence shortly deteriorated because the S&P 500 traded to the draw back alongside US front-end bond yields. US recession fears elevated as a key part of the US yield curve (10-year and 3-month unfold) inverted additional.

Sentiment-oriented crude oil costs unsurprisingly weakened, however that was compounded later by a smaller-than-anticipated contraction in inventories reported by the DOE. Oil costs broke by key assist underneath 57.34, eyeing the following psychological barrier between 55.41 and 54.55. What appeared to then pause the decline within the Canadian Dollar had been remarks from Canada’s Prime Minister and the US Vice President.

Justin Trudeau famous that he’s assured in ratification prospects for the USMCA, the substitute to NAFTA. Mike Pence in the meantime reiterated that their purpose is to ratify the deal in Congress this summer season. The latter did discuss commerce wars, noting that the US can “greater than double” tariffs on China. Markets appeared to focus extra on USMCA updates in the interim and the S&P 500 ended the day 0.21% to the upside.

This nevertheless might now be doubtful after the US threatening extra tariffs on Mexico, doubtlessly opening up one other commerce battle entrance.

Canadian Dollar, Crude Oil, S&P 500 and US Bond Yields on Thursday

Yen Up, Trump Threatens Tariffs on Mexico, USMCA Approval in Doubt?

Chart Created in TradingView

Friday’s Asia Pacific Trading Session

With that in thoughts, S&P 500 futures are pointing decrease. Asia Pacific equities will seemingly purpose decrease within the coming hours.

The Australian Dollar and ASEAN currencies may even be taking a look at upcoming Chinese Manufacturing PMI knowledge to gauge the well being of the world’s second-largest financial system. Signs of financial weak spot, particularly amidst the continuing commerce wars, can sink sentiment and doubtlessly bode effectively for the anti-risk Japanese Yen. Given the proximity of the RBA subsequent week, and with markets seeing a minimize, volatility in AUD could also be tamed.

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— Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the feedback part beneath or @ddubrovskyFX on Twitter

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