On Wednesday, April 9, the US dollar found itself on the back foot against its major currency counterparts. The primary culprit behind this downward pressure was the escalating global trade conflict, which stoked fears among investors and sent shockwaves through the financial markets. Market participants were in a state of heightened anxiety, closely monitoring the situation for any signs of further developments that could impact the dollar’s value.
Adding to the market’s jitters, the previous day had seen Wall Street experience a significant downturn. Despite a promising bullish start on Tuesday, the main stock indexes took an abrupt turn south and ended the day firmly in negative territory.
This sudden reversal was a clear indication that investors were growing increasingly cautious and were reluctant to engage in a sustained risk rally. As a result, early on Wednesday, US stock index futures were trading slightly lower, reflecting the overall pessimism in the market. Concurrently, the USD Index, which measures the dollar’s performance against a basket of six major currencies, had shed approximately 0.7% and was hovering around 102.20.
Key Developments in the Global Economy
Trade War Rhetoric and Reactions
Late on Tuesday, US President Donald Trump made a controversial claim, accusing China of manipulating the Chinese Yuan to counter the impact of tariffs. This came after the USD/CNH pair reached a new record high. However, Trump also expressed his hope that an agreement with China could be reached in the long run. Meanwhile, Reuters reported early on Wednesday, citing sources with knowledge of the matter, that senior Chinese officials from the State Council and various government and regulatory bodies were planning to hold a meeting as early as that day. The purpose of this meeting was to formulate a response to Trump’s decision to impose a steep 104% tariff on Chinese goods.
Central Bank Moves
During the Asian trading session, the Reserve Bank of New Zealand (RBNZ) announced a significant policy change. It decided to lower the Official Cash Rate (OCR) by 25 basis points, bringing it down to 3.5%. In its policy statement, the RBNZ indicated that further rate cuts might be on the horizon. This decision had an immediate impact on the NZD/USD currency pair. Initially, the pair dropped to a multi – year low below 0.5500. However, it soon reversed its course and was last seen trading in positive territory, around 0.5550.
Currency Pair Movements
The EUR/USD pair had a positive run on Tuesday and continued its upward climb in the Asian session on Wednesday. The broad – based selling pressure on the US dollar provided a significant boost to the euro. As a result, the pair was up approximately 0.8% on the day and was trading near 1.1050.
After suffering a sharp two – day decline, the GBP/USD pair staged a remarkable comeback on Tuesday. It managed to hold its ground early on Wednesday and was trading above 1.2800.
Gold, a traditional safe – haven asset, had a relatively uneventful day on Tuesday, closing flat below $3,000. However, on Wednesday morning, as risk – aversion sentiment spread across the market, XAU/USD benefited from this shift. It gained more than 2% on the day and was trading above $3,040.
The USD/JPY pair had a rough time, losing more than 1% on Tuesday. This downward trend continued in the Asian session on Wednesday, and at the time of reporting, the pair was down 0.6% on the day, trading at 145.40. Bank of Japan (BoJ) Governor Kazuo Ueda had earlier stated that the central bank would continue to raise rates if the economy continued to improve as expected.
Looking Ahead: FOMC Minutes and Market Expectations
Later in the American session, all eyes were set on the Federal Reserve (Fed). The Fed was due to publish the minutes of its March policy meeting. These minutes were expected to provide valuable insights into the Fed’s thinking and its future policy direction. Given the current market uncertainties, investors were particularly interested in any clues regarding potential interest rate changes or the Fed’s stance on the ongoing trade war.
Related Topics:
Dollar Under Siege: Trade War Woes and Market Watch
Dollar Drops as Tariff Fears and Economic Worries Boost Safe-Haven Currencies
Dollar’s Global Status in Jeopardy as U.S. Tariffs Trigger Market Panic
