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Signs that the Trump administration could be willing to give out more exemptions to higher tariffs eased trade war concerns, allowing the dollar to keep recovering.

The euro, on the other hand, returned some of its earlier gains as bulls seemed unimpressed by the ECB presser and revised economic forecasts. Its other European buddies were on weak footing as well.

  • ECB head Draghi: Economy to grow faster than initially anticipated
  • Draghi: Underlying inflation still subdued, will monitor FX developments
  • Draghi: Downside risks from rising global protectionism
  • ECB raised 2018 GDP forecast from 2.3% to 2.4%
  • ECB lowered 2019 inflation forecast from 1.5% to 1.4%
  • Canadian building permits recovered 5.6% vs. projected 0.3% dip
  • U.S. initial jobless claims up from 210K to 231K
  • Trump: 25% tariffs on steel and 10% on aluminum to take effect in 15 days
  • Trump: Mexico and Canada to be exempted, but dependent on NAFTA progress

Major Events/Reports:

ECB presser

The ECB press conference following the official announcement in the previous session turned out to be a party-pooper for euro bulls as Draghi clarified that the omitted part on QE must be taken in context.

Draghi went on to say that this shouldn’t signal a change in monetary policy expectations, adding that they’re seeing downside risks from the rise in global protectionism (cough, Trump, cough!) and financial deregulation.

His introductory statement featured revisions to their economic projections, but market participants seemed disappointed about the changes. In particular, the GDP forecast for this year was bumped up only 0.1% to 2.9% while the inflation forecast for next year was lowered from 1.5% to 1.4%. The rest of the figures were unchanged.

Draghi reiterated that monetary policy accommodation is still needed to bring inflation close to their target:

“To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for an ample degree of monetary accommodation to secure a sustained return of inflation rates towards levels that are below, but close to, 2% over the medium term.”

In the Q&A, Draghi also mentioned that he’s worried about international relations as higher tariffs would impact currency movements and market confidence. However, he did say that wouldn’t call the recent exchanges a trade war… yet.

Trump’s announcement on tariffs

The highly-anticipated announcement on Trump’s plans to impose higher tariffs didn’t cause much of a ruckus in the markets as investors took comfort in potential exemptions for some U.S. trade partners.

Although Trump declared that the 25% tariff on steel and 10% on aluminum will take effect in 15 days, he noted that Canada and Mexico present a special case. For now, the Donald said that they intend to hold off any decisions with these trade allies while NAFTA negotiations are ongoing.

In addition, the President said that he welcomes any country that they have a security relationship with to discuss alternative ways to address these trade concerns. In these cases, the government is open to modify or remove tariffs under certain conditions.

Of course his announcement was still peppered with the usual Trump flair and tough talk, taking a jab at foreign governments subsidizing the flood of cheap metals. But all in all, the protectionist rhetoric appears to have been dialed down… for now.

A bit of risk-taking

Higher-yielders seemed pleased with the Trump administration’s openness to give exemptions to its allies, which could lessen the odds of a trade war.

  • Dow 30 index is up 93.85 points to 24,895.21 (+0.38%)
  • S&P 500 index is up 12.17 points to 2,738.97 (+0.45%)
  • Nasdaq is up 31.30 points to 7,427.95 (+0.42%)

Commodities are mostly in positive territory, but gold returned some of its safe-haven gains.

  • Gold is down to $1,317.50 per troy ounce (-0.33%)
  • WTI crude oil is up to $60.38 per barrel (+0.43%)
  • Brent crude oil is up to $63.93 per barrel (+0.09%)

Major Market Mover(s):


The euro returned some of its gains after the ECB decision as the presser wasn’t as upbeat as many expected.

EUR/USD tumbled from a high of 1.2447 to a low of 1.2306, EUR/JPY dipped back to 130.50, EUR/GBP retreated from a high of .8957 to a low of .8907, and EUR/AUD is back down to the 1.5800 handle.


The Greenback carried on with its recovery as Trump’s tempered announcement on tariffs soothed fears of a trade war for the time being.

USD/JPY advanced from the 106.00 area to a high of 106.31, USD/CHF is up to a high of .9527, AUD/USD fell from .7809 to .7784, and NZD/USD is down to the .7250 area.


The Loonie was also on stronger footing as Trump confirmed a likely exemption for Canada in terms of tariffs while NAFTA negotiations are going on.

USD/CAD is down from 1.2926 to a low of 1.2889, CAD/JPY recovered to 82.38, EUR/CAD is down to 1.5869, and GBP/CAD fell from a high of 1.8050 to a low of 1.7796.

Watch Out For:

  • 1:30 am GMT: Chinese CPI y/y (2.5% expected, 1.5% previous)
  • 1:30 am GMT: Chinese PPI y/y (3.8% expected, 4.3% previous)
  • Tentative: BOJ monetary policy announcement (no change to -0.10% eyed)
  • Tentative: BOJ press conference