The U.S. dollar pulled lower Wednesday, as China said it’s putting tariffs on more than 100 products imported from America, with Beijing’s retaliatory move highlighting nervousness in global markets about trade tensions.
While the China-U.S. trade dispute is a key focus, investors face a hefty slate of economic data, including figures on private-sector hiring ahead of the U.S. government’s jobs report at the end of the week.
What are currencies doing?
The ICE U.S. Dollar Index DXY, -0.06% , which measures the buck against six rivals, fell by 0.2% to 90.035, set to erase Tuesday’s advance by the same amount. The broader WSJ U.S. Dollar BUXX, -0.02% fell to 0.2% to 83.81.
What’s driving the market?
The dollar was under pressure after China said it plans new tariffs of up to 25% on 106 U.S. products. Soybeans, airplanes and cars will be among the $50 billion in affected products, but China’s Commerce Ministry didn’t say when the levies will take effect.
China’s move comes after the Trump administration on Tuesday detailed the $50 billion of Chinese products it plans to hit with 25% tariffs unless Beijing makes major trade and investment concessions.
News of the new Chinese tariffs triggered bigger losses in U.S. stock futures ahead of Wall Street’s open. At one point, Dow Jones Industrial Average futures YMM8, -2.32% sank more than 550 points but have since recovered somewhat. S&P 500 futures ESM8, -1.81% and Nasdaq-100 futures NQM8, -2.11% were down by more than 1.5%.
Meanwhile, the euro briefly climbed above $1.2300 after the Eurostat statistics agency said eurozone inflation rose in March to 1.4%, which may underscore a view by some policy makers at the European Central Bank that inflation may rise toward the bank’s target of just below 2% by this year.
On Friday, the closely watched U.S. monthly jobs report will be released and those figures can help steer the direction of monetary policy at the Federal Reserve.
What are strategists saying?
“Despite the swift response, Chinese officials tried to strike a conciliatory tone, emphasizing that they were not interested in a trade war and were looking for a negotiated solution. Still the Chinese made a not-so-veiled threat about international capital markets – a more than obvious hint that China holds more than $1 trillion of U.S. debt and therefore could wield considerable power in that arena,” BK Asset Management’s managing director Boris Schlossberg wrote in a note.
“The political news has overshadowed the economic calendar today, but traders will still focus on ADP and U.S. ISM non-manufacturing data due later today and any positive surprise could ameliorate today’s sour mood. On the other hand, if the labor data shows an unexpected slowdown in job growth it could be the catalyst for much broader selloff during the day and could take USDJPY towards 105.50 as longs capitulate completely,” he said.
What economic data are due?
ADP’s report on private-sector employment in March is expected at 8:15 a.m. Eastern Time, ahead of the Labor Department’s report on nonfarm payrolls due Friday.
IHS Markit is scheduled to publish a March report on services activity at 9:45 a.m. Eastern. Then, ISM is due to release an update to its nonmanufacturing, or services, index at 10 a.m. Eastern.
Also at 10 a.m. Eastern, a February figure for factory orders is on tap, with 1.7% growth expected.
Check out: MarketWatch’s Economic Calendar
Also on deck, minutes from the central bank’s March 20-21 meeting are due for release at 2 p.m. Eastern.
St. Louis Fed President James Bullard is slated to give a speech on monetary policy to the Arkansas Bankers Association in Little Rock at 9:45 a.m. Eastern, and Cleveland Fed President Loretta Mester is schedule to talk about diversity in economics at 11 a.m. Eastern at Central State University in Wilberforce, Ohio.