North American FX Open - Risk sentiment sours as April 2 tariffs update looms

The DOLLAR overall is little changed to start the North American week, but souring risk sentiment has seen Usd/Jpy slip to a ten day low down at 148.70. Friday's US data continues to reverberate through the markets, with the market very concerned about the impact on the global economy on tariffs, which has lead to calls/forecasts for more central bank easing.

Joseph Brusuelas, Chief Economist at RSM US LLP, stated that the primary takeaway from the February income, spending and inflation data is that US households are moving quickly to prepare for what they believe is another price shock caused by an increase in the costs of goods via a policy induced trade shock.

With real consumption rising by just 0.1% in February, after Jan’s 0.6% slump, it is evident that the pre-tariff rush of durable goods purchases is fading fast. Near-zero growth in consumer spending now looks likely in Q1 overall.

Nick Timiraos, noted Fed watcher from the WSJ, wrote this morning that Trump officials still aren’t sure what they’re doing with tariffs this week. He adds that in recent days, advisers have considered imposing global tariffs of up to 20% that would hit virtually all U.S. trading partners. Timiraos declares that "whatever the final plan, the president wants the policy to be “big and simple.” That likely means the final action will be broader than earlier plans to prioritize levying tariffs on the U.S.’s biggest trading partners, about 15% of the world’s nations."

Goldman Sachs stated overnight that "higher tariffs are likely to boost consumer prices" and raises year-end 2025 core PCE forecast by 0.5% to 3.5% y/y. Goldman also cut its Q1 GDP estimate to just 0.2%, and cuts full year 2025 GDP forecast by 0.5% to 1.0%. The firm now sees the Fed delivering three rate cuts this year rather than two.

CBA argued that "Trump's tariff regime will be more disruptive to the global economy than markets are pricing."

The Euro garnered some fleeting support from the German state and Italian CPI updates for March, as their firm readings are contradicting the soft updates from France and Spain on Friday, but Eur/Usd's gains to 1.0849 were quickly unwound.

The ECB President Lagarde declared that Trump's trade measures will hurt global growth and that keeping inflation in check is a constant battle. Lagarde added that the Trump tariffs are a chance for Europe to display its independence. Meanwhile, the ECB's Panetta stated that monetary policy needs to consider the weak economy and that growing uncertainty requires prudence on rate cuts. Panetta also insisted that the fight against inflation is not over.

Overnight, China's composite PMI improved slightly in March, rising to 51.4 vs 51.1 last amid small uplifts in both manufacturing and non-manufacturing versions.

BBC News reported that Donald Trump has said he is "very angry" and "pissed off" with Russian President Vladimir Putin after weeks of attempting to negotiate a ceasefire in Ukraine. In an NBC News interview, the US president said he was angry with Putin for attacking Ukrainian President Volodymyr Zelensky's credibility, and threatened to impose a 50% tariff on countries buying Russian oil if he did not agree to a ceasefire.

More on the geopolitics front, Bbg reports US Secretary of Defense Peter Hegseth said the US military has begun to upgrade its operations in Japan to a new “war-fighting” command, highlighting the Trump admin’s focus on China as its primary security challenge. And, Iran's President Pezeshkian stated Tehran has told Trump it won’t engage in direct negotiations with his admin.

In other news, French far-right leader Marie Le Pen was barred from running for public office for five years, by a criminal court in Paris, ruling out a 2027 Presidential run. Le Pen and her National Rally party were found guilty of diverting millions of Euros in EU funds to finance activities related to their domestic agenda.

Data today starts off with the pan-German CPI report and is followed by the Chicago PMI.