April’s Currency Movements: Implications for International Trade

In their April 2018 Currency Outlook report, Tempus, an exchange rate and global payments company, provides a detailed report including the following topics and sections:

In Brief

• The USD fell by more than half of a percentage
• The Fed raised interest rate to 1.75%, signaling confidence
• The European Central Bank changed policy language, removing allowance for easing measures as needed
• The Mexican Peso is up 7.25% in 2018, the strongest of the major currencies

In Focus
The British Pound demonstrates historical ability to recover quickly

The View – Currency fluctuations of March continue into April

• Although many countries are safe from trade barriers, tariffs were placed on metals and other products imported to the U.S. from China.
• Claims have made by U.S. industry leaders that China has taken advantage of fair trade between the two countries.
• It is suspected that the positive correlation between the U.S. Dollar’s appreciation and increases to interest rates has faded because rate increases have not helped appreciation.
• Uncertainty over the possible repercussions to the tough stance with China trade continues, as Trump announced tariffs on aluminum, steel, other raw materials and manufactured products coming from China.
• China has reacted to U.S. tariffs by adding tariffs to agricultural products and finished goods, exported to China from the U.S.
• U.S. GDP growth in Q4 of 2017 expanded 2.9%, higher than the original reading of 2.5%
• U.S. Industrial Production increased 1.1% in February, exceeding the estimates, Durable Goods increased by 3.1% and Consumer Price Index remained at an average 2.2% for the year.
• Confidence in Europe continues to keep the Euro afloat, with an increase of 1.3% in March.
• The European Central Bank did not change interest rates or quantitative easing, but indicated that the need to inject further aid to the financial system may be coming to an end.
• NAFTA remains a concern, but to date has only impacted the Canadian Dollar, which saw a loss of 2.2% in mid-March, which mainly recovered after it was announced that Canada would be exempt from new tariffs.

IBC Members can download the complete Currency Outlook from the members-only section of the IBC website under the Special Reports section.  IBC membership is free for all regular IHA members – to learn more and to join, visit the IBC membership information page.