Asia FX mostly lower on US-China worries
The Australian dollar and most regional FX markets were weaker on Friday after US President Donald Trump said China has “totally violated” last month’s tariff-pause agreement.
Posting on Truth Social, Trump’s commentary sparked fears of another round of escalation in US-China trade negotiations. A follow-up statement from the Trump administration said the talks were now “a bit stalled”.
That said, the reaction in FX markets was mostly moderate.
The AUD/USD was down 0.2% while NZD/USD fell less than 0.1%.
The USD/SGD gained 0.3% while USD/CNH gained 0.2%.
Friday’s action brings to a close a momentous month in financial markets although FX markets were more muted.
The Aussie’s 2.8% trading range in May was the tightest trading range since June 2024.
Trump’s team develops a backup plan to apply tariffs
According to the Wall Street Journal, which cited unnamed sources, the US administration is contemplating a temporary attempt to impose tariffs under a never-before-used provision of the Trade Act of 1974 that includes language permitting tariffs of up to 15% for 150 days in order to address trade imbalances with other nations.
Then, under a separate section of the same bill, President Donald Trump would have more time to create customized tariffs for each of his main trading partners.
Although the second step necessitates a protracted notification and discussion procedure, administration officials believe it is more legally sound than the tariff policy that was declared unlawful this week.
Trump’s initial tariffs on China were one of the numerous instances in which the alternate provision was employed.
Looking forward, we’d be prepared for more FX volatility in the coming months.
For USD/SGD, the next key resistance lies with 21-day EMA of 1.2953, and 50-day EMA of 1.3082 next.
A week focused on growth and inflation metrics
The upcoming week features a relatively heavy economic calendar, with inflation and growth metrics taking centre stage. Highlights include Eurozone preliminary CPI data on Tuesday night, Australia’s Q1 GDP on Wednesday morning, and Canadian and US labor market data on Friday.
These events will provide critical insights into economic conditions and central bank policy direction.
Eurozone inflation data will dominate the early part of the week, with preliminary May CPI figures released on Tuesday night. These will help shape market expectations for the ECB’s policy decision on Thursday night. Inflation trends globally remain a key concern for policymakers and markets alike.
Midweek, all eyes will turn to Australia’s Q1 GDP figures, along with Germany’s factory orders and Eurozone growth metrics. These releases will give a clearer picture of the global growth trajectory. Thursday brings Australia’s trade balance data, while US Nonfarm Payrolls and Canada’s labor market report on Friday are expected to cap off the week.
The Bank of Canada rate decision on Wednesday will be a highlight for monetary policy watchers. Similarly, the ECB’s rate decision on Thursday will attract attention.
USD mostly higher in Asia
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 24 May
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
