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Greg Gibbs, Founder, analyst, & PM  at Amplifying Global FX Capital Pty Ltd explained that there are a few different themes to wrap your head around in the FX market.  

Key Quotes:

“We started today looking into trade rhetoric and its impact on markets.  Last week it appeared that trade tensions were easing, this week they are ratcheting up again.”

“Trump is willing to go to significant lengths to redress what he sees as long-lived and ingrained foreign policies to protect their industries. He wants to seek advantage for US industries and sees this as important for shoring up his political support and delivering on his election promises. The proposed auto tariffs are moves on the EU and NAFTA partners.”

“Sanctions policy on Iran and Russia add to trade tensions with Europe. Failing detente with North Korea may intensify US trade tensions with China.   We should continue to expect a stream of trade-protectionist threats from the US.  These are likely to be aimed at China, the EU, and its Nafta partners, but may have a much wider effect.”

“Early on, Trump’s trade rhetoric appeared to weaken the USD on fears that Trump would isolate the US, weaken US hegemony, and undermine the reserve status of the USD.   As Trump’s domestic political fortunes rise, strident trade policy is tending to boost the USD, lifting growth and inflation risks at home, dampening confidence in trade partners and global growth.”