May 1 Tariff Deadline Looms Large

In only one day’s time U.S. President Donald Trump will have to announce whether he will grant permanent exemptions to his sweeping steel and aluminum tariffs and politicians, economists and traders worldwide are eagerly awaiting this decision. Over the weekend, the European Union hinted that its hope for reaching a suitable trade agreement was waning due to Trump’s “unreasonable demands.” The EU has long been the U.S.’s biggest trading partner, and the potential for retaliatory tariffs out of the EU are very real if an agreement is not reached within the next few hours.

“The European Union should be ready to decisively defend its interests within the framework of multilateral trade rules,” the German government said in a statement over the weekend. Other world leaders took a more positive stance, with Australia, Brazil and Argentina expecting exemptions based upon their friendly relationships with the U.S. Skeptics, however, wonder whether this optimism is justified or whether it’s a coping mechanism to avoid the unpleasantries of a brewing trade war. The EU has already identified a list of products that, if taxed, will impose significant economic damage on Republican areas. Some such products include power boats manufactured in Tennessee and flight recorders produced in Arizona.

The dollar was measurably stronger during Monday’s London trading session after it retreated from 3 ½ month highs on Friday. The dollar index was up 0.34 percent to 91.89 .DXY as of 12:54 p.m. GMT. The dollar index gained 1.37 percent last week, testing the upper handle of the range its been stuck in since January.

The dollar was trading at $1.2079 against the euro and was at 109.37 against the yen, a 0.31 percent gain. Investors are also eying the Federal Reserve announcement later this week and the non-farm payroll reports due out Friday. The Fed is not expected to raise interest rates this week since it just raised rates last month, but traders are looking eagerly for signals as to whether there will be four interest rate hikes this year instead of the three hikes originally predicted.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.