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Investors bought the US dollar in early Asia trading and stocks and equity futures slid after President Donald Trump carried out his threat to impose general levies of 25% on Canada and Mexico and 10% on Chinese goods starting on Tuesday.
Talk of tariffs alone has benefited the greenback since Trump’s election. Wall Street banks think there is still plenty of money to be made buying the dollar, even after US President Donald Trump’s tariff-push sent the greenback soaring.
Among their trades: Goldman Sachs expects the dollar to break parity against the euro. JPMorgan predicts the US currency to buy around 1.50 Canadian dollars for the first time in a generation.
Behind the bullish dollar position is the bet that tariffs will fuel inflationary pressures and keep US interest rates elevated, while also hurting foreign economies more than the US and adding to the greenback’s safe-haven lure.
Foreign currencies get hurt as American demand declines for costlier imports.
“Tariffs have a strong, direct and unambiguous impact on exchange rates, unlike other asset classes,” Goldman Sachs strategists including Dominic Wilson wrote in a note, noting risks of an 8% to 10% fall in the euro in a global tariff scenario.
The dollar’s march higher on Monday pushed the loonie to its weakest level in more than two decades, while the Mexican peso, the euro and the Australian dollar fell to multi-year lows.
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