Commodity Currencies Decline As Trump Announces Tariffs

(RTTNews) - The commodity currencies such as Australia, the New Zealand and the Canadian dollars declined against their major currencies in the Asian session on Monday, after news the U.S. tariffs were put in place over the weekend, which led to concerns about higher inflation that will force the U.S. Fed to put a hold on interest rate cuts for longer.

White House press secretary Karoline Leavitt confirmed President Donald Trump's threatened tariffs will be levied against major U.S. trading partners beginning on Saturday February 1. Leavitt said the Trump administration will be implementing 25 percent tariffs on Mexico and Canada as well as a 10 percent tariff on China. Tariffs on oil and gas are likely by February 18. They also threatened 100% tariffs on BRICS nations over dollar replacement moves.

Soon after Trump on Saturday followed through with his threats to impose stiff tariffs on Mexico, Canada and China, Mexican President Claudia Sheinbaum said her country would impose retaliatory tariffs.

Outgoing Canadian Prime Minister Justin Trudeau announced "far-reaching" retaliatory levies and China said it would "take corresponding countermeasures," instigating a trade war that's set to reshape global supply chains.

A spokesperson for the European Union on Sunday said he is not aware of any additional tariffs being imposed on EU products, but the 27-nation bloc would respond firmly if targeted.

The decline of the AUD is partly due to growing wagers on a rate decrease by the Reserve Bank of Australia (RBA) later this month.

Asian markets were deep in the red, with benchmark indexes in Australia, New Zealand, South Korea, Hong Kong and Japan all falling 1-3 percent.

In economic news, data from Caixin showed that the manufacturing sector in China continued to expand in January, albeit at a slower pace, with a PMI score of 50.1. That's down from 50.5 in December.

Data from S&P Global showed that the manufacturing sector in Australia moved back up into expansion territory in January, with a PMI score of 50.2. That's up from 47.8 in December.

Meanwhile, the total value of retail sales in Australia was down a seasonally adjusted 0.1 percent on month in December, the Australian Bureau of Statistics or ABS said on Monday, coming in at A$36.991 billion. That beat forecasts for a decline of 0.7 percent following the 0.8 percent increase in November. On a yearly basis, sales were up 4.6 percent. For the fourth quarter of 2024, retail sales were up 1.0 percent on quarter and 1.1 percent on year at A$105.820 billion.

The ABS also said total number of building permits issued in Australia was up a seasonally adjusted 0.7 percent on month in December, coming in at 15,174. That missed forecasts for an increase of 0.9 percent following the upwardly revised 3.4 percent decline in November. On a yearly basis, building permits climbed 5.6 percent following the upwardly revised 7/1 percent jump in the previous month. The value of total building approved rose 3.5 percent to A$14.94 billion following a 6.6 percent rise in November.

In the Asian trading today, the Australian dollar fell to a 5-year low of 0.6088 against the U.S. dollar, from Friday's closing value of 0.6211. The aussie may test support near the 0.59 region.

Against the yen and the euro, the aussie dropped to nearly a 5-month low of 94.69 and more than a 1-month low of 1.6792 from last week's closing quotes of 96.38 and 1.6678, respectively. If the aussie extends its downtrend, it is likely to find support around 93.00 against the yen and 1.69 against the euro.

The aussie edged down to 0.8993 against the Canadian dollar, from Friday's closing value of 0.9021. The next possible downside target for the aussie is seen around the 0.88 region.

The NZ dollar fell to nearly a 6-month low of 85.84 against the yen and a 1-month low of 1.8516 against the euro, from last week's closing quotes of 87.46 and 1.8382, respectively. If the kiwi extends its downtrend, it is likely to find support around 84.00 against the yen and 1.86 against the euro.

Against the Australia and the U.S. dollars, the kiwi slipped to a 6-day low of 1.1054 and a 4-month low of 0.5517 from Friday's closing quotes of 1.1018 and 0.5636, respectively. The kiwi is likely to find support around 1.11 against the aussie and 0.53 against the greenback.

The Canadian dollar slid to nearly a 22-year low of 1.4973 against the U.S. dollar and more than a 4-month low of 105.18 against the yen, from Friday's closing quotes of 1.4524 and 106.80, respectively. The next possible downside target for the loonie is seen around the 1.48 region.

Against the yen and the euro, the loonie slipped to more than a 4-month low of 105.18 and a 4-day low of 1.5122 from last week's closing quotes of 106.80 and 1.5050, respectively. The loonie is likely to find support around 104.00 against the yen and 1.52 against the euro.

Looking ahead, U.K. factory PMI for January and Eurozone inflation data for January are slated for release in the European session.

In the New York session, U.S. and Canada PMI data for January and U.S. construction spending for December are set to be released.