The Brazilian real suffered its biggest intraday drop in three months on Wednesday after US President Donald Trump threatened to impose a 50% tariff on Brazil, a rate far higher than what he had previously announced.
The benchmark currency index fell for the fourth consecutive day, with the real plunging by 2.9% at one point towards the end of the trading day. The iShares MSCI Brazil ETF, the largest US-listed exchange-traded fund (ETF) tracking the Brazilian stock market with a size of $5.35 billion, dropped by 1.9% in after-hours trading. Trump’s announcement of a 50% trade tax on copper disrupted the copper market, and the Chilean peso also fell in response.
Juan Perez, director of trading at Monex USA, said: “The market is starting to accept the view that tariffs will continue to be a tool in all negotiations. Emerging markets/Latin American markets are showing signs of stagnation, so any factor that hinders smooth trade development will be reflected in losses in the foreign exchange market.”
Before announcing the decision to Brazil, Trump informed the leaders of six countries including the Philippines and Sri Lanka on Wednesday of the specific tariff rates against their countries.
Previously, the president had indicated that this round of tariffs would be more severe than the 10% imposed three months ago. Trump had reaffirmed his support for former President Jair Bolsonaro and complained that Brazil had not been treating the United States well.
Olga Yankova, head of emerging markets research and strategy at Crédit Agricole, said that in the case of Brazil, “the concessions Trump is seeking seem to be more of a diplomatic nature.” “These concessions could include curbing its alliance with China and reducing what Trump perceives as attacks on the political right.”
Even after today’s decline, the currency index remains close to the record high it reached last week, as investors seek to diversify their holdings outside the US, leading to a general weakening of the dollar. The currency has shown some resilience due to market speculation that Trump will not enforce his most severe tariff threats.
Hari Hariharan, chief investment officer of NWI Management, said earlier in the day: “The market is still in a ‘wait-and-see’ mode.” But “if Trump gets really angry and the tariff rate soars to a very high level, the risk will be unbearable.”
The Chilean peso fell to its lowest level since April on Tuesday after the US president announced tariffs on copper, which is Chile’s largest export product.
The Mexican peso also fell, reversing earlier gains, as global market sentiment soured. Previously, the peso had risen on the release of domestic inflation data, which dampened expectations of future interest rate cuts by the country’s central bank.
Asian currencies also performed poorly, with the Thai baht and the Philippine peso leading the decline. The peso trading was halted when Trump announced the tariff rate on the Philippines.
Technical analysis:
Gold: After the price completed the sweeping liquidity within the yellow alert area of our plugin and rebounded, it further rose after breaking through the blue area. For today, we closely monitor the pullback near 3310. Once it is completed, we continue to pay attention to the participation in the long signal. For detailed positions, please consult the plugin.
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and note “666” in the message.
Nasdaq: Yesterday, the price quickly touched above 22,900, but then it swept down to the breakout point. Currently, there is no strong signal from the bulls. Therefore, we will continue to wait for the low sweep liquidity and then catch a short-term long position, rather than considering a large wave strategy. Today, we will continue to pay attention to the result of the sweep around 22,600. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the chart, please contact V: Hana-fgfg and note “666” in the message.
Crude oil: Yesterday, the price failed to break through the 69.70 level, so the blue momentum break area did not meet the conditions. The key resistance price for the day is in the 69.20/30 area. The long signal based on momentum should still be considered after a breakthrough at this point. Meanwhile, the yellow low-sweep liquidity strategy below is still retained for one day. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
The plugin is updated from 12:00 to 13:00 every trading day. If you want to experience the same plugin as shown in the picture, please contact V: Hana-fgfg and note “666” in the message.
Key economic data and events to focus on today:
14:00 Germany’s Harmonized Consumer Price Index (HICP) for June (Final Reading)
20:30 U.S. Seasonally Adjusted Initial Jobless Claims (in thousands) (to 0705)
At 21:00, James Bullard, President of the Federal Reserve Bank of St. Louis, will deliver a speech on the U.S. economy and monetary policy.
23:00 Deputy Governor of the Bank of England, Bridgen, will deliver a speech on the theme of “Weathering the Storm: Maintaining Stability in a Changing Climate”.
