Commodity-linked currencies rallied sharply on Thursday as the U.S. dollar weakened across the board following Washington’s announcement of sweeping new trade tariffs. The Australian and Canadian dollars led gains, buoyed by both greenback softness and potential supply chain disruptions that could boost demand for raw materials. Market participants interpreted the aggressive trade measures as potentially more damaging to U.S. economic fundamentals than to resource-exporting nations, driving a broad rotation out of dollar positions.
The currency moves came amid mixed U.S. economic signals that further clouded the outlook. While weekly jobless claims unexpectedly fell to 219,000 – countering forecasts of a rise to 227,000 – the ISM services PMI plunged into near-contraction territory at 50.8, well below both February’s 53.5 reading and consensus estimates. This economic divergence has left traders struggling to assess whether resilient labor markets can offset apparent softness in service sector activity.
President Trump’s historic tariff announcement, featuring baseline 10% duties with provisions for dramatic escalation against specific countries, has dramatically reshaped near-term market calculus. The measures have immediately: increased expectations for Fed policy easing, raised the prospect of commodity price inflation from supply disruptions, and triggered volatility in manufacturing-dependent currencies. Market technicians note the dollar’s breakdown through key support levels suggests the potential for extended weakness, particularly if trade partners announce retaliatory measures in coming sessions.
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