The Impact of the UAW Strike on the FX Market

  • UAW President Fain on latest offer – “It’s definitely a no-go.”
  • A prolonged UAW strike could disrupt the US growth exceptionalism trade
  • The impact of the strike is not as disruptive but it could lead to a lengthier period of production disruption

The three Detroit automakers and the United Auto Workers (UAW) union appear to be far from ending the strike that has now entered its fourth day.  It is clear that American car manufacturers, Ford (F), GM (GM), and Stellantis (STLA) will be having higher costs once a deal is reached.  There has been some relief that onset of the strike won’t be as bad as initially thought.  The longer the hold out, the greater the impact on the economy.

These negotiations might last a while as many autoworkers haven’t had a meaningful raise in over 15 years.  The union is looking for wage increases of 36% over the next four years, which matches what chief executives have received. In addition to wage increases, they are also looking to bring back pensions.  Over the weekend, the UAW rejected a 20% offer from both Ford and GM, while Stellantis proposed a 21% increase.

The longer this strike lasts, the greater the impact on the economy, which will eventually impact the FX market.  An extended strike that lasts more than a couple weeks, will start to rattle markets.  It seems, Wall Street has priced in a short strike already, but the risk that this lasts more than a couple weeks is growing.

USD/JPY  Daily Chart

The dollar-yen trade remains focused on the BOJ commitment to an ultra-easy monetary stance and US growth exceptionalism and rising risks of more Fed tightening. If this week’s central bank actions by the Fed and BOJ don’t lead to any surprises, the bullish trend could remain intact.  Unless growth prospects start to take a turn for the worse in the US, the dollar might remain supported over the short-term.

Key upside targets the 148.25, while downside eyes the 147.00 region.  Major support remains at the 144 level, while upside targets remain the 150 price barrier.


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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya