After calmer trading in the second half of last week than the first, the United States Dollar is a touch stronger this morning against most major currencies, but FX moves as a whole are rather muted
Overview
Tariff threats and announcements continue to be at the forefront of traders’ minds today after President Trump made multiple announcements Friday and through the weekend – first that he plans to impose reciprocal tariffs potentially “on everyone,” and second that his administration would be unveiling 25% tariffs on all steel and aluminum imports. After last week’s wild swings caused by announcements rather than impositions of tariffs, though, markets are treating these statements with more discernment. Equities, for their part, are continuing to shrug off these announcements and look to be choosing the “we’ll believe it when we see it” approach, set to open the morning in positive territory.
Trump’s newly-proposed steel and aluminum tariffs would have the largest impact on Canada, Mexico, and China – Canada in particular is responsible for more than 20% of all steel imports into the US. Markets, however, are wary of overreacting following last Monday’s imposition and then near-immediate walkback of 25% tariffs on all Canadian and Mexican imports. Meanwhile, Chinese tariffs in response to US actions last week are set to go into effect today, setting the stage for further cooling of relations between the world’s two largest economies. Chinese CPI was also released this morning, slightly above expectations, but PPI undershot making moves in Asian FX as a whole fairly muted. The data calendar in the front half of this week is light, with no major releases around the world scheduled. Federal Reserve Chair Jerome Powell is set to testify to Congress tomorrow and Wednesday, so markets will focus on his words there and in particular any discussion of potential impacts of both trade and economic policy from the fledgling Administration. The US releases its own CPI figures Wednesday morning, expected to remain relatively flat from December’s rather calm reading. The UK and Eurozone will release Q4 GDP figures Thursday and Friday, respectively.
What to Watch This Week…
- US CPI, Wednesday 8:30AM
- UK GDP, Thursday
- US PPI, Thursday 8:30AM
- Eurozone GDP, Friday
- US Retail Sales, Friday 8:30AM
- Monex USA Online is always open
CAD ⇓
The Loonie is the biggest loser against USD this morning, falling in response to Trump’s announcement of 25% steel and aluminum imports. As Canada is the biggest exporter of these products to the US, its currency is responding in kind and has fallen roughly a third of a percent against the Buck in overnight trading. Markets are still hedging, though, against the not-remote possibility that these tariffs will once again be used as a negotiation tool rather than actually go into effect, keeping CAD from sliding further based on what could once again be just hot air. Canada’s economic calendar is very light this week, which will keep tariffs at the forefront of the conversation for USDCAD.
EUR ⇓
The single currency has lost a touch of ground against the Dollar this morning, but is still managing to hold onto some of the gains it saw following the walkback of tariffs from the Trump administration at the beginning of last week. The EU in particular is on high alert for any discussion of tariffs – though the economic bloc has not yet been targeted directly, Trump has said that he will in the future be imposing tariffs against the EU, possibly as soon as March 1. GDP for the Eurozone is due out Friday morning, expected to show that the region just barely avoided a recession in Q4 of last year.
