Magna Financial Market Report – January 22nd 2025
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• Trump Targets China and Russia
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RECAP
The US dollar’s earlier gains were completely undone by the end of European trading, as markets reconsidered the possibility that President Trump may not be preparing for a full-scale trade war. Instead, it seems the tariff threat could serve as a tool for negotiation. This shift in sentiment was reflected in the near-total recovery of the Canadian dollar’s losses against the USD by the end of the trading day.
Overnight, President Trump made headlines by announcing that he is contemplating a 10% tariff on all Chinese imports, with the potential implementation date set for February 1st. Additionally, he issued a warning to
Russia, stating that sanctions could be imposed if President Vladimir Putin fails to engage in discussions regarding the situation in Ukraine.
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OUR SUMMARY
Since President Trump’s November election win, the US dollar has strengthened significantly, but discussions on FX desks now centre on the potential for a pullback if his tariff actions fall short of expectations. Despite this, interest rate differentials should provide some support for the dollar, as markets are pricing in only 38bps of Fed rate cuts for the year, compared to the 65bps and 100bps expected from the BoE and ECB.
Although Trump could still impose severe tariffs that might boost the USD, the early signals from his administration suggest the currency could continue to weaken. Volatility seems likely for the dollar in the short term, and any weakness could present a buying opportunity.
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HOW WE CAN HELP
Our team of currency experts are here to help you get more from your money when making international payments. We will work with you to understand your payment needs and offer specialised guidance on the best options available to you. Get in touch with Osman Hanif today on +44 (0) 20 3371 9200 or email osman@magnafinancial.com
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