OUR SUMMARY
Over the weekend, President Trump declared that additional tariffs would be imposed on imports from Canada and Mexico, as well as a 10% tariff on China’s exports to the US. This sparked a rally in the USD when markets opened, although some of the gains were tempered after both Canada and Mexico indicated plans to retaliate, and China announced it would lodge a complaint
with the WTO. Today, Trump is reportedly targeting Europe next, prompting a firm response from the EU.
In the short term, markets are focused on key economic data this week, particularly the US job numbers leading up to Friday’s non-farm payrolls report. A positive jobs report could ease concerns about rate cuts and potentially strengthen the USD further. Meanwhile, the Bank of England’s expected 0.25% rate cut on Thursday is already priced in, but any signals from the Bank regarding concerns about the economy or a downgraded growth outlook could prompt a more aggressive rate-cut outlook, weighing on the pound.
For today, all eyes are on Europe’s January CPI data. Following disappointing CPI numbers from Germany and France on Friday, it’s likely the broader Eurozone data will follow suit, putting additional pressure on the EUR. In the US, strong ISM manufacturing data has been supporting the USD, and any positive
signs in today’s report could continue to drive demand for the dollar.
