February 10, 2025: USD Rises on Tariff Announcement

10 February 2025  

MARKET REPORT

RECAP

On Friday, Trump made headlines following a Reuters report about his plan to introduce reciprocal tariffs before the week’s end, though the targeted countries were not specified. Meanwhile, Treasury yields rose amid inflation concerns, and market expectations for a second rate cut by the Fed this year decreased. The US dollar strengthened across the board.

Earlier, the US job market painted a mixed picture. Job additions totalled 143,000, falling short of the anticipated 175,000. However, revisions added an additional 100,000 jobs over the past two months, and the unemployment rate dropped to 4% from 4.1%.

In Europe, economists at the ECB indicated that they view the neutral interest rate, where rate cuts would cease, to be between 1.75% and 2.25%. This aligns with the market’s year-end expectation of a 1.75% rate.

OUR SUMMARY

The USD is currently receiving support after Trump’s announcement of 25% tariffs on steel and aluminium, affecting countries such as Canada, Mexico, China, Brazil, South Korea, and Germany. The full details and timing of these tariffs are still pending, but they have already placed pressure on the CAD, MXN, and EUR.

This week, the EUR could see some upside if the proposed ceasefire between Russia and Ukraine progresses as planned.

Inflation data will be a focal point this week, with January’s CPI and PPI reports scheduled for Wednesday. Both headline and core CPI (YoY) are expected to match December’s levels, while retail sales are forecasted to show a slowdown in January compared to December.

Thursday’s GDP report, following the Bank of England’s downward revision, is expected to reveal a 0.1% contraction in the UK economy for the last quarter of the year.

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