US Dollar sees Trump’s tariff plans take all attention in light calendar

LONDON (January 21) The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, got knocked on Monday when tariffs were not part of the executive orders signed by Donald Trump in his first hours as US President. Markets got wrong footed thinking the stance on tariffs got eased and would face broad delay. However, a surprise comment from US President Trump late Monday night triggered a turnaround with reversals in all major pairs, including the US Dollar. President Trump said the application of 25% tariffs on imports from Canada (CAD) and Mexico (MXN) is due at the start of February, with Canadian Dollar (CAD) and Mexican Peso (MXN)devaluing as an immediate reaction. Overall, reversals are taking place on Tuesday from Monday’s losses on nearly all fronts and asset classes impacted by those comments.   

Daily digest market movers: Fundamentals to drive this week

• The US Treasury will publish some data this Tuesday in an otherwise very empty economic calendar ahead. At 16:30 GMT,  3-month, 6-month and 52-week Bills will be allocated in the markets. 
• Equities are tying up with gains on Tuesday. European equities are flat, while US futures are up near 0.50%.
• The CME FedWatch tool projects a 54.2% chance that interest rates will remain unchanged at current levels in the May meeting, suggesting a rate cut in June. Expectations are that the Federal Reserve (Fed) will remain data-dependent with uncertainties that could influence inflation during US President Donald Trump’s term. 
• The US 10-year yield is trading around 4.56% and has a long road to recover if it wants to head back to last week’s levels near 4.75%. 

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