Tag: TradeWar

  • Dow Jones backslides on trade war rhetoric

    Dow Jones backslides on trade war rhetoric


    • The Dow Jones shed 400 points on Thursday, falling 1.45%.
    • US PPI inflation hit a soft patch, further easing fears of an inflation reignition.
    • Despite easing price pressures, equities still took a hit as Trump threatens more tariffs.

    The Dow Jones Industrial Average (DJIA) fell some 400 points on Thursday, declining around one full percent after United States (US) President Donald Trump and his administration ramped up their trade war rhetoric. President Trump pivoted to threatening new tariffs on targeted goods from the European Union after his tactic of trying to strong-arm Canada into making trade concessions went nowhere earlier this week.

    The US Producer Price Index (PPI) cooled faster than expected in February, with core PPI inflation easing to 3.4% YoY versus the expected print of 3.5% and January’s 3.6%. Headline PPI inflation also chilled, falling to 3.2% on an annualized basis compared to the forecast of 3.3%, however January’s headline PPI print was revised higher to 3.7% as revisions continue to be a thorn in the side of preliminary data watchers.

    Despite a general easing in this week’s batch of inflation data, the odds of another rate cut from the Federal Reserve (Fed) next week look slim. Inflation metrics are still running well above the Fed’s 2% annual target, and according to the CME’s FedWatch Tool, rate markets are pricing in functionally 100% odds of the Fed holding rates steady after its rate call meeting next week. Rate traders expect the Fed’s next move on rates to be in June, if not later.

    US President Donald Trump hit the ground running on Thursday, vowing to impose a stiff 200% tariff on European wines if the EU doesn’t back off from its 50% tariff on US-produced whisky, which was imposed as a retaliatory measure against the US’s global 25% steel and aluminum tariff that went into effect this week. President Trump attempted to strong-arm his Canadian neighbors into not retaliating against his steel import fees. 

    However, those measures largely fizzled and resulted in no concessions from Canada, and now the Trump administration is shifting its tit-for-tat tariff strategy on Europe. Donald Trump also returned to musing about ‘taking’ Greenland from Denmark as the US president revisits talking points from his campaign trail.

    Dow Jones news

    A large majority of the stocks listed on the Dow Jones fell back on Thursday, with two-thirds of the index’s securities slipping into the red. Verizon (VZ) rebounded 2.5% to above $43 per share as the telecoms giant recovers from a rout earlier this week. Salesforce (CRM) and Home Depot (HD) both fell over 4%, falling to $271 per share and below $350 per share, respectively. Tech stocks and building suppliers are growing increasingly uneasy in the face of the Trump administration’s trade policies.

    Dow Jones price forecast

    Losses are beginning to accumulate on the Dow Jones Industrial Average chart, dragging the major equity index into correction territory with the Dow Jones down 2,000 points on the week. The DJIA has shed nearly 10% from last November’s record highs just north of 45,000, and price action is back below the 41,000 handle for the first time in 6 months.

    Dow Jones 4-hour chart

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • Canadian Dollar loses ground for a third straight day as trade war heats up

    Canadian Dollar loses ground for a third straight day as trade war heats up


    • The Canadian Dollar shed 0.3% against the Greenback on Tuesday.
    • Bank of Canada (BoC) rate call looms large during the midweek session.
    • US President Trump’s trade war against Canada has hit a new gear.

    The Canadian Dollar roiled on Tuesday, falling roughly six-tenths of one percent against the Greenback at its lowest as markets weigh the latest evolution in US President Donald Trump’s self-styled trade war against Canada. The Canadian Dollar is still testing within familiar technical territory against the US Dollar, however, the Loonie is poised for further losses after shedding weight for three straight sessions against the USD, all on rising trade war fears.

    The Bank of Canada (BoC) is slated to deliver its latest rate call on Wednesday, however markets are getting thrown for a loop on whether the BoC will be able to deliver its expected quarter-point rate trim as trade war rhetoric from team Trump ramps up. Donald Trump took to his favorite social media app to declare that he’s instructed his Secretary of Commerce to double tariffs on all steel and aluminum imported from Canada to 50%, also to begin on Wednesday.

    Daily digest market movers: Canadian Dollar withers again on new tariff threats

    • US President Donald Trump vowed via social media to impose an additional tariff on Canadian steel and aluminum, bringing the total to 50% and declaring the tariff to go into effect on Wednesday.
    • Ontario Prime Minister Doug Ford was quick to retaliate against the US with a flat export tax of 25% on all electricity sent to the US, which sent Donald Trump into a further tailspin on social media.
    • Ontario PM Ford followed up with an additional warning that Ontario could shut up energy exports to the US entirely, which would see 1.5M Americans without power.
    • White House officials followed up with an announcement that the “paperwork” on additional steel and aluminum tariffs targeted at Canada hasn’t been “signed” in an effort to cross the moat that President Trump continues to dig for the US.
    • President Trump reiterated his misunderstanding of Canadian cap-trade tariffs on US dairy products that are baked into the USMCA trade agreement, which Donald Trump himself spearheaded during his first term in the White House.
    • The BoC is slated to cut interest rates by another quarter of a point to 2.75% on Wednesday, but rising tariff concerns could throw a wrench in the works.

    Canadian Dollar price forecast

    The Canadian Dollar whipsawed against the Greenback on Tuesday, falling 0.9% top-to-bottom at its absolute lowest as markets churn on geopolitical headlines. The Loonie has somewhat recovered its footing, but still remains down for a third straight session against the US Dollar. USD/CAD has risen around 2% in three straight trading days as the Loonie backslides against the Greenback.

    USD/CAD 4-hour chart

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • US Dollar dives lower with German defense spending bill back on track

    US Dollar dives lower with German defense spending bill back on track


    • The US Dollar trades broadly in the red on Tuesday, devaluing further against most major peers.
    • The German Green coalition is said to be back on track for a defense spending bill. 
    • The US Dollar Index heads to the lower range of 103.00 and could break below it. 

    The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is eking out lows not seen since October 2024. The index trades above 103.50 at the time of writing on Tuesday. The Greenback faces headwinds on early European comments from the German green coalition, who said to be back on track for an agreement on a German defense spending bill. This pushes the US Dollar (USD) lower in favor of the Euro (EUR).

    On the economic data front, the US JOLTS Job Openings report for January will catch most of the attention. Traders are already spooked by recession fears, so a further decline in job openings could add to that conviction and see further downside momentum for the DXY. The US NFIB Business Optimism Index for February already released fell to 100.7, missing the 101 estimate and further down from the previous 102.8 reading. 

    Daily digest market movers: Some dots to connect

    • In the early European trading session, a headline was published that the German Green coalition leader said to be hopeful on a defense spending deal this week, Bloomberg reported. This news represents a 180-degree shift from the headline that triggered some US Dollar (USD) strength on Monday, where the Green Party was unwilling to support any defense spending deal. 
    • At 14:00, the US JOLTS Job Openings report for January will be published. Expectations are for an uptick to 7.75 million openings against the 7.6 million from December.
    • Equities are trying to brush off the doom and gloom from Monday. European equities are higher while US futures are in positive territory. 
    • The CME Fedwatch Tool projects a 95.0% chance for no interest rate changes in the upcoming Fed meeting on March 19. However, the chances of a rate cut at the May 7 meeting increase to 47.8% and to 89.9% at June’s meeting.
    • The US 10-year yield trades around 4.20%, off its near five-month low of 4.10% printed on Tuesday last week.

    US Dollar Index Technical Analysis: Not a one-day event

    The US Dollar Index (DXY) faces more selling pressure on Tuesday as recession fears are not going away. Traders remain concerned about tariffs’ impact and uncertainty on the US economy. Seeing the performance in US equities year-to-date, there is not much reason to be happy and no reason to support a stronger Dollar in the current narrative. 

    There is an upside risk at 104.00 for a firm rejection. If bulls can avoid that, look for a large sprint higher towards the 105.00 round level, with the 200-day Simple Moving Average (SMA) at 105.03. Once broken through that zone, a string of pivotal levels, such as 105.53 and 105.89, will present as caps. 

    On the downside, the  103.00 round level could be considered a bearish target in case US yields roll off again, with even 101.90 not unthinkable if markets further capitulate on their long-term US Dollar holdings. 

    US Dollar Index: Daily Chart

    US-China Trade War FAQs

    Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.

    An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.

    The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.

     



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  • US Dollar sees some gains on a quiet start of the week

    US Dollar sees some gains on a quiet start of the week


    • DXY stalls around 103.95 as market sentiment remains fragile.
    • Traders eye Wednesday’s US CPI data for fresh market direction.
    • Nasdaq slides 3.3%, dragging broader equities lower.

    The US Dollar (USD) remains under pressure on Monday, with DXY hovering around 103.95, struggling to find traction after last week’s steep decline. Federal Reserve (Fed) Chair Jerome Powell’s latest remarks on Friday reassured markets that the central bank sees no urgent need to adjust policy at the moment, though economic uncertainties are growing. Meanwhile, the Nasdaq is facing heavy market losses, down 3.3%, as investors remain cautious ahead of key United States (US) inflation data due midweek.

    Daily digest market movers: Fed in focus as CPI looms

    • Market participants are bracing for the release of February’s Consumer Price Index (CPI) on Wednesday, expected to provide key insights into inflation trends.
    • The Federal Reserve enters its blackout period ahead of the March 19 meeting, limiting central bank commentary for the week.
    • Fed Chair Jerome Powell reiterated on Friday that the Fed remains patient and does not see an urgent need to act, preferring to wait for additional economic data before making any policy changes.
    • US equities face a sharp correction, with the Nasdaq leading losses, down 3.3%.
    • CME FedWatch Tool indicates a majority expectation for rates to remain at current levels in May, while June rate cut expectations have risen significantly.
    • Ahead of the blackout media period, the Fed’s sentiment index on the daily chart has fallen towards neutral ground, which could also explain the USD’s decline.

    DXY technical outlook: Testing support near 103.50

    The US Dollar Index (DXY) stabilizes below 104.00, consolidating after last week’s steep drop. The 20-day and 100-day Simple Moving Averages (SMA) confirmed a bearish crossover near 107.00, reinforcing the negative trend. The Relative Strength Index (RSI) remains near oversold territory, signaling potential for a short-term rebound. Meanwhile, the Moving Average Convergence Divergence (MACD) remains bearish, suggesting further downside risk unless buyers step in near support levels. If DXY fails to reclaim 104.50, the next support is seen near 103.30, which could determine whether a deeper decline unfolds.

    Fed FAQs

    Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

    The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

    In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

    Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

     



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  • Dow Jones backslides amid wavering sentiment

    Dow Jones backslides amid wavering sentiment


    • The Dow Jones shed around 575 points on Thursday, as trade war fears resume.
    • The more the Trump administration tries to soothe tariff fears, the worse things get.
    • Market sentiment is still churning despite announced tariff delays and upbeat jobs data.

    The Dow Jones Industrial Average turned tail and ran on Thursday, in tandem with the rest of the US equity indexes. United States (US) President Donald Trump continues to waffle on his own trade war rhetoric, exploring tariff exemptions and extensions on a sector-by-sector basis. However, the lack of clarity and consistency in policy that tends to get announced off-the-cuff via social media posting is beginning to weigh on market sentiment.

    The Trump administration is continuing to pivot on its own tariff threats, granting a 30-day reprieve for the US automotive industry, which remains heavily reliant on foreign trade to produce its vehicles. Other industries, sectors, and businesses are up for making a case for why they should receive an exemption, at least for a little while, and the ongoing uncertainty around President Trump’s trade war rhetoric is sinking investor risk appetite.

    US Nonfarm Payrolls (NFP) net job gains numbers for February are due on Friday, and Thursday’s Challenger Job Cuts number is providing little reason for traders to hope for a decent NFP print this week. Challenger firings reached their highest level since August of 2020 in February, climbing to 172K net terminations in key industries, strongly implying that a general slowdown is gathering speed.

    Dow Jones news

    Nearly the entire Dow Jones equity board is falling back on Thursday, with all but three listed securities trading into the red. Verizon Communications still managed to find some gains, climbing 1.2% to cross above $43 per share. Nvidia (NVDA) fell back once again, falling nearly 5% and dipping below $112 per share as the AI trade continues to fizzle out.

    Dow Jones price forecast

    Thursday is turning into a lunchbag letdown for bullish hopefuls, shredding the midweek rebound that has vanished as quickly as it disappeared. The Dow Jones is trading back into the 42,500 handle, with a near-term technical floor priced in at the 42,400 level.

    The Dow Jones is poised to make contact with the 200-day Exponential Moving Average (EMA) near the 42,000 key figure, but only if selling pressure is able to push bids down another 500 points, a move that would likely require a shift in fundamentals… or a bad employment data print.

    Dow Jones daily chart

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • President Trump’s Capitol address: The agenda takes shape

    President Trump’s Capitol address: The agenda takes shape


    United States (US) President Donald Trump will address Congress from the US Capitol at around 02:00 GMT Wednesday, marking his first appearance before lawmakers since retaking the White House. He’s expected to outline his vision for a wide range of domestic and foreign policy initiatives.

    In his second term, President Trump has wasted no time getting started. He’s signed a series of executive orders in just a few weeks and he promises even more are on the way. During his inaugural speech, he declared that “the golden age of America” had arrived, identifying immigration, trade and national security as top priorities.

    On the international front, the President recently held a turbulent Oval Office meeting with Ukrainian President Volodymyr Zelensky. Following that meeting, he announced a pause on military aid to Ukraine.

    Turning to trade, another round of tariffs went into effect on March 4. Tariffs on Chinese imports have doubled to 20%, while imports from Canada and Mexico now face a 25% tariff (with a lower 10% rate for Canadian energy). President Trump also revealed plans to impose tariffs on “external” agricultural products starting April 2, along with automobile tariffs and country-by-country reciprocal tariffs set to begin the same day.



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  • Gold soars as investors flock to safety on trade and geopolitical uncertainty

    Gold soars as investors flock to safety on trade and geopolitical uncertainty


    • XAU/USD climbs to $2,888 as markets brace for tariffs, weaker US growth
    • Gold snaps a two-day losing streak as risk-off sentiment drives safe-haven flows.
    • Trump’s tariff threats, clash with Zelenskyy fuel market uncertainty.
    • Atlanta Fed GDP Now forecast plunges to -2.8%, boosts Gold’s appeal.

    Gold price is rallying over 1% on Monday, snapping two days of losses as the Greenback gets battered due to safe-haven demand and falling United States (US) Treasury bond yields. Geopolitical tensions and tariff threats by US President Donald Trump increased demand for the safety appeal of Bullion. XAU/USD trades at $2,888 at the time of writing.

    Risk appetite deteriorated following the clash between US President Donald Trump and Ukrainian President Volodymir Zelenskyy last Friday. In the meantime, tariffs imposed on Mexico, Canada and China are expected to kick in on Tuesday.

    Data-wise, business activity in the manufacturing sector in February was mixed, with S&P Global improving, while the ISM dipped but continued to expand.

    In the meantime, the last round of US economic data pushed the Atlanta GDP Now Q1 2025 forecast model further deep into negative territory from -1.6% on February 28 to -2.8% as of writing.

    Source: GDPNow

    Therefore, traders seeking safety bought Bullion pushing prices on the way towards $2,900. The US 10-year Treasury note falls two basis points (bps) down to 4.176% levels last seen in December 2024.

    Alongside the data, St. Louis Fed President Alberto Musalem said the economic outlook is for continued solid economic growth, but recent data pose some downside risks.

    Daily digest market movers: Gold price surges amid pessimistic US economic outlook

    • US real yields, as measured by the yield in the US 10-year Treasury Inflation-Protected Securities (TIPS), tumble almost three bps to 1.808%.
    • The US ISM Manufacturing PMI for February held steady at 50.3, slightly down from 50.9 and below the 50.5 forecast, indicating a mild slowdown in business activity.
    • S&P Global Manufacturing PMI showed improvement, rising to 52.7 from 51.2, surpassing expectations of 51.6, signaling continued expansion in the sector.
    • Money markets had priced in that the Federal Reserve (Fed) would ease policy by 71 basis points (bps), up from 58 bps last week, revealed data from Prime Market Terminal.

    Source: Prime Market Terminal

    XAU/USD technical outlook: Gold price advances towards $2,900

    Gold price uptrend resumed after two days of losses that drove XAU/USD below the $2,900 figure. Nevertheless, buyers stepped in near the $2,830 mark, lifting spot prices above $2,850, which exacerbated the rally toward $2,893. If buyers achieve a daily close above $2,900, bullion could be poised to challenge the year-to-date (YTD) peak at $2,954.

    Otherwise, on further weakness, XAU/USD could aim toward the February 14 low of $2,877, followed by the February 12 swing low of $2,864. However, the broader uptrend remains intact unless XAU/USD drops below $2,800.

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • Australian Dollar declines as US Dollar attempts to recover recent losses

    Australian Dollar declines as US Dollar attempts to recover recent losses


    • The Australian Dollar remains tepid following the release of the monthly Consumer Price Index.
    • China’s International Trade Representative and Vice Minister of Commerce met with US business leaders to discuss tariffs.
    • The Trump administration considers tightening chip export controls on China.

    The Australian Dollar (AUD) remains subdued against the US Dollar (USD) for the fourth consecutive day on Wednesday. The AUD/USD pair remains under pressure after Australia’s monthly Consumer Price Index (CPI) showed a 2.5% year-over-year rise in January, matching December’s increase. This fell short of market expectations for 2.6% growth.

    China’s Commerce Ministry announced on Wednesday that the country’s International Trade Representative and Vice Minister of Commerce, Wang Shouwen, met with US business leaders. The discussions focused primarily on tariffs, though no further details were disclosed.

    A Bloomberg report early Tuesday revealed that the Trump administration plans to tighten chip export controls on China, a key trading partner of Australia. The US is reportedly considering stricter restrictions on Nvidia chip exports and may introduce additional limitations on Chinese companies such as SMIC and CXMT.

    The AUD/USD pair struggles amid growing risk sentiment after US President Donald Trump stated late Monday that broad US tariffs on imports from Canada and Mexico “will go forward” once the month-long implementation delay ends next week. Trump asserted that the US has “been taken advantage of” by foreign countries and reaffirmed his intention to impose so-called reciprocal tariffs.

    Australian Dollar depreciates amid increased risk aversion

    • The US Dollar Index (DXY), which measures the USD against six major currencies, falls to near 106.00 with 2-year and 10-year yields on US Treasury bonds declining to 4.09% and 4.28%, respectively, at the time of writing.
    • Federal Reserve Bank of Chicago President Austan Goolsbee remarked on Monday that the US central bank needs greater clarity before considering interest rate cuts.
    • The US Composite PMI fell to 50.4 in February, down from 52.7 in the previous month. In contrast, the Manufacturing PMI rose to 51.6 in February from 51.2 in January, surpassing the forecast of 51.5. Meanwhile, the Services PMI declined to 49.7 in February from 52.9 in January, falling short of the expected 53.0.
    • US Initial Jobless Claims for the week ending February 14 rose to 219,000, exceeding the expected 215,000. Meanwhile, Continuing Jobless Claims increased to 1.869 million, slightly below the forecast of 1.87 million.
    • President Trump signed a memorandum on Friday instructing the Committee on Foreign Investment in the United States (CFIUS) to limit Chinese investments in strategic sectors. Reuters cited a White House official saying that the national security memorandum seeks to encourage foreign investment while safeguarding US national security interests from potential threats posed by foreign adversaries like China.
    • China released its annual policy statement for 2025 on Sunday. The statement details strategies to advance rural reforms and promote comprehensive rural revitalization. Additionally, China’s state-supported developers are aggressively increasing land purchases at premium prices, driven by the government’s relaxation of home price restrictions to revitalize the troubled property market.
    • The People’s Bank of China (PBOC) injected CNY300 billion on Tuesday via the one-year Medium-term Lending Facility (MLF), maintaining the rate at 2%. Additionally, the PBOC injected CNY318.5 billion through seven-day reverse repos at 1.50%, consistent with the prior rate.
    • The Reserve Bank of Australia (RBA) lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% last week—the first rate cut in four years. Reserve Bank of Australia (RBA) Governor Michele Bullock acknowledged the impact of high interest rates but cautioned that it was too soon to declare victory over inflation. She also emphasized the labor market’s strength and clarified that future rate cuts are not guaranteed, despite market expectations.

    Australian Dollar moves toward 14-day EMA barrier after breaking below 0.6350

    AUD/USD trades near 0.6340 on Wednesday, breaking below the ascending channel that reflects a weakening bullish market bias. However, the 14-day Relative Strength Index (RSI) remains above 50, supporting the positive outlook is still in play.

    On the upside, the AUD/USD pair tests the immediate barrier at a nine-day Exponential Moving Average (EMA) of 0.6342. A successful break above this level could improve the short-term price momentum and support the pair in testing the key psychological resistance at 0.6400, with the next hurdle at the ascending channel’s upper boundary around 0.6450.

    The AUD/USD pair tests immediate support at the 14-day EMA of 0.6331. A decisive break below this level could cause the emergence of the bearish bias and lead the pair to test the psychological level of 0.6300.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   0.09% 0.11% 0.36% 0.04% 0.18% 0.11% 0.07%
    EUR -0.09%   0.03% 0.27% -0.06% 0.09% 0.02% -0.02%
    GBP -0.11% -0.03%   0.23% -0.08% 0.06% -0.00% -0.04%
    JPY -0.36% -0.27% -0.23%   -0.32% -0.18% -0.26% -0.28%
    CAD -0.04% 0.06% 0.08% 0.32%   0.14% 0.08% 0.05%
    AUD -0.18% -0.09% -0.06% 0.18% -0.14%   -0.05% -0.09%
    NZD -0.11% -0.02% 0.00% 0.26% -0.08% 0.05%   -0.04%
    CHF -0.07% 0.02% 0.04% 0.28% -0.05% 0.09% 0.04%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    Australian Dollar FAQs

    One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

    The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

    China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

    Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

    The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

     



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  • GBP/USD climbs as US Dollar weakens due to falling yields

    GBP/USD climbs as US Dollar weakens due to falling yields


    • Trump reiterates tariffs on Canada and Mexico, fueling trade concerns.
    • UK retailers slash investment as consumer spending weakens.
    • Markets expect BoE to hold rates at 4.50% in March, cut by Q2.

    The Pound Sterling (GBP) advanced early in the North American session, bouncing off a two-day low of 1.2605, as the Greenback weakened due to falling US Treasury yields. The GBP/USD pair trades at 1.2669, gaining 0.37%.

    Sterling bounces off 1.2605, gaining 0.37% amid sour market mood

    The market mood shifted sour amid US President Donald Trump’s threats of tariffs. On Monday, he reiterated that duties on Canadian and Mexican products would be enacted as planned. In the meantime, weaker-than-expected data from the United States (US) has begun to take its toll on the US Dollar (USD) and is also sending US Treasury bond yields plunging. The US 10-year Treasury note plummets 10 basis points (bps) to 4.30% at the time of writing.

    Data in the US revealed the S&P/Case-Shiller Home Prices for December rose by 4.5% YoY, up from November 4.3%. Ahead in the day, Fed Governor Michael Barr and Richmond Fed President Thomas Barkin would cross the wires.

    In the United Kingdom (UK), the Confederation of British Industry (CBI) revealed that British retailers plan to cut investment by the most in more than five years due to weak consumer spending and elevated prices.

    Recently, a Reuters poll revealed that 65 economists estimate the Bank of England (BoE) would keep rates unchanged at 4.50% in March and expect a cut to 4.25% in Q2.

    A day ago, Swati Dhingra, a BoE external member, said that the policy would still be restrictive even if the bank cut rates by 0.25% quarterly. Meanwhile, traders await BoE chief economist Huw Pill, who sits in the hawkish aisle of the BoE.

    Ahead of the day, traders will watch the Conference Board (CB) ‘s announcement of US Consumer Confidence.

    GBP/USD Price Forecast: Technical outlook

    GBP/USD is neutral to upward biased, exchanging hands above the 100-day Simple Moving Average (SMA) at 1.2648. A daily close above the latter could open the door to clear 1.2700, followed by the 200-day SMA at 1.2786. On the other hand, if GBP/USD struggles at 100-day SMA and drops below 1.2600, sellers could drive prices toward the February 5 peak turned support at 1.2549.

    British Pound PRICE Today

    The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.36% -0.30% -0.49% 0.06% 0.19% 0.21% -0.43%
    EUR 0.36%   0.06% -0.11% 0.42% 0.56% 0.57% -0.07%
    GBP 0.30% -0.06%   -0.19% 0.36% 0.49% 0.51% -0.14%
    JPY 0.49% 0.11% 0.19%   0.54% 0.68% 0.68% 0.05%
    CAD -0.06% -0.42% -0.36% -0.54%   0.14% 0.15% -0.49%
    AUD -0.19% -0.56% -0.49% -0.68% -0.14%   0.01% -0.62%
    NZD -0.21% -0.57% -0.51% -0.68% -0.15% -0.01%   -0.64%
    CHF 0.43% 0.07% 0.14% -0.05% 0.49% 0.62% 0.64%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

     



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  • NZD/USD advances to two-month peak, around mid-0.5700s amid weaker USD

    NZD/USD advances to two-month peak, around mid-0.5700s amid weaker USD


    • NZD/USD gains positive traction for the third straight day amid sustained USD selling.
    • The divergent Fed-RBNZ expectations warrant caution for aggressive bullish traders. 
    • Last week’s breakout above the 0.5700 mark supports prospects for additional gains.

    The NZD/USD pair attracts buyers for the third successive day on Monday and climbs to a two-month peak, around the 0.5750 area during the Asian session amid the prevalent US Dollar (USD) selling bias. 

    The global risk sentiment gets a minor lift from the latest optimism led by US President Donald Trump’s approach to ending the protracted Russia-Ukraine war. Apart from this, a delay in Trump’s reciprocal tariffs keeps the USD depressed near its lowest level since 17 touched on Friday and acts as a tailwind for the NZD/USD pair. 

    The Greenback is further undermined by Friday’s disappointing US Retail Sales, which dropped by the most in nearly two years in January. In fact, The US Census Bureau reported that Retail Sales declined by 0.9% during the reported month, worse than the decrease of 0.1% expected and the 0.7% increase (revised from 0.4%) in December. 

    That said, the growing acceptance that the Federal Reserve (Fed) would stick to its hawkish stance amid still-sticky inflation could help limit further USD losses. Apart from this, the increasing likelihood that the Reserve Bank of New Zealand (RBNZ) will deliver a third supersized rate cut later this month might cap the NZD/USD pair. 

    From a technical perspective, last week’s breakout through the 0.5700 round figure favors bullish traders and supports prospects for a further near-term appreciating move for spot prices. Hence, any corrective pullback might still be seen as a buying opportunity and remain limited ahead of the crucial RNNZ meeting on Wednesday.

    New Zealand Dollar FAQs

    The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

    The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

    Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

    The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

     



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  • US Dollar sinks to a 1.5% on the week after Retail Sales deliver the final blow for the Greenback

    US Dollar sinks to a 1.5% on the week after Retail Sales deliver the final blow for the Greenback


    • The US Dollar dives lower in the US Retail Sales aftermath and is set to close out the week at a loss. 
    • Almost a full -1 % slide in headline Retail Sales for January spells domestic issues for President Trump. 
    • The US Dollar Index (DXY) drops substantially below 107.00 and is on its way to 106.50.

    The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is devaluing substantially towards 106.50 at the time of writing, amounting to over 1.5% loss on the week since Monday. United States (US) President Donald Trump might be facing his first domestic challenge next to the egg-crisis, with now even US Retail Sales starting to turn over big time. With a whopping -0.9% decline in January headline sales and a surprise decline in Sales excluding cars and transportation by -0.4%, it becomes clear that the US consumer is clearling keeping his money aside for a rainy day. 

    The economic calendar will start to shift as of now to next week> Investors will focus on the S&P Global Purchase Managers Index (PMI) preliminary data for February due on Friday 21. Meanwhile the weekend could get interesting in case President Donald Trump releases more headlines or actions on tariffs, Ukraine or other topics.

    Daily digest market movers: Retail sales look bleak

    • Here are the most important data releases for this Friday:
      • January Import/Export came out, with the monthly Export Price Index rising to 1.3%, beating the 0.3% expected, while the Import Price Index fcame in at 0.3%, missing the estimate from 0.4% compared to resived 0.2% in December.
      • January Retail Sales shrank by 0.9% compared to the expected 0.1% contraction, a wide decline from the revised up 0.7% growth in December. Retail Sales without Cars and Transportation contracted by 0.4%, a big disappointment from the expected 0.3% growth and the revised 0.7% in the previous month.
    • Equities are taking a turn for the worse and are all sliding in red numbers across the board with both European and US indices in red numbers just before the US opening bell. 
    • The CME FedWatch tool shows a 57.4% chance that interest rates will remain unchanged at current levels in June. This suggests that the Fed would keep rates unchanged for longer to fight against persistent inflation. 
    • The US 10-year yield is trading around 4.47%, a nosedive move over just two days time from this week’s high of 4.657%.

    US Dollar Index Technical Analysis: Next leg lower

    The US Dollar Index (DXY) is done for this week. A clear weekly loss is unavoidable, and the strong resistance at 107.35 is far away. From here, the DXY is technically handed over to the mercy of the moving averages and the Relative Strength Index (RSI), which is still bearing plenty of room for more downturn. The 200-day Simple Moving Average (SMA), trading around 104.93, might be the one to look out for. 

    On the upside, that previous support at 107.35 has now turned into a firm resistance. Further up, the 55-day SMA at 107.90 must be regained before reclaiming 108.00. 

    On the downside, look for 106.52 (April 16, 2024, high), 106.34  (100-day SMA), or even 105.89 (resistance in June 2024) as better support levels. Even though the RSI shows room for more downside, the 200-day SMA at 104.93 could be a possible outcome. 

     

    US Dollar Index: Daily Chart

     

    BRICS FAQs

    The BRICS is the acronym denoting the grouping of Brazil, Russia, India, China and South Africa. The name was created by Goldman Sachs’ economist Jim O’Neill in 2001, years before the alliance between these countries was formally established, to refer to a group of developing economies that were predicted back then to lead the global economy by 2050. The bloc is seen as a counterweight to the G7, the group of developed economies formed by Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

    The BRICS is a bloc which intends to give voice to the so-called “Global South”. The alliance tends to have similar views on geopolitical and diplomatic issues, but still lacks a clear economic integration as the governing systems and cultural divergence between its members is significant. Still, it holds yearly summits at the highest level, coordinates multilateral policies and has implemented initiatives such as the creation of a joint development bank. Egypt, Ethiopia, Iran and the United Arab Emirates joined the group in January 2024.

    The five founding members of the BRICS alliance account for 32% of the global economy measured at purchasing power parity as of April 2023, according to data from the International Monetary Fund. This compares with the 30% of the G7 group.

    There has been increasing speculation about the BRICS alliance creating a currency backed by some sort of commodity like Gold. The proposal is meant to reduce the use of the dominant US Dollar in cross-border economic exchanges. In the BRICS’ 2023 summit, the group stressed the importance of encouraging the use of local currencies in international trade and financial transactions between the members of the bloc as well as their trading partners. The group also tasked finance ministers and central bank governors “to consider the issue of local currencies, payment instruments and platforms” for this purpose. Even if the bloc’s de-dollarization strategy looks clear, the creation and implementation of a new currency seems to have a long way to go.

     



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  • Dow Jones backslides amid wavering sentiment

    Dow Jones gains ground as investors shrug off new tariff threats


    • The Dow Jones rose on Thursday, testing near 44,750.
    • Equities are cautiously optimistic after PPI numbers softened inflation blow.
    • Markets continue to shrug off US President Donald Trump’s tariff threats.

    The Dow Jones Industrial Average (DJIA) found some room on the high side on Thursday, rising around 350 points and testing the 44,750 level. Equities were jarred by some steep upside revisions in Producer Price Index (PPI) inflation figures, but the overall print hit a decidedly softer tone than this week’s Consumer Price Index (CPI) inflation figures. A spike in inflation fears has subsided, and rate markets are now pricing in revisions to when the Federal Reserve (Fed) is expected to deliver its next rate cut.

    United States (US) President Donald Trump delivered his latest batch of tariff threats on Thursday. “Reciprocal tariffs” on most of the US’ closest trading partners are now on the block, alongside specific flat tariffs against Canada and Mexico, as well as punitive import taxes on things like automobiles, microchips, and pharmaceuticals. Markets are getting used to brushing off trade war threats from Donald Trump, and this represents the fourth consecutive time that the Trump administration’s threats of imposing steep import taxes on foreign goods have been announced and then put off until some point in the future.

    Core US PPI inflation clocked in at 3.6% YoY in January, well above the forecast of 3.3%. The previous period also saw a sharp revision higher to 3.7% from 3.5%, but the overall tick lower post-revision helped to assuage market fears of a resurgence of widespread inflation pressures. According to the CME’s FedWatch tool, rate markets are now pricing in better-then-even odds that the Fed will deliver at least a 25 bps rate trim in September compared to Wednesday’s forecast of December.

    Dow Jones news

    The Dow Jones saw a late bullish break across the board on Thursday, and nearly every single listed security is finding room on the green side for the day. Nvidia (NVDA) rallied 3.0% to $135 per share on stronger-than-expected microchip demand, giving the overall tech sector a leg up. Merck & Co (MRK) fell 1.35% to $84.50 per share.

    Dow Jones price forecast

    44,500 is becoming familiar territory for the Dow Jones. The mega-cap index has been churning within a choppy range between 45,000 and 44,000 since mid-January with bidders unable to find a foothold into fresh record highs, but short pressure is still unable to knock the DJIA lower.

    Price action is still leaning in favor of buyers with bids churning north of the 50-day Exponential Moving Average (EMA) near 43,850. The gap between intraday prices and the long-run 200-day EMA near 41,800 has closed in recent weeks, but the Dow Jones is still trending well above its long-term average, outpacing the 200-day EMA since November of 2023. The Dow Jones has closed higher for all but three of the last 14 consecutive months.

    Dow Jones daily chart

    Economic Indicator

    Producer Price Index ex Food & Energy (YoY)

    The Producer Price Index ex Food & energy released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Those volatile products such as food and energy are excluded in order to capture an accurate calculation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

    Read more.

     



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  • US President Trump on likely reciprocal tariffs: We’ll see

    US President Trump on likely reciprocal tariffs: We’ll see


    When asked if reciprocal tariffs are still coming on Wednesday, US President Donald Trump said ‘we’ll see’.

    Trump commented on this at an event to welcome home a hostage released by Russian President Vladimir Putin late Tuesday.

    Market reaction

    Markets remain on tenterhooks on Trump’s tariffs uncertainty, with the US Dollar Index (DXY) finding fresh demand above 108.00 so far this Wednesday.

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • UoM Consumer Sentiment Index drops as inflation fears climb

    UoM Consumer Sentiment Index drops as inflation fears climb


    According to the University of Michigan’s (UoM) Consumer Sentiment Index, American consumers are beginning to grow increasingly concerned about United States (US) President Donald Trump’s approach to economic policy and international trade. Trade war fears have knocked back consumer confidence, and consumer inflation expectations have also climbed.

    The Preliminary UoM Sentiment Index showed that aggregate consumer outlook contracted in January, falling to 67.8 compared to investors’ median forecasts of a climb to 71.8 from December’s 71.1. It’s the lowest reading in the UoM’s main sentiment index since July of last year, and the average US consumer may not be in as great shape or feeling as confident as Wall Street might have originally thought.

    UoM Consumer Inflation Expectations also rose across the board, climbing to 3.3% over the next 5 years and jumping to 4.3% over the next 12 months as multiple rounds of tariff threats take hold of the economy at the consumer level.



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  • Can’t ignore threats to supply chains like tariffs

    Can’t ignore threats to supply chains like tariffs


    Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee noted on Wednesday that it is difficult for central banks to generally estimate the fallout of things like tariffs, and could complicate the Fed’s ability to accomplish its task of bringing inflation down to 2%.

    Key highlights

    If inflation rises or progress stalls, US central bank will need to figure out if it’s from overheating or tariffs.

    Inflation has come down and is approaching Fed’s 2% goal.

    US has a strong economy and plausibly full employment.

    Distinguishing the cause of any inflation will be critical for deciding when or even if the Fed should act.

    COVID-19 pandemic experience shows supply chain disruptions can have a material impact on inflation.

    Ignoring potential consequences of new threats to supply chains, like tariffs, would be a mistake.

    Opinions differ widely on how much tariffs would get passed into prices, suppliers may have to eat the cost.

    Tariffs this time may be broader and higher than in 2018; impact could be larger and longer-lasting.



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  • USD/CAD slumps below 1.4300 as CAD capitalizes on Trump’s suspension of tariff orders

    USD/CAD slumps below 1.4300 as CAD capitalizes on Trump’s suspension of tariff orders


    • USD/CAD falls sharply below 1.4300 as the Canadian Dollar continues to advance on US President Trump’s decision to postpone tariffs on Canada.
    • BofA expects US tariff threats to China will continue to persist until a new USMCA deal gets negotiated.
    • Investors await the US ISM Services PMI and the ADP Employment data for December.

    The USD/CAD pair extends its losing streak below the key level of 1.4300 in Wednesday’s European session. The Loonie pair weakens as the Canadian Dollar (CAD) continues to gain, given that United States (US) President Donald Trump delayed his orders to impose 25% tariffs on Canada for 30 days. President Trump suspended orders after Canada agreed for criminal enforcement at borders to stop the flow of drugs and undocumented immigrants into the US.

    A suspension in tariff orders on Canada has forced market experts to revise the Canadian economic outlook, who were accounting for the impact of levies. While the Canadian Dollar has surged this week against the US Dollar due to a relief rally from Trump’s decision to put the tariff plan on hold, analysts at Bank of America (BofA) expect the rally is unlikely to sustain as US tariffs threats and headlines on Canada to persist until a “new United States-Mexico-Canada Agreement (USMCA) deal is negotiated”.

    This week, investors will focus on the Canadian employment data for January, which will be released on Friday. The employment report is expected to show that the economy added 25K workers, significantly fewer than 90.9K addition seen in December. The Unemployment Rate is estimated to have accelerated to 6.8% from the former release of 6.7%.

    The labor market data will influence market expectations for the Bank of Canada’s (BoC) monetary policy outlook. Currently, traders expect the BoC to cut interest rates by 25 basis points (bps) to 2.75% in the March meeting.

    Meanwhile, the US Dollar (USD) underperforms its major peers as the market sentiment turns cheerful amid expectations that Trump’s tariff agenda would be less fearful than expected.

    On the economic front, investors will focus on the US ADP Employment Change and the ISM Services PMI data for January, which will be published in Wednesday’s North American session.

    Canadian Dollar FAQs

    The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

    The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     



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  • EUR/USD recovers strongly as Trump defers tariff plans for Canada and Mexico

    EUR/USD recovers strongly as Trump defers tariff plans for Canada and Mexico


    • EUR/USD rebounds sharply to near 1.0350 as US President Trump postpones his orders of tariffs on Canada and Mexico for 30 days.
    • Trump’s intentions to impose tariffs on China remain intact.
    • The ECB is expected to cut interest rates three times more this year.

    EUR/USD bounces back from the intraday low of 1.0270 and rebounds to near 1.0350 in Tuesday’s North American session. The major currency pair finds buyers’ demand as United States (US) President Donald Trump’s decision to postpone tariffs on Canada and Mexico has diminished the safe-haven appeal of the US Dollar (USD).

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surrenders its intraday gains and trades at 108.44 at the time of writing, right on track to Monday’s low of 108.40.

    US President Trump suspended tariff imposition on his North American partners after they agreed to cooperate to stop the flow of fentanyl. On the other hand, the president’s proposal of imposing 10% tariffs on China is still on the table, and moreover, he has even proposed to go further. “China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” Trump said.

    Meanwhile, China has delivered a swift response to Trump’s tariffs with higher levies of 15% on Coal and Liquified Natural Gas (LNG), and 10% for Crude Oil, farm equipment, and some autos.

    Such a scenario indicates that the trade war will not go global and will remain majorly between the US and China, which has weighed on demand for safe-haven assets.

    On the economic front, the US Dollar will be guided by a slew of labor market-related economic indicators this week, such as JOLTS Job Openings, ADP Employment Change and Nonfarm Payrolls (NFP) data, and the US ISM Services PMI figures.

    The labor market data will influence market speculation for the Federal Reserve’s (Fed) monetary policy outlook for the entire year. Currently, the Fed is in a waiting mode in interest rates until it sees any “real progress in inflation or at least some weakness in the labor market”.

    US Dollar PRICE Today

    The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.49% -0.24% 0.36% -1.25% -0.53% -0.40% -0.47%
    EUR 0.49%   0.25% 0.85% -0.77% -0.04% 0.09% 0.01%
    GBP 0.24% -0.25%   0.58% -1.02% -0.29% -0.16% -0.23%
    JPY -0.36% -0.85% -0.58%   -1.59% -0.87% -0.75% -0.81%
    CAD 1.25% 0.77% 1.02% 1.59%   0.73% 0.86% 0.81%
    AUD 0.53% 0.04% 0.29% 0.87% -0.73%   0.13% 0.09%
    NZD 0.40% -0.09% 0.16% 0.75% -0.86% -0.13%   -0.07%
    CHF 0.47% -0.01% 0.23% 0.81% -0.81% -0.09% 0.07%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

    Daily digest market movers: EUR/USD rebounds at USD’s expense

    • The recovery move in the EUR/USD pair has come from some weakness in the US Dollar, while the outlook for the Euro (EUR) continues to remain uncertain as investors expect the Eurozone would be the next to face lethal tariff threats by US President Trump. Over the weekend, Trump said that he would definitely impose tariffs on the Eurozone after accusing the old continent of not buying enough US cars and farm products. He added that the EU takes “almost nothing and we take everything from them”.
    • In response to Trump’s tariff threats, French President Emmanuel Macron said that the European Union (EU) would retaliate if its interests were targeted. “If our commercial interests are attacked, Europe, as a true power, will have to make itself respected and therefore react,” Macron said, The Guardian reported.
    • Market experts believe that trade and investment between the old continent and the US are one of the largest globally, and a trade war between them would accelerate inflation and lead to an economic disruption. Higher Eurozone inflation would also create troubles for the European Central Bank (ECB), which is on the policy expansion path amid confidence that price pressures will sustainably return to the central bank’s target of 2% this year. 
    • On Tuesday, ECB policymaker and French Central Bank Governor François Villeroy de Galhau said, “There probably will be more ECB rate cuts as we are nearing to 2% inflation target.”
    • The ECB reduced its Deposit Facility rate by 25 basis points (bps) to 2.75% and guided that the monetary policy path is clear. Traders are confident that the ECB will deliver three more interest rate cuts by the summer.

    Technical Analysis: EUR/USD aims to return above 20-day EMA

    EUR/USD recovers from its three-week low of 1.0210 to trade near 1.0350 on Tuesday, but is still trading below the 20-day and 50-day Exponential Moving Averages (EMAs) around 1.0379 and 1.0439, respectively, suggesting a bearish trend.

    The 14-day Relative Strength Index (RSI) holds above 40.00. A bearish momentum could trigger if the RSI breaks below that level.

    Looking down, the January 13 low of 1.0177 and the round-level support of 1.0100 will act as major support zones for the pair. Conversely, the psychological resistance of 1.0500 will be the key barrier for the Euro bulls.

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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