Markets in general and high beta currencies in particular breathed a sigh of relief yesterday when the WSJ reported that President Trump would not impose aggressive tariffs immediately upon returning to the White House. Rather, the incoming administration will take a more considered approach to tariff action after reviewing existing agreements, says Shaun Osborne, chief currency strategist at Scotiabank.
USD reverses part of Monday’s decline
“The US dollar (USD) fell, but losses were partially reversed late yesterday after Trump pulled out the threat of a 25% tariff on Canada and Mexico (and additional tariffs on China) starting February 1, citing problems (drugs, illegal immigrants). The USD is trading higher in the session so far today, with the CAD and MXN expected to underperform, but the DXY remains well below levels. opening on Monday.”
“Trade tariffs are still coming in some form, but the apparent capriciousness of policymaking means that anticipating the president’s decisions becomes increasingly difficult. That’s probably deliberate, but greater uncertainty means greater volatility for markets “Overall, JPY and Asian currencies are the best performers of the session, limiting USD losses to around –0.2/0.3%.”
“Assuming the threat of a 25% tariff is just that (although very damaging to Canada and Mexico, the negative repercussions for the US economy would also be significant), a more considered approach to trade tariffs hinted at in the WSJ report of “Yesterday could still be a drag on the USD’s near-term prospects, given sentiment and positioning that was geared toward (aggressive) ‘day one tariffs.'”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
