The U.S. dollar remained steady on Monday following new tariff threats from President Donald Trump, which impacted investor sentiment, weighed on commodity markets, and pressured the euro, Australian dollar, and Canadian dollar.
Trump announced that he would impose a 25% tariff on all U.S. steel and aluminum imports, along with reciprocal tariffs on Tuesday or Wednesday matching the tariff rates imposed by other countries.
These remarks fueled fears of a global trade war, especially as China’s retaliatory tariffs on U.S. goods took effect on Monday. However, market movements remained limited, with investors cautious about taking major positions.
Last week, Trump initiated a trade war by imposing tariffs on Mexico and Canada, then temporarily suspending them, while continuing to target Chinese goods. Analysts suggest Beijing's measured response may indicate room for negotiation.
Vasu Menon, managing director of investment strategy at OCBC Bank, stated:اضافة اعلان
"It’s unclear whether these new tariffs on steel and aluminum are just a negotiation tactic that Trump may later withdraw."
He added:
"Markets will remain tense and volatile as the trade war escalates. Investors should be cautious and prepared for further market disruptions."
Currency Market Reactions
- Euro fell 0.1% to $1.0317, nearing its two-year low of $1.0125 from last week, amid concerns over Trump’s tariffs on Europe.
- Australian dollar dropped 0.1% to $0.62705, hovering near its five-year low.
- Canadian dollar declined by 0.3%, as Canada remains the largest aluminum supplier to the U.S.
Tony Sycamore, a market analyst at IG, noted:
"Despite today's announcement, some trade decisions have greater impacts than others. Tariff-related headlines have become part of the ‘new normal’ under Trump’s presidency."
Upcoming Market Focus
Beyond Trump's tariff threats, investors will focus on:
- U.S. inflation data on Wednesday.
- Federal Reserve Chairman Jerome Powell's testimony before Congress on Tuesday and Wednesday, where trade tariffs will be a key topic.
Analysts warn that tariffs could lead to higher inflation, potentially prompting the Federal Reserve to keep interest rates high. Market projections now suggest a 36 basis-point rate cut this year, down from 42 basis points after last Friday’s strong U.S. jobs report.
Analysts at Macquarie Bank stated:
"January’s jobs report paints a positive picture of the labor market and economic growth, but heightened uncertainty has led us to adjust our Fed policy outlook."
Their revised forecast now expects no rate cuts in 2025, keeping the Fed's target range at 4.25%-4.5%, versus their earlier projection of a 25 basis-point cut in March or May.
Dollar & Other Currencies
- U.S. Dollar Index remained steady at 108.23.
- New Zealand dollar held firm at $0.5656, staying near its two-year low.
- Japanese yen weakened over 0.3% to 151.93 per dollar, though still close to its one-month high reached on Friday amid expectations that the Bank of Japan could raise interest rates this year.
- Chinese yuan hit a three-week low at 7.3082 per dollar, surpassing the 7.3 level for the first time since January 20, amid rising trade tensions.
