Dollar Declines as Trump Pauses Tariffs on Canada, Mexico
GBP
GBP/USD has climbed to 1.2427 (interbank), while GBP/EUR is trading at 1.2013 (interbank).
The latest S&P Global Manufacturing PMI for the UK remained in contraction territory for the fourth consecutive month, registering 48.3 in January, up from 47.0 in December, signalling a slight easing in the downturn.
Investors are now turning their attention to the Bank of England’s interest rate decision on Thursday, where a 25-basis point rate cut to 4.5% is widely anticipated.
Meanwhile, uncertainty continues regarding Donald Trump’s proposed trade tariffs, though his latest comments suggest the UK may escape higher duties despite concerns over trade imbalances. Sterling has rebounded against the dollar after the US delayed tariff plans for Canada, opening the door to potential trade negotiations.
No major UK economic data releases are scheduled today.
No significant events are scheduled for today.
EUR
EUR/USD has regained some ground after Monday’s 1.1% drop, currently trading at 1.0340 (interbank).
Yesterday’s Eurozone inflation data showed consumer prices rose 2.5% in January, up from 2.4% in December, with core inflation steady at 2.7%, slightly above expectations, though monthly declines indicate ongoing economic weakness.
Germany’s factory output showed some improvement, with PMI climbing to 45.0, the highest reading since May 2023, though the sector remains in contraction.
The Euro remains pressured as markets anticipate further ECB policy easing after last week’s 25bps rate cut, which lowered the Deposit Facility Rate to 2.75% and the Main Refinancing Rate to 2.9%, in line with expectations.
With no major economic reports due today, sentiment remains cautious around the Euro’s outlook.
No significant events are scheduled for today.
USD
The Dollar Index, which tracks the US dollar against a basket of six major currencies, has retreated to 108.43, following Monday’s fresh two-week high of 109.88.
The greenback weakened after Donald Trump’s decision to delay trade tariffs on Canada and Mexico, easing market concerns and lifting risk sentiment. However, Trump remains committed to a 10% tariff on Chinese imports, with further increases possible, which could weigh on investor confidence.
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In response, China has announced retaliatory tariffs on US goods, imposing 15% duties on coal and liquefied natural gas (LNG), and 10% on crude oil, agricultural equipment, and some automobiles.
Additionally, Trump has agreed to pause new tariffs on Mexico and Canada for 30 days, conditional on border security and crime-related negotiations with both countries.
The focus now turns to Friday’s Nonfarm Payrolls (NFP) data for January, a key release that will provide further direction for the US dollar
Today’s events (GMT):
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18:15 - FOMC Member Daly Speaks? ????? ??????????????? ??????????????? ???????????????
CAD
USD/CAD is currently trading at 1.4430 (interbank), recovering from multi-year lows following an agreement between Canada and the US to halt new trade tariffs.
Yesterday, Trump announced a temporary pause on planned 25% tariffs on imports from Canada and Mexico for one month, providing relief for the Canadian dollar after USD/CAD spiked to 1.4792, its highest level since April 2003.
Despite this recovery, the risk of tariffs remains, with a new deadline set for early next month to evaluate progress in trade negotiations.
The Bank of Canada has already flagged US tariff threats as a drag on business and consumer confidence, potentially weighing on future economic growth.
Meanwhile, oil prices have slipped, with Brent crude down to $75.47 a barrel, and West Texas Intermediate (WTI) at $71.70 a barrel.
No significant events are scheduled for today.
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