Global Currencies vs. Trump’s Tariffs: Trade War Tensions Escalate

Global financial markets remained volatile this week as renewed trade tensions, shifting interest rate expectations, and inflation concerns shaped currency movements. From the USD stabilizing amid policy uncertainty to the INR hitting a record low, here are the key updates you need to know.

USD: Dollar Index Stabilizes

• The US Dollar Index (DXY) held at 107.8 after the Fed maintained interest rates, noting inflation remains “somewhat elevated.”
• Fed Chair Powell signaled possible rate cuts later in the year, though market expectations remain mixed
• US Q4 GDP growth slowed to 2.3%, while initial jobless claims fell to 207K, better than expected
• Uncertainty over Trump’s proposed tariffs on Mexico and Canada added pressure on market sentiment

JPY: Japanese Yen Drops

• The yen weakened beyond 155.5 per USD, marking its second consecutive decline
• Japan remains exposed to global trade disruptions, with the US imposing 25% tariffs on Mexico/Canada and 10% on China
• The BoJ signaled potential future rate hikes, depending on inflation and economic trends

EUR: Euro Hits Three-Week Low

• The euro slumped to $1.02, its lowest in three weeks, pressured by a strong USD and Trump’s new tariff policies
• The ECB cut rates by 25bps last week and may implement three more cuts this year
• The EUR/USD pair fell 1.14% to 1.0247, with analysts predicting 1.03 by quarter-end and 1.01 in 12 months

GBP: British Pound Falls

• GBP/USD dropped to $1.22, near a two-week low, following concerns over Trump’s sweeping tariffs
• The BoE is expected to cut rates by 25bps in February, but strong data could delay further cuts
• Analysts project GBP/USD at 1.23 by the quarter-end and 1.21 in 12 months

INR: Indian Rupee Hits Record Low

• INR depreciated past 87 per USD for the first time, pressured by foreign investor outflows
• The rupee weakened further due to concerns over economic slowdown and high crude oil prices
• USD/INR rose 0.47% to 87.1050, with projections at 86.87 by quarter-end and 87.39 in 12 months

PHP: Philippine Peso Nears Record Low

• The peso traded near 58.42/USD, approaching December lows, after a 2.4% drop since August
• Goldman Sachs, Barclays, and Fitch Solutions forecast the peso to hit 60/USD by midyear
• The BSP has cut rates by 75bps so far and is expected to continue easing at a slower pace

XAU: Gold Falls

• Gold declined amid a rising dollar, despite increased trade war fears boosting safe-haven demand
• Tariffs on Canada, Mexico, and China sparked retaliation concerns, impacting inflation expectations

WTI: Crude Oil Climbs

• WTI crude rebounded after Trump imposed tariffs on Canada, Mexico, and China, escalating trade tensions.
• Potential supply disruptions and retaliatory measures could drive further price volatility.

With trade tensions rising, currency markets remain in flux as central banks weigh rate decisions. Stay informed as these developments continue to shape the financial landscape.

For expert insights and personalized guidance, call 600522265 today!

The Week Ahead - Economic Calendar

Al Fardan Exchange is licensed by the Central Bank of the UAE.

This weekly market update is published every Monday. If delayed due to unforeseen circumstances, it will be posted on the next working day.

The information provided in this update is for informational purposes only and should not be construed as specific financial, investment, or trading advice. It is not intended to serve as a recommendation or endorsement for any specific product, service, or investment strategy.

Foreign currency exchange rates and market conditions are subject to constant fluctuations, and changes in political, economic, or regulatory events may significantly affect these rates. Past performance is not indicative of future results, and diversification does not ensure a profit or protect against loss.

While every effort is made to ensure the accuracy of the information presented, Al Fardan Exchange does not guarantee its completeness, reliability, or timeliness. All content is subject to change without notice.

Al Fardan Exchange shall not be held liable for any decisions made based on the information contained in this update. Readers are advised to consult with a qualified financial advisor or expert before making any financial or investment decisions.

For further inquiries or personalized guidance, please call 600522265 to speak to an expert.

Author Soumoyjit Khan & Charan Jogi