Following some bearish action on Monday, the DXY index has consolidated around the 107 level.
News that fund manager Scott Bessent was nominated as the US Treasury Secretary led to the US dollar dipping and stocks rising. Bessent is known to take a more cautious approach, which would likely lead to slower trade restriction execution.
Trump recently stated that he would impose a 25% tax on all products entering the country from Mexico and Canada, with an additional 10% tariff on goods from China.
Today the Fed will release the minutes of the November policy meeting, where markets will look for clues regarding policy outlook alongside the vote split.
EURUSD remains below 1.05 as US tariff talks dampen the market sentiment and support the US dollar.
The Euro is facing pressure from many ongoing risks, including US tariffs, the war in Ukraine, and political uncertainty in France and Germany. Joined with weaker economic data, there is mounting pressure for a more aggressive 50bps interest rate cut in December by the ECB.
Further depreciation of the pair is expected due to the increased market pessimism for the region’s economic outlook. Stronger US data has increased expectations that the Fed will follow a more gradual approach to further rate cuts.
The past few days have seen cable in the 1.25 and 1.26 range as market makers patiently wait for data indicating BoE rate cuts next month.
US data will be the main influence for the pair this week, with FOMC meeting minutes coming out later today and US PCE data out on Wednesday. This key data will be a guiding influence for near-term USD pricing and a possible move below the 1.25 psychological level.
World News
After President-elect Donald Trump shared the news that he would enact 25% tariffs on all products from Mexico and Canada, both currencies fell, with the peso by 1% and the loonie by 1.7%.
Trump also shared that he would impose an extra 10% tariffs on goods from China. This current news is creating risk sentiment for any currency associated with US trade, and making the US dollar a safe haven.
This news comes before Trump is even in power, and there’s a high likelihood that more tariffs and restrictions will be announced. As one economist said in a recent report, “Buckle up”.
