HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

Risk sentiment suffers as Trump makes the first move


3 February 2025 Written by Raffi Boyadjian XM Investment Analyst Raffi Boyadjian

Trump makes the first move

US President Trump has signaled the start of “Trade War 2.0” with the imposition of a 25% tariff on both Mexican and Canadian imports, but only a 10% tariff on Canadian energy products, and an extra 10% tariff on goods imported from China. These trade restrictions will commence on February 4.

Trump’s decision sends a clear message that he is not bluffing and is determined to implement the “America First” agenda that earned him a second presidential term. He could have started with a 10% tariff on America’s two neighboring countries and gradually increase this level, but his “shock and awe” plan does not support a soft approach.

However, Trump has opened the door to the withdrawal of these tariffs on Canadian products, if Canada addresses the fentanyl crisis and illegal immigration. The US President is scheduled to speak today with both Canadian and Mexican leaders, with the chances of a U-turn appearing to be very slim at this stage. Such an outcome, though, would potentially reverse today’s negative market sentiment.

Risk sentiment suffers

Friday’s rumours about the postponement of these tariffs seem to have worked against the markets, as the announcement of these trade restrictions has resulted in severely negative market sentiment today. An acute risk-off reaction is taking place, with equity indices gapping lower and maintaining the negative momentum from last week. The cryptocurrency market is suffering the most at this point, with Ethereum leading the correction, and Bitcoin once again outperforming the pack.

Meanwhile, the dollar is showing its strength and recording solid gains across the board, with the exception of the yen that tends to benefit from safe haven flows. Euro/dollar is hovering around the 1.0200 level, as some market participants remain convinced that this pair will hit parity soon.

Markets try to predict the Fed’s likely reaction

The gradual digestion of the tariff news could temper the markets’ nerves, but, unless Trump softens his tone, risk appetite will remain weak. Some might argue that the current stock market rout suits Trump’s plan for interest rates. He talked about the need for lower rates at the recent World Economic Forum in Davos, and he was also quite displeased following last week’s Fed meeting.

In the meantime, economists are busy recalculating the impacts of these trade tariffs. Most agree that there will likely be a considerable impact on both Canada’s and Mexico’s growth rates, but a negligible one on the US economy. However, a debate is brewing about the size of the impact on US inflation.

Therefore, the Fed might soon find itself stuck between a rock and a hard place. On the one hand, tariffs are expected to push inflation higher, complicating the economic outlook, and, on the other, a protracted correction could increase pressure on the Fed to support the markets. The famous “Fed put” could play into Trump’s hands, as the Fed might eventually be forced to loosen its monetary policy stance much earlier than currently priced in.

Data and Fed speakers in focus this week

While markets digest the latest developments, the week is crammed with key data releases and Fed speakers. Today, the focus will be on the January Eurozone preliminary CPI print and the US ISM manufacturing survey. Meanwhile, Fed members Bostic and Musalem, who tend to be slightly more hawkish than Chairman Powell, will be on the wires later today.

Finally, while gold is trying to recover from a quick $40 dip, oil prices are edging higher towards the $75 level, benefiting from Trump’s announcements. An OPEC+ meeting is scheduled for today and, provided this is not postponed amidst the worsening market conditions, it would be interesting to check if Saudi Arabia’s stance has changed after the recent call between Trump and Mohammed bin Salman.

By XM.com

#source


RELATED

A quieter market session could favour the dollar

Geopolitics takes centre stage as US markets enjoy a bank holiday. Both gold and US dollar try to recoup Friday's losses. Major currencies extend monthly gains versus the dollar. Yen benefits from strong GDP.

17 Feb 2025

US CPI and Trump could upset the fragile risk appetite

Dollar losses mount as markets prepare for US CPI. An upside CPI surprise to spice up Powell's testimony. Trump could open a new round of tariffs. Gold drops from a new record high.

12 Feb 2025

Risk appetite tested as tariffs rhetoric intensifies

Trump opens a new round of tariffs, the EU is next. Mixed US data keep the door shut to Fed rate cut. Dollar benefits, risk appetite remains fragile. Gold at a new record high, oil tries to find its footing.

10 Feb 2025

Nonfarm payrolls take center stage

The US dollar rebounded somewhat against most of its major peers on Thursday, extending its losses only against the turbocharged yen, which continued to gain on the hawkish rhetoric by BoJ officials.

7 Feb 2025

Dollar slips on receding trade war risk

The dollar fell against all its major peers yesterday, extending its latest correction triggered by Trump's decision to delay tariffs on Mexico and Canada. Today, the greenback is reclaiming some of the lost ground.

6 Feb 2025

Market sentiment remains fragile as Trump takes aim at Iran

Amidst these geopolitical developments and with markets on their toes regarding additional comments from Trump about trade tariffs, a crammed data calendar might force market participants to refocus on the real economy.

5 Feb 2025

Trump delays tariffs on Mexico and Canada, China retaliates

Dollar pulls back after Mexico and Canada agree with Trump. But rebounds after China announced retaliatory tariffs. Aussie and Kiwi are today's main losers.

4 Feb 2025

Tech earnings and the Fed to test the fragile market sentiment

Risk appetite appears to be on the rise since Monday’s disastrous sessions in equity markets, as US technology stocks staged a solid recovery yesterday.

29 Jan 2025

Trumpэs tactics continue to weigh on market sentiment

A new week begins with the markets finding themselves jumping from the frying pan into the fire, as President Trump is starting to implement his aggressive trade strategy.

27 Jan 2025

Trump promises tariffs on Canada and Mexico

Dollar slips on reports that Trump will not impose tariffs on day one. But rebounds after Trump threatens Canada and Mexico. Stock futures slip but immediately recover.

21 Jan 2025

Improved risk appetite ahead of Trump's ceremony

Markets are in a relatively good mood; Trump's second presidency will commence today; Dollar takes losses, while the crypto market is thriving; Yen tries to benefit from BoJ expectations; oil struggles.

20 Jan 2025

US data to test the improved risk appetite

Mixed US CPI report results in a risk-on market reaction; Both stocks and bitcoin record sizeable gains; Today's US data prints could upset markets again; Yen benefits from BoJ rate hike talk; pound suffering lingers.

16 Jan 2025

Markets threatened by dollar's dominance

Strong US labour market data dent Fed rate cut chances; The 10-year US yield climbs as dollar's gains persist; The pound is probably reliving the September 2022 events.

13 Jan 2025

Strong US data could further assert the dollar's dominance

After a rare US bank holiday yesterday, markets are preparing for a plethora of US labour market data.

10 Jan 2025

Risk sentiment remains weak ahead of key US data

Euro/dollar is edging lower again today, as the dollar is trying to recover from this week’s underperformance, while dollar/yen is hovering just below the 158 level.

8 Jan 2025

Market uncertainty lingers

Markets are gradually preparing for an eventful week; Trump's rhetoric overshadows US data prints; Dollar maintains this week's gains, euro/dollar closer to parity; Gold and bitcoin rally for opposite reasons.

3 Jan 2025

Markets crave another quiet session

Markets remain in holiday mode; Dollar maintains most of last week's gains; US debt ceiling debate resurfaces, hits risk-sentiment; Yen and bitcoin suffering continues.

30 Dec 2024

Interest rate bets in focus amid holiday-shortened week

The US dollar rebounded against most of its peers on Monday and remained on the front foot on Tuesday, as the lack of major economic releases due to a shortened Christmas week may allow monetary policy expectations to remain the main driver in the FX arena.

24 Dec 2024

Fragile market appetite ahead of the Fed meeting

US retail sales on the agenda today, but Fed rate cut looks secure; Dow Jones experiences its longest negative daily streak since 2018; Pound gains following strong labour market data; Government crisis in Canada; Loonie could get a respite from the CPI data.

17 Dec 2024

Dollar fails to benefit from muted risk-off sentiment

Risk appetite took a hit yesterday, as US stock indices and the cryptocurrency market suffered losses. The S&P 500 index lost around 40 points and the Nasdaq 100 index led the correction.

10 Dec 2024


Editors' Picks

Regulation Matters: Why a Licensed Forex Broker Should Be Your Top Priority

Choosing a regulated broker is not just a matter of preference; it is a necessity for safeguarding your investments and ensuring that you trade in a fair and secure environment.

Automating Success: The Benefits and Risks of Using Forex Expert Advisors

This article explores the benefits and risks associated with using Forex Expert Advisors, providing insights into how traders can maximize their potential while mitigating potential downsides.

Best Forex Brokers 2024

By prioritizing factors such as overall rating, regulatory compliance, trading conditions and platform reliability traders can make an informed decision that aligns with their trading needs and aspirations, setting the stage for a potentially prosperous trading journey.

The Top Forex Expert Advisors 2024: Performance, Strategy, and Reliability Review

An annual roundup reviewing the most successful Forex Expert Advisors (EAs) based on their performance, strategies employed, reliability, and user feedback. This piece would provide insights into which EAs have been market leaders and why.

The Evolution of Forex Expert Advisors: Navigating the Path of Technological Revolution

The concept of automated trading has been around for decades, but the accessibility and sophistication of Forex EAs have seen significant advancements in the past few years. Initially, automated trading systems were rudimentary, focusing on simple indicators like moving averages.

Best Forex EAs 2024 – Forex Expert Advisors Rating

Expert Advisors (EAs) Rating features high-quality Free and paid Forex EA most popular on the market today.

FP Markets information and reviews
FP Markets
81%
RoboForex information and reviews
RoboForex
77%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.