Currency news / January 31, 2025

Countdown to Trump Tariffs

3 min read Thanim Islam

Thanim IslamJanuary 31, 2025

Market snapshot:

All eyes on whether tariffs imposed on Canada and Mexico
ECB cut interest rates by 25bps

Yesterday's currency recap

USD was the biggest loser yesterday with markets reducing their long position on the currency, with yesterday's European Central Bank (ECB) meeting perceived as being less dovish by traders. The ECB cut rates by 25bps (in line with expectations), with a unanimous decision amongst policy makers suggesting the consensus is that inflation will return to target. There were no changes to forward guidance as the ECB sticks to its meeting-by-meeting approach. JPY was the biggest climber of the day following Deputy Governor Ryozo Himino’s comments from earlier in the day that the Bank of Japan (BoJ) will continue to hike interest rates if its economic and inflation outlooks are realised.

Fourth quarter GDP in the US missed expectations of 2.6%, coming in at 2.3% and the core PCE inflation over that same period rose in line to 2.5% from 2.2%.

Today's GBP rates

Currency pair	Daily move*	Indicative rate**
GBPAUD	0.06%	1.9992
GBPCAD	0.04%	1.7959
GBPCHF	0.20%	1.1312
GBPDKK	0.04%	8.9191
GBPEUR	0.04%	1.1953
GBPJPY	-0.47%	192.3130
GBPNOK	0.01%	14.0584
GBPNZD	0.15%	2.2039
GBPSEK	0.14%	13.7176
GBPUSD	0.10%	1.2464

*Daily move - against G10rates at 7:30am, 31.01.25
** Indicative rates - interbank rates at 7:30am, 31.01.25

Key data points

Currency	Event	Period	Consensus	Previous
EUR	German CPI MoM	Jan	0.10%	0.50%
EUR	German CPI YoY	Jan	2.60%	2.60%
USD	Personal Spending	Dec	0.50%	0.40%
USD	Personal Income	Dec	0.40%	0.30%
USD	Core PCE Index MoM	Dec	0.20%	0.10%
USD	Core PCE Index YoY	Dec	2.80%	2.80%

What we think

On the data front, French inflation numbers for January came in lower than expected this morning, with Germany's numbers released later today. Any signs of 'sticky' inflation and we could see markets reduce the number of rate cuts expected by the ECB this year, which would be EUR positive. The same can be said with the core CPE number from the US but given yesterday’s Q4 imprint was in line with expectations, we are not expecting much deviation in December's number

For USD volatility, focus will primarily be on whether the Trump administration imposes those 25% tariffs on Canada and Mexico that were mentioned last week. Donald Tump reiterated his plans for tariffs overnight, resulting in a weaker CAD and MXN this morning. Technically, Trump said he will look to deliver these tariffs by the 1st February 2025 but markets will be watching closely for any further tariff headlines. Next Monday's open will be very interesting! Have a good weekend, all.

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