Markets were relatively flat by the end of day despite seeing some USD weakness earlier in the day, which saw EURUSD hit year-to-date highs for 2025. Market perception when it comes to USD is that we are now in the calm before the storm, particularly given the expectation that tariffs are merely being delayed for the time being. Thus, there is room for the USD correction to continue over the coming weeks given the outperformance of the currency over the last 3-4 months.
The next big dates for markets to focus on will be 1st February, supposedly when Trump will hit Canada, Mexico and China with tariffs, and 1st April, which is the deadline for the US Commerce Department to conduct a review of the US trade deficits.
*Daily move - against G10 rates at 7:30am, 23.01.25
** Indicative rates - interbank rates at 7:30am, 23.01.25
Quiet day ahead with just the jobless claims numbers due out in the afternoon. As mentioned yesterday, focus remains on USD and whether its tactical correction continues, whilst markets breathe a sigh of relief that tariffs are not imminent. But with the US economy faring far better than its peers, favourable rate differentials and the view that Trump policies will be USD-positive, the longer-term outlook does currently favour the currency.
For this week, markets await tomorrow's PMI numbers to gauge preliminary activity in January and the relative strengths of the US, EU, and UK economy.
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