Trump made the headlines on Friday after Reuters reported that he was planning to issue reciprocal tariffs before the end of the week, although there was no mention of which countries were targeted. Treasury yields rose on inflation concerns and markets reduced the odds of seeing a second rate cut by the Federal Reserve (Fed) this year. USD gained across the board as well.
Earlier in the day, the US job market presented a mixed picture - while job additions fell short at 143,000 compared to the anticipated 175,000, revisions added 100,000 more jobs over the past two months, and the unemployment rate dipped to 4% from 4.1%.
Economists at the European Central Bank (ECB) confirmed that they see the neutral rate of interest (where rate cuts will end) between 1.75% and 2.25%, which is roughly in line with market pricing of 1.75% for year end rates.
*Daily move - against G10 rates at 7:30am, 10.02.25
** Indicative rates - interbank rates at 7:30am, 10.02.25
This morning, the USD continues to be supported following Trump's announcement of 25% tariffs on steel and aluminium which once again puts Canada, Mexico, and China in the frame alongside Brazil, South Korea and Germany. The timing and nature of these tariffs are yet to be announced but already we are seeing the CAD, MXN and EUR under pressure.
This week, the EUR might find a boost if the proposed Russia-Ukraine ceasefire takes shape.
Looking ahead to this week, on Wednesday we have January’s CPI and PPI numbers to provide a gauge of inflation in the US. Both headline and core CPI (YoY) are expected to stay the same as December's reading. The retail sales report is expected to show a slowdown in sales in January compared to December.
Following on from the Bank of England's downgrade of Gross Domestic Product (GDP) for this year, on Thursday we are expecting the GDP report to show the economy contracted by 0.1% in the last quarter of the year.
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