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FOREX: Tariff Targets Suffer as Trump Eyes February Levies on Mexico and Canada

FOREX
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  • Dollar strength pervades early Tuesday, rallying against all others in G10. Dollar strength comes off the back of Trump's clarification having entered office that his administration will be targeting 25% tariffs on Mexico and Canada as soon as February, reversing the slightly easier start to his Presidency that markets enjoyed on Monday.
  • As a result, EUR/USD trades back below the $1.04 handle, while USD/CAD has rallied back toward C$1.45. These levels remain important psychological pivot points, and will help drive sentiment in either direction in the coming sessions.
  • CAD is the poorest performer so far, with NOK, AUD and NZD not far behind.
  • Canadian CPI takes focus going forward, with markets expecting CPI to slow to -0.4% on a monthly basis (from 0.0% prior), dragging both the core-median and the core-trim subcomponents lower. The release comes during a period of particular sensitivity for the CAD, which rallied well yesterday on news that suggested no 'day one' tariffs from Trump - but those gains have been swiftly reversed on Trump's clarification that his admin will target February 1st for 25% tariffs on USMCA nations, with migrant flows the main focus.
  • Central bank speak today consists of ECB's Centeno, who appears in Lisbon following comments from Villeroy today. Villeroy pointed to sequential ECB rate cuts to neutral, but stopped short of suggesting pressing policy into accommodative territory.
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  • Dollar strength pervades early Tuesday, rallying against all others in G10. Dollar strength comes off the back of Trump's clarification having entered office that his administration will be targeting 25% tariffs on Mexico and Canada as soon as February, reversing the slightly easier start to his Presidency that markets enjoyed on Monday.
  • As a result, EUR/USD trades back below the $1.04 handle, while USD/CAD has rallied back toward C$1.45. These levels remain important psychological pivot points, and will help drive sentiment in either direction in the coming sessions.
  • CAD is the poorest performer so far, with NOK, AUD and NZD not far behind.
  • Canadian CPI takes focus going forward, with markets expecting CPI to slow to -0.4% on a monthly basis (from 0.0% prior), dragging both the core-median and the core-trim subcomponents lower. The release comes during a period of particular sensitivity for the CAD, which rallied well yesterday on news that suggested no 'day one' tariffs from Trump - but those gains have been swiftly reversed on Trump's clarification that his admin will target February 1st for 25% tariffs on USMCA nations, with migrant flows the main focus.
  • Central bank speak today consists of ECB's Centeno, who appears in Lisbon following comments from Villeroy today. Villeroy pointed to sequential ECB rate cuts to neutral, but stopped short of suggesting pressing policy into accommodative territory.