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FOREX: Universal Tariff Talk Puts USD Index Back Above 50-dma

FOREX
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  • The greenback is clawing back a small part of the recent lost ground, aiding the USD Index back above the 50-dma (107.648). As a result, markets are back above the 23.6% retracement for the year-to-date range in the currency, which helps add to the argument for a near-term bounce off lows for the dollar. It's the Fed decision ahead, and in particular any observations on the neutral rate, that should trigger short-term conviction here.
  • Having been the best performer across G10 on Monday, the JPY is weaker against most others into Tuesday's NY crossover. Equity sentiment remains a key driver here, and the bounce off lows for the e-mini S&P has been instructive in the pullback for the JPY today.
  • Trump tariff threats have further worked in favour of the greenback, as they re-demonstrate the concerns around a further inflationary impulse. Both the President and his Treasury Secretary talked up the benefits of universal import tariffs overnight, with Bessent eyeing 2.5% tariffs as a starting point, but Trump claiming he wants "much bigger" levies.
  • Preliminary durable goods orders and the Conference Board's consumer confidence stats for January are next to cross, but are unlikely to shake up markets given the proximity to the Fed on Wednesday. The central bank speaker schedule remains very contained, with both the FOMC and ECB's Governing Council inside their pre-meeting media blackout periods.
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  • The greenback is clawing back a small part of the recent lost ground, aiding the USD Index back above the 50-dma (107.648). As a result, markets are back above the 23.6% retracement for the year-to-date range in the currency, which helps add to the argument for a near-term bounce off lows for the dollar. It's the Fed decision ahead, and in particular any observations on the neutral rate, that should trigger short-term conviction here.
  • Having been the best performer across G10 on Monday, the JPY is weaker against most others into Tuesday's NY crossover. Equity sentiment remains a key driver here, and the bounce off lows for the e-mini S&P has been instructive in the pullback for the JPY today.
  • Trump tariff threats have further worked in favour of the greenback, as they re-demonstrate the concerns around a further inflationary impulse. Both the President and his Treasury Secretary talked up the benefits of universal import tariffs overnight, with Bessent eyeing 2.5% tariffs as a starting point, but Trump claiming he wants "much bigger" levies.
  • Preliminary durable goods orders and the Conference Board's consumer confidence stats for January are next to cross, but are unlikely to shake up markets given the proximity to the Fed on Wednesday. The central bank speaker schedule remains very contained, with both the FOMC and ECB's Governing Council inside their pre-meeting media blackout periods.