A look at the day ahead in European and global markets from Kevin Buckland
Everything investors feared about another Donald Trump presidency was proven true in the early hours of day one, and currency traders in particular were left in a state of shock.
The lack of tariff threats in Trump's inauguration speech was seen as a green light to sell the dollar. Hours later, the new US president surprised with plans to impose 25% tariffs on Canada and Mexico starting February 1. The value of the peso and the peso decreased.
These moves reflect the volatility Trump has experienced during his first term as commander-in-chief, with markets needing to remain on alert. But as was often the case then, Trump's salvos may turn out to be just a negotiating tactic.
Trump has always said he is a deal maker, and investors were perhaps encouraged by his comments about TikTok and China that seemed like an invitation to the table, and also came with a warning of tariffs if Beijing tried to block the deal.
As for the European Union, Trump said that tariffs are just a way to “settle” the trade deficit. Another reason will be increased oil and gas sales in the United States.
Despite these comments, Trump backed away from imposing global tariffs, saying, “We're not ready for that yet.”
The coins have been on yo-yo strings for the past few hours. However, as of midday in Asia, the US dollar was higher against a basket of its biggest rivals, although not as strongly as it was early Tuesday.
The Chinese central bank protected the yuan by setting the strongest fixing rate since early November. Given that China has been a particular focus of Trump's tariff warnings, analysts said extended force seems unlikely.
The euro and British pound fell by about 0.3% each, while the yen strengthened. The Japanese currency strengthened thanks to bets on policy tightening by the Bank of Japan on Friday, despite some concerns about the impact of any US tariffs on the auto industry.
Meanwhile, the Trump meme has soared to over $10 billion in market cap, helping to lift other cryptocurrencies along with it. This included Bitcoin, which rose to a new all-time high above $109,000, though it was back below $102,000 in most recent trading.
In today's European economic calendar, Britain will release jobs data and Germany will release ZEW opinion polls.
European Union finance ministers are meeting in Brussels to discuss how to improve competitiveness.
European Central Bank Vice President Luis de Guindos joined the ECOFIN meeting, which was also held in the Belgian capital.
The Fed is not scheduled to speak this week, with officials in a blackout period ahead of next week's policy meeting.
Key developments that may impact markets on Tuesday:
– UK pay scales (December)
– German ZEW polls (January)
– Canadian Consumer Price Index (December)
