Stefano Rebaudo
(Reuters) – The U.S. dollar continued to fall after U.S. President-elect Donald Trump was quoted saying at his inauguration later in the session that he would not yet impose U.S. tariffs.
As the Wall Street Journal reported on Monday, Trump will release a lengthy trade memo on Monday that will not impose modern tariffs on his first day in office. Market participants expected Trump to announce trade tariffs by executive order. Such a move would raise expectations for a large-scale campaign, rising inflation and higher Federal Reserve interest rates for longer. Trading volume was low due to US markets being closed for the Martin Luther King Jr. holiday. “Markets have been pricing in some risk from the executive order on tariffs that won’t happen,” said Francesco Pesole, forex strategist at ING, referring to Trump’s valuation on tariffs. The index, which measures the U.S. currency against six other currencies, fell 1.01% to 108.21. It hit a 26-month high of 110.17 last week. Goldman Sachs strategists expect a further potential 5% dollar gain in their base-case scenario over the next few months, but warn of near-term risks due to market expectations for quick action on tariffs. The dollar has risen 4% since November’s presidential election as investors expect Trump’s policies to boost economic growth and inflation.
Investors’ attention was focused on the policies Trump would introduce on the first day of his term. At Sunday’s rally, Trump said he would impose severe restrictions on immigration.
Some analysts expected Trump to invoke the International Emergency Economic Powers Act (IEEPA).
IEEPA is a U.S. federal law that gives the president the authority to regulate economic transactions in response to unusual and extraordinary threats.
In addition to tariffs, immigration and tax cuts will be the main issues covered by the market analysis.
On the fiscal side, “we’ll be watching to see if President Trump mentions fiscal stimulus,” said Sjay Rajadhyaksha, a research analyst at the firm Barclays (LON:)
The euro rose 1.2% to $1.0398. It hit a two-year low of $1.0177 last week as tariff threats intensified.
Meanwhile, softer U.S. inflation data and the prospect of multiple interest rate cuts by the Federal Reserve have recently boosted risky assets, including assets that hit a record high of $109,071.86 on Monday and recently rose 4.2% to $107,120.
Trump has promised to be a “crypto president” and is expected to issue executive orders aimed at promoting widespread adoption of digital assets.
Some analysts are now concerned that delays in the US administration’s implementation of measures could trigger a sell-the-news response, potentially disrupting positive momentum.
The yen recently traded at 155.65 per dollar, up 0.42% as the BoJ is likely to raise its key interest rates this week barring market shocks after Trump takes office.
Markets will focus on guidance on the interest rate outlook as money market pricing suggested an 80% chance of a 25 basis point and 50 basis point rate hike by the end of the year. [IRPR]
rose on Monday to its highest level against the dollar since Jan. 3, buoyed by a amiable call between Trump and Chinese President Xi Jinping on Friday and better-than-expected fourth-quarter economic data.
It reached 7.2777 per dollar, the highest since mid-December, up 0.86%.
It has outperformed most of its peers since the U.S. election despite expectations of high U.S. tariffs as the People’s Bank of China continued its efforts to maintain currency stability.
On Friday evening, China’s central bank told Reuters it was confident it could keep the yuan exchange rate “broadly stable” at a “reasonable and sustainable” level.
