Dollar Edges Up, Stocks Higher as Latest Tariffs Swirl

Economic

Summary:

The dollar edged higher as Trump warned of new tariffs, while global stocks rose despite trade concerns. Investors await Fed Chair Powell’s testimony for policy insights.

The dollar rose slightly on Monday after U.S. President Donald Trump warned of more tariffs, including on steel and aluminium, while a gauge of global stocks shook off concerns about more duties and advanced.

Speaking to reporters on Air Force One on Sunday, Trump said he would announce on Monday 25% tariffs on all steel and aluminium imports into the U.S., and reveal other reciprocal tariffs soon afterwards.

China's retaliatory tariffs on some U.S. exports take effect on Monday, with no sign as yet of progress towards a new trade arrangement between Beijing and Washington.

The dollar index , which measures the greenback against a basket of currencies, advanced 0.13% to 108.23, with the euro down 0.13% at $1.0312.

"This is still very early days," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “The market's sort of just sort of chopping around rather than really directional right now.”

Against the Japanese yen , the dollar strengthened 0.17% while sterling weakened 0.16% to $1.2386.

The Canadian dollar weakened 0.27% versus the greenback to C$1.43 per dollar and the Mexican peso weakened 0.37% versus the dollar at 20.642 as the greenback retreated from earlier highs.

Dollar Edges Up, Stocks Higher as Latest Tariffs Swirl_1

Bar chart showing US steel imports by country of origin

On Wall Street, U.S. stocks were higher, led by gains in the energy and tech sectors. The S&P 500 materials index rose 0.2%, buoyed by gains of more than 5% in steel companies Nucor and Steel Dynamics.

Shares of McDonald's also climbed to provide support for stocks after the fast-food restaurant reported its quarterly results.

MSCI's gauge of stocks across the globe rose 4.77 points, or 0.55%, to 874.21 and was on track for its fourth gain in the past five session. Europe's STOXX 600 index rose 0.63% to hit an intraday record of 546.34.

Europe's continent-wide STOXX 600 index rose 0.5% after slipping 0.38% on Friday.

Shares of some European steelmakers gained, reversing earlier declines, including Luxembourg-based ArcelorMittal and Germany's Salzgitter.

Some analysts are concerned tariffs could rekindle U.S. inflation pressures, removing flexibility from the Federal Reserve to cut interest rates, a possible outcome which has helped support the U.S. dollar since Trump's re-election.

Markets are largely expecting the Fed to hold rates steady at its March meeting, with expectations for a cut of at least 25 basis points not climbing above 50% until June, according to CME's FedWatch Tool.

Morgan Stanley chief U.S. economist Michael Gapen said in a note to clients the recent imposition of tariffs raised the bar for rate cuts and the firm only expects a single cut this year, to come at the June meeting.

Fed Chair Jerome Powell is due to speak on Tuesday for the semiannual monetary policy testimony before the Senate Banking, Housing and Urban Affairs Committee. His comments on tariffs and inflation are likely to be closely monitored.

The yield on benchmark U.S. 10-year notes fell 1.8 basis points to 4.469% in the wake of comments from Trump on Sunday that his administration may look into Treasury debt payments for signs of fraud.

Oil prices rebounded despite lingering fears over a potential global trade war. U.S. crude rose 1.49% to $72.06 a barrel and Brent rose to $75.64 per barrel, up 1.29% on the day.

Source: Reuters

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Warren Takunda

Economic

Donald Trump's plan to slap fresh tariffs on the European Union could provoke retaliation in an unexpected way - not by taxing American goods, but by taking aim at the dominance of US tech firms in Europe's digital economy.

The idea, outlined in a Goldman Sachs report released Monday, suggests that rather than responding with tit-for-tat duties on US exports, Brussels could exploit its growing trade deficit in services. By restricting American digital services, the EU could hit a sector that generates billions in revenue from European markets.

A new transatlantic trade war looming?

Trump vowed last Friday to impose "reciprocal tariffs" as soon as this week, fuelling fears of a renewed transatlantic trade war.

Goldman Sachs economists Giovanni Pierdomenico and Filippo Taddei said that they now expect expect the US to increase duties on European car exports by 25 percentage points and introduce a 10% tariff on a broad set of critical imports, ranging from metals and minerals to pharmaceuticals.

This move, they estimate, could impact EU exports worth €190 billion, or about 40% of the bloc's total shipments to the US.

If tariffs are imposed, Goldman Sachs predicts the EU's response will resemble the strategy it used in 2018, when Trump first targeted European steel and aluminium. At the time, Brussels retaliated with duties on key US products - including bourbon whiskey and motorcycles - covering about 40% of the affected EU exports.

A second round of tariffs was prepared but never implemented, pending a World Trade Organization ruling.

This time, the EU is likely to tread cautiously once again.

"We expect the EU to favour a de-escalation of trade tensions as much as possible and resort to strong retaliation only as a last resort", economists said.

The digital economy: A new front in the conflict?

Unlike in 2018, however, the EU now has an additional tool at its disposal: the Anti-Coercion Instrument (ACI), a mechanism designed to counter economic pressure from third countries.

The ACI, which grants Brussels the authority to impose tariffs and restrict access to European markets in response to coercive trade measures, could provide a framework for action against Washington.

One area that could come under scrutiny is the digital economy. While the EU enjoys a significant trade surplus in goods with the US, it runs an annual trade deficit of nearly €150bn in services - half the size of its goods surplus.

A major factor in this imbalance is the dominance of American tech companies. These firms generate substantial revenues from European customers and repatriate earnings as royalties through low-tax jurisdictions like Ireland.

Goldman Sachs economists suggest that targeting this sector could be a way for Brussels to push back without resorting to a tit-for-tat tariff war on physical goods.

"Services imported by the EU from the US span different sectors, including the financial sector, but the lion's share are IT services that are then invoiced as royalties channelled to the US from Ireland", Goldman Sachs said, adding that any restrictions on these transactions could have a meaningful impact on the services trade balance. Why Trump's Tariffs Could Push Europe to Target US Tech Services_1

Why Trump's Tariffs Could Push Europe to Target US Tech Services_1

A high-stakes decision

Unlike traditional tariffs, which can be imposed quickly, any measures under the ACI would require approval from at least 15 of the EU's 27 member states, a process that could slow Europe's response.

For now, Europe is watching Trump's next move closely. If he follows through with his promise of new tariffs, Brussels will have to decide between direct retaliation on American goods or a more strategic approach - one that could put the US tech sector in the crosshairs of a trade war it has largely avoided until now.

Source: Euronews

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Owen Li

Economic

In Denmark, inflation data for January is released. January data is always extra exciting because many businesses only adjust prices at the turn of the year. Sales also increases uncertainty. Particularly fuel prices have increased due to higher energy fees but also higher oil prices. Even so, we expect a decline in annual inflation to 1.5% from 1.9% in December, driven by particularly electricity, as a big increase in tariffs and fees in January 2024 exits the inflation measure.

In Norway, January inflation figures are always extra uncertain. This is the time when most administrative prices are regulated, and the effects can be large in some years. In addition, there can be large variations in the price offers in the January sale. Prices normally drop in January, but as prices were unchanged last year, we expect that the annual growth in core inflation slowed to 2.6% in January, in line with Norges Bank’s forecast from the December MPR. The high inflation figures from Sweden for January obviously imply a certain upside risk for the Norwegian figures, because there are some similar seasonal and administrative factors in January as in Norway.

In Sweden, the figures for industrial orders and monthly household consumption for December are being released. We anticipate some improvement in the household consumption figures, as December’s retail sales and the latest consumer confidence surveys have been encouraging.

For the remainder of the week, the key data release will be the US January CPI, while US politics will also remain in focus. Attention in the US will also be on Fed Chair Powell’s congressional testimony on Wednesday and US retail sales on Friday. In China, focus will be on whether a call between Xi Jinping and Trump, cancelled last week due to China’s retaliation to Trump’s 10% tariffs, will take place. In the euro area, data releases are limited, but Q4 employment data on Friday will be a highlight. On Friday the Munich Security Conference begins, where the war in Ukraine and possible peace talks will be in focus.

Economic and market news

In the US, the labour market report was to the strong side again. The establishment survey showed nonfarm payrolls for January grew by 143k SA, close to our forecast of +150k (cons. +170k), while data for the past two months was revised up by 100k. Average hourly earnings growth accelerated to 0.5% m/m SA, but this largely reflected a drop in average hours worked.

The household survey was heavily distorted by updated population controls, which boosted labour force and household employment estimates by 2.2m. This effect is purely statistical and has no market impact. The unemployment rate declined to 4.0% (from 4.1%), but as it is based on the household survey, it is difficult to gauge if this really reflects the labour market re-tightening. The annual benchmark revisions to NFP data from April 2023 to March 2024 was -598k, slightly less negative than the preliminary estimate suggested (-818k). Overall, nothing in the report is particularly hawkish or dovish for the markets, when you look past all the possible distortions.

Consumer sentiment fell from 71.1 in January to 67.8 in February. Notably 1y inflation expectations ticked higher to 4.3% from 3.3%, while 5y expectations were largely unchanged. While Republican respondents were much more optimistic about the future back in November and December, it seems that now both Democrats and Republicans have become much more concerned with the negative consequences of tariffs. However, Chicago Fed President Goolsbee (dovish and non-voting member) did not express new worries about inflation, repeating that the US is on its path back to 2% inflation.

Turning to the geopolitical front, Trump has reportedly spoken with Putin during the weekend about ending the war in Ukraine. Putin has indicated he is willing to discuss a Ukraine peace deal but rules out making any territorial concessions.

On Sunday, U.S. President Donald Trump announced plans to introduce new 25% tariffs on all steel and aluminium imports, on top of existing duties. These tariffs, along with reciprocal tariffs to match other countries’ rates, are set to be announced today.

In the euro area, the most discussed piece on ECB staff updates on r* was published on 7 February. While the piece emphasised do and don’ts of using the estimates for real time monetary policy decisions, it underlines that the broad range of estimates can be summarized as neutral rate being in the range of 1.75% to 2.25% in nominal terms.

In Germany, industrial production numbers were weak again in December, with production declining 2.4% m/m, leaving total Q4 production 0.9% lower than in Q3. The decline was especially due to the automotive industry and capital goods. Hence, the problems in the German industry are not over and we expect to see a continued decline in production the coming quarters. Yet, rebounding manufacturing PMIs in January gives a small ray of light in combination with the outlook for further rate cuts from the ECB, which should stabilize the industry from the second half of this year.

In Norway, manufacturing production increased 3.2% m/m in December, which seems to be a shift in the negative trend seen since last summer. Hence, manufacturing activity was down 0.8% in Q4 and will act as a headwind to GDP (due this week).

In China, CPI was stronger than expected showing a rise in the headline inflation from 0.1% y/y to 0.5% y/y (consensus 0.4% y/y) lifted by an increase in core inflation increased from 0.4% y/y to 0.6% y/y. Holiday spending from the Chinese New Year likely contributed to the increase. It is positive that inflation moved higher and further away from deflation territory, but overall price pressures are still low in China. Producer prices showed a decline again being unchanged at -2.3% y/y.

Equities: Equities were generally lower on Friday, ending just off worst levels (MSCI World -0.7%). It was a bit of a reversal of the risk appetite from the prior session, with all sectors lower and the VIX rising. Europe outperformed US, with US big tech being the notable laggard. The usual drivers were in play: yields edging higher due to a double whammy of rising wage inflation and household inflation expectations were coupled with disappointing guidance from Amazon (currency related) on top of massive capex plans. However, it was not a full risk-off session, as banks and industrials held up relatively well. Equity markets are not startled by Trump’s steel tariffs, with US futures higher this morning and Hong Kong gaining a full 1.7%. We do not know details yet (such as exceptions). However, tariffs tend to gain Nordic producers which are local US producers in a net importer market and benefitted when tariffs were introduced the last time.

FI: Global rates sold off with a knee-jerk reaction on the US labour market report on Friday, despite the headline print of 143k new jobs in January was consensus. 10y UST rose 5bp on the announcement and stayed there for the rest of the trading session. For policy signals, Friday’s print is difficult given the statistical uncertainties and revisions as per usual with the January print. Initially the US reaction took 10y Bund higher, albeit that reversed during the afternoon, thus with 10y Bunds ending the day broadly unchanged. Markets price 85bp worth of ECB rate cuts until year end. BundASW tightened into -3bp, a new low.

FX: Trump’s new weekend pledge to impose tariffs on all steel and aluminium imports is hurting commodity currencies such as AUD and CAD. There might be even more to come this week, as Trump has threatened to unveil reciprocal tariffs on “everyone”. EUR/USD is starting the week’s trading in the low 1.03’s whereas Scandies are close to Friday’s closing levels again, following a temporary overnight sell-off. The ZAR suffers as the US has frozen all aid to South Africa.

Source:action forex

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Warren Takunda

Economic

U.S. President Donald Trump delayed tariffs on Canada and Mexico in order to allow for negotiations to commence, triggering a rise in the value of the Canadian Dollar.

The Pound-to-Canadian Dollar exchange rate (GBPCAD) reflected this by registering a 1.54% weekly decline as it fell from a high of 1.8163 to close out at 1.7728.

Monday sees the pair rise to 1.7790 as that selloff fades and traders refocus on the risks facing CAD.

These risks were highlighted by Sunday's announcement by the U.S. to impose a 25% import tariff on steel and aluminium. Given that Canada exports aluminium to the U.S., this decision is a negative for CAD.

Trump said further unspecified tariffs would be announced later in the week, confirming that the tariff train is rumbling on and reminding us why the CAD faces fundamental headwinds.

All this creates scope for GBPCAD to find its feet in the coming days.

"Dollar bloc currencies including CAD, AUD and NZD, and the EUR are in the firing line, following the decline in short term bond yields vs the US as investors pare back growth expectations," says Kit Juckes, an analyst at Société Générale.

"The Yen and GBP outperform in G10," he adds.

Although fundamentals are poised to favour GBPCAD upside, the technicals etched onto the daily chart remind us that the pair is at risk of further declines. Pound-to-Canadian Dollar Forecast to See Support Build This Week_1

Pound-to-Canadian Dollar Forecast to See Support Build This Week_1

Above: GBPCAD at daily intervals.

The exchange rate is below the 9-day and 50-day exponential moving averages, and we would want to see a move above here before we call a rebound.

If anything, the charts are telling us to expect a decline down to 1.7712 (last week's low) and then an eventual move to the November 2024 and January lows at 1.7479.

Sterling's recent setback against the Canadian Dollar also has a lot to do with last week's Bank of England decision to cut interest rates by 25 basis points and signal it was not yet done.

GBP losses reflect expectations in some corners of the market that the Bank could, in fact, be inclined to accelerate the pace of its cuts.

However, we wrote at the time that the weakness would be temporary as the Bank would be severely curtailed by the UK's inflation dynamics, which saw the Bank aggressively raise its inflation forecasts to a peak of 3.7% later in the year.

The realisation that the Bank is severely curtailed in its ambitions should ultimately bolster GBP.

Risks to the currency come in the form of a slew of speeches from Bank of England policy setters Andrew Bailey, Catherine Mann and Megan Green, who should shed further light on last week's decision. We will be watching for any market-moving soundbites.

The bigger risk to GBP comes on Thursday when Q4 GDP data is released, and a -0.1% q/q reading is confirmed.

This would mean the economy has shrunk since Labour took office, posing difficult decisions for the UK's Chancellor Rachel Reeves who might need to raise taxes again later this year to ensure she meets her goal of shrinking debt as a percentage of GDP by the end of the parliament.

An unexpectedly larger fall would result in a weaker Pound that could put GBPCAD under renewed pressure.

Source: Poundsterlinglive

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Warren Takunda

Cryptocurrency

Bitcoin sought higher levels around the Feb. 10 Wall Street open as traders demanded $100,000. Bitcoin Teases Gains as Traders Say $100K Now Key Support Reclaim_1

Bitcoin Teases Gains as Traders Say $100K Now Key Support Reclaim_1

BTC/USD 1-week chart. Source: Cointelegraph/TradingView

$100,000 “pivotal” for BTC price breakout

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD reaching $98,349 on Bitstamp.

Up 1.3% on the day, the pair saw a firm bounce after hitting weekly lows of $94,750 immediately before the weekly close.

Still caught in the midsection of an extended three-month range, Bitcoin offered market participants little by way of inspiration amid a lack of volatility catalysts.

“Finally got a fill into that 95k level. I now want to see 96.3k defended if we pull back during NY,” popular trader CJ told followers in a post on X.

“100k is the main pivotal level - can't get too excited while we are below.” Bitcoin Teases Gains as Traders Say $100K Now Key Support Reclaim_2

BTC/USDT perpetual swaps 1-hour chart. Source: CJ/X

Fellow trader Skew agreed that a $100,000 reclaim was necessary to effect “significant change” on the status quo.

“Still stuck within the same current range although notably market has now swept liquidity both ways - ask liquidity & bid liquidity,” part of his latest X analysis read.

“Keep an eye on price control during early week trading & weekly / daily open.” Bitcoin Teases Gains as Traders Say $100K Now Key Support Reclaim_3

BTC/USDT 4-hour chart. Source: Skew/X

Meanwhile, trader and analyst Rekt Capital focused on key levels to hold as support going forward.

“Bitcoin is holding this potential pattern, the series of Higher Lows remain intact,” he wrote about weekly timeframes.

“Downside wicks below the Higher Low are permitted but price needs to continue holding above ~$96500 on the Weekly and reclaim $97900 for intra-pattern continuation.” Bitcoin Teases Gains as Traders Say $100K Now Key Support Reclaim_4

Bitcoin Teases Gains as Traders Say $100K Now Key Support Reclaim_4

BTC/USD 1-week chart. Source: Rekt Capital/X

Bitcoin at the mercy of sentiment fluctuations

Commenting on the overnight dip, trading firm QCP Capital suggested that BTC price weakness was not a sign of a broader risk-off capital flight.

“Commodities were largely unchanged, while Asian equities dipped, and BTC briefly dropped to $95K before rebounding—suggesting a sentiment-driven move rather than a fundamental shift in risk appetite,” it noted about the start of the week’s first Asia trading session.

“BTC volatility now skews in favor of puts until April, reflecting a lack of upside catalysts.”

News that business intelligence firm Strategy (formerly MicroStrategy) had purchased an additional 7,633 BTC for its corporate treasury had little impact on market performance.

The company, which last week reported Q4 net losses of $670 million, nonetheless revealed a BTC yield of 4.1% year-to-date.

Source: Cointelegraph

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Owen Li

Forex

GBP/USD is consolidating near the 1.2380 zone.USD/JPY dipped toward the 151.20 level and started a consolidation phase.

EUR/USD Technical Analysis

The Euro started a fresh increase above 1.0350 against the US Dollar. However, EUR/USD struggled near 1.0450 and recently trimmed gains. Euro’s Gains Restricted: EUR/USD Faces Strong Resistance_1

Euro’s Gains Restricted: EUR/USD Faces Strong Resistance_1

Looking at the 4-hour chart, the pair settled below the 1.0380 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The bears pushed the pair below the 50% Fib retracement level of the upward move from the 1.0210 swing low to the 1.0442 high.

On the downside, immediate support sits near the 1.0365 level. It is near the 76.4% Fib retracement level of the upward move from the 1.0210 swing low to the 1.0442 high.

The next key support sits near the 1.0250 level. Any more losses could send the pair toward the 1.0210 level. On the upside, the pair seems to be facing hurdles near the 1.0330 level.

The next major resistance is near the 1.0360 level. The main resistance is now forming near the 1.0400 zone and the 100 simple moving average (red, 4-hour). A close above the 1.0400 level could set the tone for another increase. In the stated case, the pair could even clear the 1.0465 resistance.

Looking at GBP/USD, the pair was able to recover above the 1.2350 resistance, but the bears are still active below 1.2450.

Source:action forex

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Justin

Economic

Forex

AUD/USD recovers sharply to near 0.6280 as investors digest US Trump’s tariff threats quickly.

Hot China’s CPI report has also boosted demand for the Australian Dollar.

This week, investors will focus on the US CPI and the Fed Powell’s testimony before Congress.

The AUD/USD bounces back strongly to near 0.6280 and turns positive after a weak opening near 0.6235 in Monday’s European session. The Aussie pair attracts significant bids as investors shrug off fears associated with United States (US) President Donald Trump’s tariff threats.

Over the weekend, President Trump threatened to raise 25% tariffs on imports of steel and aluminum from all nations and reciprocal tariffs on nations where he sees unfair trade practices. The impact of Trump’s international agenda was visible on the market sentiment as investors rushed to the safe-haven fleet. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, had a strong opening to near 108.50 but later on, gives up the majority of intraday gains and drops to near 108.20.

Market participants have started anticipating that Trump’s tariff threats are more a negotiation tool to gain an upper hand for closing better deals.

Another reason behind strength in the Australian Dollar (AUD) is faster-than-expected acceleration in the China Consumer Price Index (CPI) data for January. Year-on-year CPI rose by 0.5%, faster than expectations of 0.4% and the former reading of 0.1%. On month, the CPI grew by 0.7% after remaining flat in December but was slower than estimates of 0.8%.

The Australian Dollar (AUD) is a liquid proxy to Chinese Yuan (CNY), being Australia a major trading partner of China.

This week, the major trigger for the US Dollar (USD) will be the Federal Reserve (Fed) Chair Jerome Powell’s testimony before Congress on Tuesday-Wednesday and the US CPI data on Wednesday.

Source: FXSTREET

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Dollar Edges Up, Stocks Higher as Latest Tariffs Swirl

Bar chart showing US steel imports by country of origin

Source: Reuters

Why Trump's Tariffs Could Push Europe to Target US Tech Services

A new transatlantic trade war looming?

The digital economy: A new front in the conflict?

A high-stakes decision

Source: Euronews

Investor Focus Remains on US Data and Trump

Economic and market news

Source:action forex

Pound-to-Canadian Dollar Forecast to See Support Build This Week

Above: GBPCAD at daily intervals.

Source: Poundsterlinglive

Bitcoin Teases Gains as Traders Say $100K Now Key Support Reclaim

BTC/USD 1-week chart. Source: Cointelegraph/TradingView

$100,000 “pivotal” for BTC price breakout

BTC/USDT perpetual swaps 1-hour chart. Source: CJ/X

BTC/USDT 4-hour chart. Source: Skew/X

BTC/USD 1-week chart. Source: Rekt Capital/X

Bitcoin at the mercy of sentiment fluctuations

Source: Cointelegraph

Euro’s Gains Restricted: EUR/USD Faces Strong Resistance

EUR/USD Technical Analysis

Source:action forex

AUD/USD Bounces Back To Near 0.6280 As Investors Shrug Off US Trump’s Tariff Threats

Source: FXSTREET

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