The US dollar weakened significantly on Monday after an official from the incoming US administration stated that President-elect Donald Trump would not be implementing new trade tariffs on his first day in office. This news sparked a rally in global currencies, particularly the euro, and eased market concerns over potential trade disruptions.
The US dollar experienced a significant decline on Monday following a statement from an official within the incoming U.S. administration. The official stated that President-elect Donald Trump would not implement new trade tariffs on his first day in office, alleviating some of the anxieties surrounding an immediate imposition of such measures.
Trump, who assumes office later in the day, had previously pledged tariffs of 10% on global imports, 60% on Chinese goods, and a 25% import surcharge on Canadian and Mexican products. These potential tariffs could significantly disrupt global trade flows, increase costs for consumers and businesses, and provoke retaliatory actions from trading partners. The Canadian dollar, the Mexican peso, and the Chinese yuan all strengthened by 1-1.5%, while the euro surged by 1.5%, poised for its largest single-day rally against the dollar in over a year. Market analysts reacted to the news, expressing both cautious optimism and reservations about its long-term implications. Nick Rees, Head of Macro Research at Monex Europe in London, commented that markets appeared to be taking comfort from the news regarding the postponement of day-one tariffs. However, he cautioned that this confidence might be premature, as more targeted import levies could be implemented shortly after the inauguration. Rees pointed out that Trump's directive to Federal agencies to evaluate U.S. trading relationships with China and America's continental neighbors was a significant development, and the details of this evaluation would ultimately shape market sentiment. The initial market reaction to the news of delayed tariffs was a sharp rise in risk-on sentiment, particularly benefiting the euro. This was fueled by the prospect of reduced trade tensions and a more stable economic environment. However, market participants remain vigilant and await further clarity from the Trump administration regarding its trade policies. The focus now shifts to Trump's executive orders and the extent to which they will address deregulation and other economic priorities. Reports suggest that Trump may not implement a comprehensive package of tariffs today but will instead sign a memo directing Federal agencies to conduct a thorough review of U.S. trade relationships with key partners. This memo will also likely focus on investigating other U.S. trade deficits and unfair trading practices. The absence of immediate tariff announcements suggests that the debate within the Trump administration regarding trade policy is ongoing and complex
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