Dollar Gains as Trump Imposes 25% Steel, Aluminium Tariffs
GBP
GBP/USD is currently trading at 1.2407 (interbank), while GBP/EUR stands at 1.2030 (interbank).
The pound weakened significantly last week following the BoE’s decision to cut interest rates from 4.75% to 4.5%, as expected, but it was the dovish forward guidance and downgraded 2025 growth forecast that weighed heavily on Sterling.
Governor Andrew Bailey stated in the press conference that further rate reductions are likely, though the pace and extent of cuts will be assessed "meeting by meeting.” He also noted that economic activity is slowing and the labour market is weakening.
Markets are now pricing in a further 50 basis points (bps) of cuts in 2025.
BoE policymakers Catherine Mann and Andrew Bailey are due to speak tomorrow, with December and Q4 GDP figures later this week expected to bring additional volatility.
No significant events are scheduled for today.
EUR
EUR/USD opened the week lower, currently trading at 1.0313 (interbank).
Euro buyers remain cautious, with recent gains failing to hold due to ongoing trade tensions and concerns over potential US tariffs on the Eurozone. French Foreign Minister Jean-Noel Barrot stated today that the EU will retaliate against President Trump’s latest tariff measures.
The ECB is expected to continue cutting interest rates, and some policymakers have suggested rates may need to drop below the neutral rate, as the eurozone economy struggles to maintain inflation at 2%. ECB economists estimate the neutral rate to be between 1.75% and 2.25%.
A series of ECB official speeches are due this week, starting with Christine Lagarde today, followed by the Economic Bulletin and forecasts, and ending with Eurozone GDP figures on Friday.
Today’s events (GMT):
14:00 - ECB President Lagarde Speaks
USD
The Dollar Index, which measures the US dollar against six major currencies, is trading at 108.23.
On Friday, Non-Farm Payrolls (NFP) rose by just 143,000 in January, significantly below December’s revised figure of 307,000 and the 170,000 expected. However, the unemployment rate edged down to 4% from 4.1% in December.
The dollar strengthened at the start of the week after Trump reaffirmed plans for fresh tariffs, denting risk appetite and putting pressure on major trade-exposed currencies.
Trump announced 25% tariffs on all steel and aluminium imports, with additional "reciprocal tariffs" expected in the coming days. This escalation raises fears of a widening global trade war, particularly as China’s retaliatory duties on US goods come into effect today.
Despite ongoing trade concerns, market moves remain muted, with investors hesitant to take strong positions.
No significant events are scheduled for today.
CAD
USD/CAD is currently trading at 1.4334 (interbank) in this morning’s session.
On Friday, Canada’s labour market outperformed expectations, adding 76,000 jobs in January—well above the 25,000 forecast—while the unemployment rate fell to 6.6%, beating the expected 6.8% and improving from 6.7% in December.
Following these results, markets have reduced expectations of a Bank of Canada (BoC) rate cut in March, with the probability dropping slightly from 64% to 62%.
Despite this, Trump’s new steel tariffs continue to put pressure on the Canadian dollar, given that Canada is a major steel supplier to the US. Additionally, Canada accounted for 79% of total US aluminium imports in the first 11 months of 2024, making the economy particularly vulnerable to potential trade restrictions.
Oil prices have risen slightly this morning, with Brent crude at $75.26 per barrel and West Texas Intermediate (WTI) at $71.57 per barrel.
Data is light for Canada this week, with the next key release being Wholesale Sales figures on Friday.
No significant events are scheduled for today.
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