(Finance) – The first day of Donald Trump’s new presidency was a volatile one for the currency marketswith the dollar plummeting before the inauguration as media reports surfaced that Trump would not impose tariffs on day one, then recovering when the Republican politician announced moves on Canada and Mexico.
The highly anticipated settlement day offered very little concrete information on tariff policies. In fact, no tariffs have yet been announced, although Trump has repeated his threat of 25% tariffs against Canada and Mexico potentially as early as February 1st.
“The great long placement of the dollar and a potential thinner liquidity due to US holidays may have exacerbated” the movements of the last 24 hours, analysts note ENG.
In his first day series of executive orders, Trump confirmed theestablishment of the External Revenue Service responsible for collecting duties. Other executive orders declared a national emergency on the border and on energy, and rolled back some of former President Joe Biden’s green energy measures.
Later in the day, Trump said he would likely impose 25% tariffs on Canada and Mexico by February 1. This generated a rebound in the dollar, with CAD and MXN which wiped out daily earnings. However, theUS Dollar Index (DXY) is trading about 0.7% lower than Friday’s close, as markets are at least cautiously optimistic that indiscriminate universal tariffs will not be applied all at once.
“The euro could do well in exchange rates if several days pass without Europe being explicitly mentioned in Trump’s comments on tariffs – ING analysts added – Such support could, however, prove rather short-lived as things can, as we learned yesterday with Canada and Mexico, change sharply on protectionism and the euro remains generally unattractive from a series of macro fundamentals”.
EUR-USD and GBP-USD are trading below 1.04 and 1.23 respectively this morning. “We still suggest that the recovery of many pairs against the greenback should be accepted with caution – analysts write UniCredit – Why Volatility and intraday swings will likely continue to characterize the start of Trump’s second presidency depending on his early announcements on many topics, including geopolitics, fiscal policy, deregulation and immigration, as well as tariffs.”