Trump’s return sparks market volatility across global markets
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The re-inauguration of Donald Trump as U.S. President has brought back familiar volatility to global markets, with currency traders bearing the brunt of whiplash-inducing swings. In his first hours in office, Trump’s lack of tariff threats during his inaugural speech initially prompted a sell-off in the U.S. dollar. However, the mood shifted dramatically when he later announced plans for 25% levies on Canadian and Mexican imports, effective February 1.
Volatility returns to the currency markets
U.S. dollar reaction
The dollar initially weakened but rebounded to gain 0.50% against a basket of major currencies (DXY) by midday in Asia. Despite the recovery, currency markets remain on edge, reminiscent of the erratic policy announcements during Trump’s first term.
Canadian and Mexican currencies
The loonie and peso plummeted following Trump’s tariff announcements. However, analysts speculate that these measures may be part of Trump’s dealmaking strategy rather than concrete policy shifts.
Yuan stability
China’s central bank intervened to stabilize the yuan (USDCNY) by setting the strongest fixing since early November. While this move provided temporary relief, analysts warn that the yuan’s strength may be short-lived given Trump’s focus on addressing trade imbalances with Beijing.
European currencies The euro (EURUSD) and sterling (GBPUSD) fell by 0.49% and 0.51%, respectively, as investors reacted to broader market uncertainty. Meanwhile, the yen (USDJPY) strengthened, buoyed by expectations of Bank of Japan policy tightening later this week.
Crypto markets surge, then retreat
Trump’s newly launched meme coin saw its market value soar above $10 billion, boosting other cryptocurrencies in its wake. Bitcoin (BTCUSD) reached an all-time high above $109,000 before retreating below $102,000 in subsequent trades. This highlights the heightened volatility in crypto markets, fueled by speculative interest and Trump’s polarizing impact on investor sentiment.
Key developments on the horizon
European economic data
The UK will release December payroll figures, offering insights into the state of the British labor market.
Germany’s ZEW sentiment surveys for January are expected to provide a gauge of economic confidence in Europe’s largest economy.
EU finance meetings
EU finance ministers are convening in Brussels to discuss measures to enhance competitiveness.
ECB Vice-President Luis de Guindos will participate in the ECOFIN meeting, signaling potential monetary policy directions.
Outlook
With no Federal Reserve speakers scheduled this week due to the pre-policy meeting blackout period, markets will focus on European economic data and further developments from Trump’s administration. Currency and crypto traders should brace for continued volatility as Trump’s policies unfold and global markets adjust to the renewed unpredictability.
Volatility returns to the currency markets
U.S. dollar reaction
The dollar initially weakened but rebounded to gain 0.50% against a basket of major currencies (DXY) by midday in Asia. Despite the recovery, currency markets remain on edge, reminiscent of the erratic policy announcements during Trump’s first term.
Canadian and Mexican currencies
The loonie and peso plummeted following Trump’s tariff announcements. However, analysts speculate that these measures may be part of Trump’s dealmaking strategy rather than concrete policy shifts.
Yuan stability
China’s central bank intervened to stabilize the yuan (USDCNY) by setting the strongest fixing since early November. While this move provided temporary relief, analysts warn that the yuan’s strength may be short-lived given Trump’s focus on addressing trade imbalances with Beijing.
European currencies The euro (EURUSD) and sterling (GBPUSD) fell by 0.49% and 0.51%, respectively, as investors reacted to broader market uncertainty. Meanwhile, the yen (USDJPY) strengthened, buoyed by expectations of Bank of Japan policy tightening later this week.
Crypto markets surge, then retreat
Trump’s newly launched meme coin saw its market value soar above $10 billion, boosting other cryptocurrencies in its wake. Bitcoin (BTCUSD) reached an all-time high above $109,000 before retreating below $102,000 in subsequent trades. This highlights the heightened volatility in crypto markets, fueled by speculative interest and Trump’s polarizing impact on investor sentiment.
Key developments on the horizon
European economic data
The UK will release December payroll figures, offering insights into the state of the British labor market.
Germany’s ZEW sentiment surveys for January are expected to provide a gauge of economic confidence in Europe’s largest economy.
EU finance meetings
EU finance ministers are convening in Brussels to discuss measures to enhance competitiveness.
ECB Vice-President Luis de Guindos will participate in the ECOFIN meeting, signaling potential monetary policy directions.
Outlook
With no Federal Reserve speakers scheduled this week due to the pre-policy meeting blackout period, markets will focus on European economic data and further developments from Trump’s administration. Currency and crypto traders should brace for continued volatility as Trump’s policies unfold and global markets adjust to the renewed unpredictability.