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Donald Trump triggered a new wave of currency sales hours after his inauguration, threatening to impose high tariffs on Mexico and Canada.
Speaking in the Oval Office on Monday evening, Trump said he could enact 25% tariffs against the two countries as soon as February 1, reiterating his earlier threats to hit two of the United States’ closest trading partners. United with taxes in retaliation for weak border security and fentanyl. traffic.
Trump’s renewed warnings sent the Mexican peso down 1.3 percent and the Canadian dollar down 1 percent against the U.S. dollar, according to morning trading in Europe on Tuesday.
Both currencies appreciated sharply the day before after administration officials said Asset would refrain from immediately imposing levies on key partners and would instead study the commercial situation.
The price swings highlight how investors are bracing for this week’s upheaval, particularly in foreign exchange markets, as Trump implements plans to dismantle many of Joe Biden’s signature policies and adopt A protectionist program which militarizes America’s economic weight.
“This type of volatility is the new normal,” said Eric Winograd, an economist at AllianceBernstein. “Politics under the Trump administration will likely be less predictable and less process-driven than what we have become accustomed to under the Biden administration. »
Broad selling in the greenback also eased after Trump’s comments on tariffs, with the dollar index, a measure of the currency against six of its peers, paring a drop of up to 1, 3 percent to trade down 0.6 percent.
Futures contracts tracking Wall Street’s S&P 500 and Nasdaq 100 indexes both forecast an opening 0.4 percent higher. Both markets were closed Monday for a U.S. holiday.
In a sign of how Trump intends to use trade restrictions as a key diplomatic tool, the new president lashed out at the EU, threatening the bloc with tariffs if it doesn’t buy more American oil.
“They don’t take our cars, they don’t take our agricultural products, they take almost nothing,” Trump said. “And yet we take their cars and we take their agricultural products, we take a lot from them. So we’re going to deal with that either with tariffs or they’re going to have to buy our oil.
The euro, which has the biggest weight in the dollar index, fell 0.6 percent against the greenback to $1.04, partially reversing a 1 percent gain on Monday.
Sterling fell 0.6 percent to $1.23 after rising 0.8 percent the day before.
European stock markets were quiet in morning trading, with the FTSE 100 and Dax up 0.1 percent. The broader Europe Stoxx 600 index rose 0.1 percent.
Wind companies collapsed after the Trump administration announced it would stop permitting and leasing new wind projects. Danish turbine maker Vestas fell 2 percent, while Germany’s Nordex fell 3 percent.
Bitcoin prices, which briefly rose to a new intraday high of $109,241 on Inauguration Day, later reversed their gains as the president made no mention of cryptocurrency policy in his speech inaugural. Prices edged up 0.1 percent to $102,660 per token.
In Asian markets, traders were relieved after Trump refrained from immediately imposing trade restrictions against China, although he warned he could do so if Beijing refused to cede control to the United States partial of the social media application TikTok.
The CSI 300 index of listed companies in mainland China was flat and Hong Kong’s Hang Seng rose 0.9 percent.
The offshore renminbi also strengthened to a six-week high of RMB 7.25 per dollar, before weakening to 7.28.
“The short version is that we may have avoided the worst case scenario from a risk asset perspective. There have been no tariffs on China from day one,” said Jason Lui, head of Apac equity and derivatives strategy at BNP Paribas.
“The Chinese stock market [already] rallied behind the inauguration after the Trump-Xi phone call over the weekend, so the reaction is more measured.”
Reporting by Adam Samson and Harriet Clarfelt in New York, Aime Williams in Washington, Arjun Neil Alim in Hong Kong, Leo Lewis in Tokyo, Nic Fildes in Sydney and Mari Novik in London
