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Expert market insight and updates to help you navigate the ever changing global currency markets.
Decoding Last Week's Market Moves: Beyond the Trade Headlines
The news last weekend of the massive Trump climb down on Chinese tariffs buoyed the dollar, but the bump soon faded and the dollar ended the week down against all of its G10 peers and nearly all major currencies worldwide.
Trump's apparent demolition of the post-war European security architecture is having a paradoxical impact in currency markets. It is forcing Europe, and Germany in particular, to embrace massive increases in defense spending, to be financed apparently via deficit spending and additional debt.
The dollar is trading higher across the board this afternoon after President Trump cooked up another storm on his Truth Social account, proclaiming that tariffs aimed at Canada and Mexico would go ahead as planned next week.
In the expectation that Trump 2.0 would entail higher inflation,and a more hawkish Federal Reserve, the US Dollar Index rose by around 8% in the final quarter of 2024. We’ve seen an element of ‘buy the rumour, sell the fact’ since then, with the Republican’s plans for tariffs largely taken in stride by market participants thus far.
Without question, the biggest economic development out of markets this week has been the surprise to the upside in the January US inflation report, which has pushed the expected timing for the next Federal reserve rate cut further into the future.
Financial markets breathed easier after better than expected inflation data out of the US. Rates across the curve fell back, risk assets rallied, and the dollar fell against all its G10 peers save the British pound and the Canadian dollar, both of which are mired in domestic troubles. Most emerging market currencies rebounded as well.
The relentless dollar rally continued for yet another week, fuelled by sharply higher bond yields in the US and signs that the world’s largest economy is, yet again, gaining momentum.Australian Dollar (AUD) Once again, the Australian dollar printed near the bottom of the G10 FX performance tracker last week.
This morning, the New Zealand Dollar (NZD) experienced a significant decline, influenced by two key factors. Firstly, US Federal Reserve Governor Powell indicated a potential reduction in rate cuts for 2025, suggesting that inflation is likely to persist into the New Year.
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