Key Headline:

Trump Targets China and Russia: President Trump directs attention toward China and Russia, signalling potential policy or trade actions involving these nations.

Recap

The USD's early gains were wiped out by the end of European trading as markets speculated that Trump may not be preparing for a full-scale trade war but rather using tariff threats as a negotiation tool. This sentiment was reflected in the recovery of CAD against USD, erasing earlier losses. Overnight, Trump announced he is considering a 10% tariff on all Chinese imports by February 1 and warned of potential sanctions on Russia if President Putin does not engage in negotiations over Ukraine.

Today’s Rates

Today's Interbank Rates at 09:30 am against GBP movement.

GBP>EUR – 1.1838

GBP>USD – 1.2348

EUR>GBP – 0.8446

EUR>USD – 1.0430

GBP>CAD – 1.7696

GBP>AUD – 1.9668

GBP>SEK – 13.562

GBP>AED – 4.5346

GBP>HKD – 9.6160

GBP>ZAR – 22.801

GBP>CHF – 1.1183

GBP>PLN – 5.0275

Today’s Key Takeaways

1.      USD Corrections on the Horizon?

With significant USD strength since Trump’s election, FX discussions suggest potential corrections if his tariff actions continue to underwhelm.

2.      Interest Rate Differentials Provide Support:

USD is buoyed by relatively limited market expectations of Fed rate cuts (38bps this year), compared to deeper cuts anticipated from the BoE (65bps) and ECB (100bps).

3.      Tariff Uncertainty Remains Key:

Severe tariff measures from Trump could bolster USD, but weak signals from his initial actions may prolong USD softness.

4.      Volatility Ahead:

Short-term USD weakness presents a "buy the dip" opportunity, though the outlook suggests heightened volatility in the coming days.

22nd January 2025

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