US dollar climbs as Trump sparks fresh tariff fears

Pound (GBP) mixed in absence of data

The pound (GBP) moved without clear direction yesterday as a lack of British economic data left the currency rudderless.

Meanwhile, a souring mood saw GBP soften slightly against some of its safer peers while holding strong against riskier rivals.

Today, Bank of England (BoE) Governor Andrew Bailey will testify in front of the UK Treasury committee. Any policy hints could impact GBP.

Euro (EUR) struggles amid USD strength

The euro (EUR) faced some pressure yesterday as EUR suffered from its negative correlation with a stronger US dollar (USD).

However, a cautious market mood helped the safer euro resist losses against its more risk-sensitive peers.

Turning to today, Germany’s latest consumer confidence report showed that households remained pessimistic heading into February, with the index printing below forecasts. This could pressure EUR.

US dollar (USD) strong on fresh tariff fears

The US dollar held strong yesterday after Donald Trump sparked fresh trade war fears in markets.

Trump said that he wants to impose universal tariffs on goods coming into the US that are ‘much bigger’ than 2.5%. This spooked markets, providing USD with safe-haven flows.

Movement in the US dollar may be muted today as markets brace for the Federal Reserve interest rate decision this evening. A hawkish hold from the Fed could see the US dollar surge.

Canadian dollar (CAD) buoyed by rising oil

The crude-linked Canadian dollar (CAD) firmed yesterday thanks to rising oil prices and CAD’s positive correlation with USD.

Looking ahead, an expected rate cut from the Bank of Canada (BoC) could see CAD stumble this afternoon.

Australian dollar (AUD) declines as inflation cools

The Australian dollar (AUD) dropped sharply overnight after domestic inflation cooled more than forecast in the fourth quarter, thereby stoking Reserve Bank of Australia (RBA) rate cut bets.

New Zealand dollar (NZD) dragged down by AUD

The New Zealand dollar (NZD) also weakened overnight, with the ‘kiwi’ softening due to its positive correlation with the ‘Aussie’.

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